Southeast Asian ports hopeful of post-pandemic surge in breakbulk demand

Now that the lockdowns and restrictions linked with the pandemic are being gradually relaxed or even phased out in many parts of the world, Southeast Asian ports are hoping that this will give a strong impetus to cargo traffic, including the breakbulk segment.

Indeed, many in Southeast Asia discern a propensity towards breakbulk, heavy lift cargo, etc., as costs of container shipments have soared exacerbated by supply chain disruptions that have caused considerable distress to both shippers and their importers.

“For some of us shipping to the U.S., the chaos and long delays in shipment clearances at some American ports gave us sleepless nights and there was a general feeling that we have to look for alternatives that would ensure smooth trading,” said Mark Nguyen whose company organized shipments from Vietnam to the West Coast last year.

Energy Sector Growth

Experts predict that growth in Southeast Asia’s energy sector will drive breakbulk demand with operators relying on heavy lift services and complex logistics, as the maritime dedicated Wallem Ship Agency has been saying. Demand for wind turbines is expected to remain strong, even though some bottlenecks in traffic would continue to push freight rates in the ASEAN (Association of Southeast Asian Nations) region.

After the pandemic downturn, Southeast Asia appears to be on the path to becoming one of the world’s fastest recovering regions – Malaysia’s GDP, for example, rose 14.2% in the July-September 2022 period from a year ago, according to Bank Negara Malaysia - and some pundits predict that Southeast Asia is well positioned to drive growth in the cargo sector.

Southeast Asia has major energy sector-related projects that are either in the pipeline or already completed; these are expected to benefit the breakbulk segment. These projects – one example is Singaporean developer Sunseap’s floating solar farm and energy storage facility on the Indonesian island of Batam - are considered to be crucial for generating strong demand for breakbulk handling.

The Philippine conglomerate Ayala is building five wind farms in Vietnam. The projects, to be developed by its subsidiary AC Energy, are expected to deliver a combined capacity of 440 megawatts once fully operational. “As turbine and project sizes grow, we expect an increase in demand for all types of multipurpose vessels and general cargo ships,” predicts Oscar Guzman, Filipino analyst who closely monitors energy trends in Southeast Asia.

Overcoming Bottlenecks

But many also see challenges facing breakbulk operators in the region. Though significant improvements have been made, there are still major bottlenecks in inland transport infrastructure in Southeast Asia, as firms frequently need to build their own connecting solutions which can raise the overall costs. Handling breakbulk cargo in these countries requires specific resources. The inland logistics challenges can often be an area that is overlooked.

ASEAN representatives are aware that the 10-member nation grouping has considerable work to do to raise and upgrade its infrastructure which will benefit breakbulk and project cargo service providers. Infrastructure development will drive growth in all cargo segments transported between Southeast Asia and China which has emerged as the ASEAN region’s biggest trading partner.

An uneven level of infrastructure is noticeable between individual ASEAN member states; an example of this uneven level of infrastructure development can be seen in Indonesia and Malaysia. Indonesia has about 10 times the population of Malaysia, but only one-tenth of the infrastructure; Indonesia has a lot of catching up to do. Logistics experts say that Indonesia will need to ship large volumes of equipment and this, in the final analysis, means that it will be relying heavily on breakbulk services.

Indonesia has already been importing large volumes of capital equipment, goods, and big bulk materials for infrastructure programs, according to ASEAN shipping experts. This trend is also visible in other neighboring countries such as Vietnam, Malaysia, and Cambodia.

The ASEAN member countries also need to further strengthen cooperation with each other in port matters. This aspect was underscored during the 41st Working Committee Meeting (WCM) of the ASEAN Ports’ Association (APA) held in July 2022 and hosted by Vietnam, with participants from Brunei, Cambodia, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

The WCM chairman, Nguyen Uyen Minh, who is also the deputy general director of the Saigon Port Authority, emphasized the need for close cooperation among APA members to overcome the difficulties resulting from the continuing effects of the pandemic, the Ukraine invasion, soaring fuel and freight costs, and rising inflation.

Le Tuan Anh, Director General of the International Cooperation Department, Ministry of Transportation of Vietnam, urged the APA to assume more responsibilities and obligations in promoting sustainable development of the maritime and ports community in the region.

ASEAN Ports

While Singapore’s port is the biggest in the region and, in fact, one of the five top ports of the world, Malaysia is working towards strengthening its position in the region, projecting itself as the “Gateway to the ASEAN market”, and highlighting its location at the confluence of the intercontinental and intra-Asian maritime trade routes through the Strait of Malacca.

In an interview with the American Journal of Transportation, Nelson Samuel, the director of the New York office of the Malaysian Investment Development Authority, which promotes investment to Malaysia, emphasized Malaysia’s “crucial shipping and distribution location” in the ASEAN region. “Malaysia has one of the biggest port facilities in the world, besides being a transshipment hub of the Asian region and a preferred point of entry into the ASEAN market,” he said.

Malaysia’s top two ports, Port Klang near Kuala Lumpur, and the Port of Tanjung Pelepas (PTP) in Johor, are expected to boost their capacity to support the growth recorded by Malaysian ports, thanks to strong demand for commodities and other products. Port Klang deals with exports of commodities such as timber, automobiles, rubber, liquid bulk such as latex, palm and coconut oil, petroleum goods, fuel, and containerized goods. It handles imports of steel coils, rods, wires, billets, fruits, grains, machine equipment, etc. However, the PTP in Johor, though posting strong growth in cargo shipments, deals mainly with containerized goods.

While Port Klang and PTP primarily serve East-West routes such as China to Europe, Penang Port’s focus is mainly on the Bay of Bengal. A multifunctional port, it deals with all kinds of conventional cargo, dry and liquid bulk, apart from containers. The setting up of new factories in Penang could help drive exports and shipment.

“Johor port, situated at the southern tip of the Malaysian Peninsula, near Johor strait, is an important maritime gateway for the country as it lies in the industrial region of Pasir Gudang which houses major industries like engineering, petrochemicals, electrical goods, furniture, and packaged food,” the MIDA director explained.

This multipurpose port deals with all kinds of cargo through its numerous dry bulk, liquid bulk, and container handling facilities. The port is famous for its expansive storage space for keeping palm oil and is a major exporter of petrochemical goods.

“Ports are crucial for Malaysia’s foreign trade and its export-oriented economy. Malaysia’s maritime industry contributes about 40% to the country’s GDP and more than 90% of Malaysia’s trade is seaborne,” Samuel said.