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About RM5b needed to expand 3 Malaysian ports, says RAM Ratings

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by July 20, 2017 General

About RM5bil would be needed over the next five years for the expansion of Kuantan Port, Sapangar Bay Container Port and Port of Tanjung Pelepas, says RAM Ratings.

“This estimate may swell to over RM250bil if large-scale projects such as the third Port Klang at Carey Island and the Melaka Gateway projects take off,” said the rating agency’s co-head of infrastructure and utilities ratings, Davinder Kaur Gill.

She pointed out on Wednesday hence, from a funding perspective, the financing needs of the Malaysian and regional port sectors would be massive if all the announced expansion plans come to fruition in the near future. However, she expects a gradual roll-out of the expansion projects.

Davinder said Malaysian ports’ container- and cargo-handling prospects are expected to remain healthy in 2017 but growth would be in tandem with the gradual global economic recovery.

Throughput growth was expected to remain in the low single-digit levels, akin to the modest 3% recorded in 2016.

“Prospects for the key national ports – including Westports Holdings Bhd, Northport (Malaysia) Bhd and Pelabuhan Tanjung Pelepas Sdn Bhd – remain stable, benefiting from the strengthening local and regional economic outlook,” she said.

“Nonetheless, in the immediate term they are still vulnerable to the effects of the current trend towards protectionism and changes in shipping alliances,” she adds.

Davinder said while the global economy is gaining momentum – with world trade expected to expand 3.8% in 2017 against 2.2% in 2016 – “this raises questions on what recent developments, such as Brexit and President Donald Trump’s protectionism rhetoric, mean for global trade flows”.

Malaysia continues to benefit from its strategic position along the Straits of Malacca, one of the busiest shipping lanes in the world.

Malaysia’s throughput remained resilient in 2016, with container throughput recording a 10-year compounded annual growth rate of 6% while that of cargo throughput came in at 5%.

At the same time, Malaysia handled more than 25% of the containers passing through the Asean-5 nations (i.e. Malaysia, Singapore, Thailand, Indonesia and the Philippines) and accounted for 3% of world container traffic.

“While prospects for regional trade expansion are still encouraging, the long-term growth of South-East Asian ports must be analysed in the context of economic growth, the region’s upcoming new port capacity and the requirements of the newly formed shipping alliances,” Davinder said.

Regional port expansion in Singapore, Malaysia, Indonesia, Thailand and the Philippines will add at least 100 million twenty-foot equivalent units of new container-handling capacity over the next 20 years, with most of this planned along the Straits of Malacca.

“Although the new capacity will provide opportunities in terms of scale, there is a possibility of running into a supply glut and an ultra-competitive situation if trade growth does not keep pace.

“With China pursuing its ambitions through the One Belt, One Road plan, the prominence of the Straits of Malacca vis-à-vis global trade must be closely monitored,” she pointed out.
Source: The Star

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