BMI View: Moderate Growth, Downside Risks Inching Up Two forces appear to be pulling the Malaysian ports and shipping industry in different directions this year. On the downside, the world economy remains somewhat troubled, and global demand has weakened. This means that Malaysian GDP and foreign trade growth is slowing down in 2012 compared to 2011.
BMI predicts GDP growth at 3.3%, down from 5.1% last year, for example. But on the upside, the country''s major ports (Port Klang and Port Tanjung Pelepas) continue to outperform for a variety of reasons. These include greater reliance on intra-Asian and local trade, which have performed better than global long-haul trade routes; the impact of fairly aggressive capacity expansion programmes; and relative success in attracting and retaining the custom of major shipping lines. As a result of these countervailing forces, we are holding our main projections unchanged compared to our last quarterly report. At both ports we see bulk cargo and container traffic staying up in the high single digits in percentage growth terms.
Headline Industry Data
- The real value of Malaysia''s total trade will rise by a predicted 3.4% in 2012, a slowdown on the estimated 4.5% expansion experienced in 2011.
- Total cargo volume handled at Port Klang will rise by 7.7% to 197.70mn tonnes in 2012, while volume at the Port of Tanjung Pelepas will rise by a slightly higher 8.2% to 130.09mn tonnes.
- Box traffic at Port Klang is projected to rise 8.3% to 10.34mn twenty-foot equivalent units (TEUs), while at the Port of Tanjung Pelepas a gain of 6.1% to 7.33mn TEUs is expected.
Key Industry Trends
Westports Expects To Handle Over 7mn TEUs The chairman of Westports Malaysia has delivered an upbeat message despite the sluggish global economy, saying he expects the privately-owned terminal will handle 7mn twenty-foot equivalent units (TEUs) this year, up from 6.5mn in 2011. He also underlined the importance of the company''s US$1bn investment programme, which among other things involves the completion of four new terminals by 2016, to add to the five already in operation.
Maybulk Experiences Hard Times Malaysian Bulk Carriers (Maybulk) has been hit by plummeting dry bulk freight rates. In 2011 net profit was down 61.7% to MYR91.3mn due to lower charter rates, while revenue fell to MYR256.3mn from MYR404.2mn in 2010. Revenue from the company''s dry bulk segment was down 39% year-onMalaysia year, reflecting the fact that the Baltic Dry Index averaged US$1,549 in 2011, versus an average of US$2,758 in 2010. BMI believes operating conditions will remain very tough for the company in 2012.
Tanjung Pelapas To Buck Global Trends? Despite the rather gloomy performance of the global economy, we think there are some upside risks to our forecasts for the Port of Tanjung Pelapas (PTP), the second largest in the country after Port Klang. PTP cargo turnover grew 15% in 2011, above the industry average of 7%, and officials believe it will outperform again in 2012 with growth of 11%. BMI notes however, that these projections depend on the successful completion of a number of expansion and development plans.
Key Risks to Outlook
In our last quarterly report we identified two downside risks to our freight forecasts: first, a sharper-thanexpected slowdown in global economic growth; second, domestic political risk factors associated with the impending Malaysian general elections. We continue to believe these are the most significant risks, but in reverse order. We think domestic political risk factors have moved up to the forefront. This is due to increased speculation that the government may call early elections, perhaps as early as mid-2012 (under existing regulations, elections must be called no later than March 2013). The risk is that during an election campaign the business community will take a ''wait and see'' attitude, and perhaps put investment projects on hold.
However, we have to say this is a relatively small risk, given that we do not expect any fundamental changes in economic policy; we also believe the balance of probabilities is that the ruling Barisan Nasional (BN) party will be re-elected.
As for the second risk - a sharper than expected global economic slowdown - we think it remains present, but its importance is beginning to wane a little. The eurozone financial crisis continues to weigh on business confidence, and the Chinese slowdown is of concern because of its impact on Malaysian exports. But as time goes on, the US economy is showing signs of emerging from recession and there seems to be scope for some cautious optimism about 2013.