An extract from the Port Economics, Management and Policy website reads below:
Due to geography, geopolitics, and trade flows, specific locations play a strategic role in the global maritime network. They are labeled as chokepoints and can be classified into two main categories:
- Primary chokepoints. The most important is that they offer limited cost-effective maritime shipping alternatives, which would seriously impair global trade if disrupted. The first type of chokepoints concerns connectors along major oceans and seas. Among those are the Panama Canal, the Suez Canal, and the Strait of Malacca, which are key locations in the global trade of goods and commodities. The closure of these bottlenecks would force the diversion of maritime traffic over long distances with the associated loss of time and capacity.
Of late, the Panama Canal is running dry and water is at critically low level for the waterway to operate. The lack of rain due to the El Nino phenomenon has resulted in the second driest season in the canal's 110 year history. [read BBC here].
According to IMF blog, Panama Canal saw trade fell by 32% in the early part of 2024. Larger still is Suez Canal, by 50%. Since late December 2023, Suez Canal and Red Sea are under threat. Houthi rebels from Yemen attacked ships in response Israel's bombardment of Gaza and so-called retaliation to Hamas rocket attacks.
Ships were diverted through the Cape of Good Hope and it added 6,000 nautical miles to journey. Situation may worsen with Israel seemed destined to attack Hezbollah in Lebanon and the possible confrontation with Iran.
If that is not problematic enough for international trade, the Straits of Melaka recently faced a massive congestion.
‘Help deal with shipping congestion’
By KHOO GEK SAN
Nation
Tuesday, 06 Aug 2024
PETALING JAYA: Manufacturers and exporters were caught in a race against time after the US tariff deadline on Aug 1 for Chinese goods had passed.
The region experienced a surge in shipping traffic when the US Trade Representative’s office announced that increased tariffs on a range of Chinese imports, such as electric vehicles, computer chips, and medical products, would come into effect on that date.
The Federation of Malaysian Manufacturers (FMM) reported that since April, vessels have taken an average of three to five days to berth in these ports due to high yard density, with feedback from members indicating a growing sense of urgency to resolve the issue.
ALSO READ: Port Klang on track to normalcy after months of delays
A key factor in the delays, said FMM president Tan Sri Soh Tian Lai, was Singapore’s port congestion, with ships waiting up to five days to berth.
He added that this led to some ships diverting to Malaysian ports, which exacerbated the congestion here.
“The impact of these delays is multifaceted, leading to punitive detention and demurrage charges for businesses as containers and storage exceed the ‘free period’ allowed by shipping lines and terminal operators,” he said when contacted.
The FMM, whose members import raw materials, intermediary goods and machinery parts, as well as export semi-finished and finished products, is calling for immediate support.
They want shipping companies to grant additional free days for detention and demurrage, and for terminal operators to extend the free storage period to better accommodate shippers’ planning needs.
ALSO READ: Look to Asean amid trade choke points
Congestion can occur in two ways. The first relates to vessels arriving at ports like Singapore only to find no available berths.
Due to full capacity at the docks, ships must wait at the anchorage, unable to offload or unload cargo. This berthing congestion represents just one part of the gridlock facing the shipping industry.
The second aspect of congestion concerns landside operations at the ports, specifically at the container yard (CY) when importers or exporters attempt to collect or deposit containers. The congestion at the CY can lead to significant delays in moving cargo in or out of the port facility.
Shipping Association Malaysia chairman Ooi Lean Hin said the congestion at Malaysian ports was caused by the situation in the Red Sea as well as the US government’s import tariffs on goods from China.
“So much of the capacity and containers have been allocated to the trade between China and the US.
“This shift disrupts the rest of the world because capacity is being redirected to service the US market,” he said, adding the reallocation had caused excess cargo volumes to be “dumped” into transit hubs like Singapore and Port Klang – leading to a bottleneck that affected yard capacity and disrupts key port operations.
Ooi, however, said this bottleneck is expected to be short-lived.
The situation should normalise post-August as ports increase their resources to expedite the clearance of ships, he said, adding that calls by Malaysian shipping companies that they be given priority at the ports could safeguard the country’s supply chain.
While acknowledging that traffic has eased significantly since the onset of August, the Malaysia Shipowners’ Association said vessels en route to Singapore and Port Klang had experienced significant delays of five to seven days in the last two months.
“The situation in Singapore and Port Klang is easing off, but challenges remain at other ports such as Kota Kinabalu and Bintulu due to a combination of factors including weather conditions, infrastructure limitations and productivity issues.
ALSO READ: Busy trade route a magnet for nautical incidents
“Last month, the congestion in Kota Kinabalu was so severe that ships waited for more than seven days,” a statement from the association read.
Federation of Malaysian Freight Forwarders president Datuk Tony Chia Han Teun said the situation has been improving since July 24.
There has been a significant decrease in berthing delays, with Westport expecting a 17-hour wait and Northport seeing a 12 to 18-hour hold-up, he said.
“We’re navigating through a crisis but the situation is looking up. We’re optimistic that by the end of this month, things will have significantly improved,” he said, adding that Malaysian ports have experienced an unexpected boom due to diverted ship calls.
This advantage, however, is temporary, as the influx of containers from these diverted vessels consists primarily of transhipment cargo rather than local imports.
While Malaysian ports can accommodate the additional cargo, Chia said handling of the extra load should not disrupt local import and export activities.
Generally sea lanes in the Straits of Malacca and the Indonesian Archipelago are critical. The nearest secondary checkpoint in the region is the Sunda Straits. There is also the Straits of Macassar and Lombok Straits in Indonesia.
FMM has this advise to importers and exporters, reported Star Online below:
Look to Asean amid trade choke points
Nation
Tuesday, 06 Aug 2024
PETALING JAYA: Pivot your exports and imports to the Asean market and refine your business strategies to cope with congestion at the ports, the Federation of Malaysian Manufacturers (FMM) has urged local manufacturers and shippers.
Citing the region’s diverse economic development levels and industry specialisations as a robust alternative given current geopolitical uncertainties, FMM said it is important to leverage agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), to which several Asean countries are signatories.
ALSO READ: ‘Help deal with shipping congestion’
Malaysian companies should also explore multimodal transportation options and encourage manufacturers to integrate sea, air, rail and road transport to minimise delays and costs, it said in a statement.
“While air freight may not accommodate large cargo volumes, it can significantly reduce transit times for urgent high-value shipments.
“With the Red Sea crisis potentially exacerbating global supply chain disruptions that could be intensified by extreme weather events or geopolitical tensions, the FMM has called on the Malaysian government to closely monitor the situation to prevent further burdens on businesses and the economy.
“Malaysian manufacturers must stay alert and proactively plan for resilience amidst ongoing supply chain turbulence,” it added.
Timely to revisit this blog's June 28th posting entitled "ASEAN rail network, Kra landbridge, and JS-SEZ". More so, in view of Anwar's recent meeting with Thai Prime Minister, Stretta Thaivisin in Golok last week.
Malaysia should seek for area of cooperation with Thailand on the planned Kra landbridge.
If the current occurance on the Straits of Malacca becomes a permanent phenomenon, an alternative to Singapore, Penang and Klang ports is imminent. The landbridge serve to relieve the congestion at the Straits of Malacca and offer a new East-West sea route.
New trade routes are springing up everywhere. Ports are springing up in Kyaukpyu, Myanmar and Gwardar port, Pakistan as part of the BRI. Already India and Russia is building the 7,200 kilometre International North-South Transport Corridor.
In 2018, Turkey unveiled a controversial plan to build the Kanal Istanbul, the second route between the Black Sea and Sea of Marmara to relieve the busy Bhosphorus Straits. The project is already on-going.
Even Israel have a Ben Gurion canal plan as alternative to the Suez Canal. Follow the money to track the motivation for the Gaza genocide.
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