‘Imports not impacted yet’ | The Star

PETALING JAYA: Imports arriving into Malaysia are yet to be impacted despite global trading activities facing a hiccup – in view of a drought at the Panama Canal and the violence linked to the Israel-Hamas war near the Suez Canal, say local shipping associations.

However, they warn that should the issues prolong, it may spell higher costs for consumers.

“Christmas (imports) is a done deal, so no issue there. For Chinese New Year, the trade between Malaysia and China doesn’t go through the Red Sea,” said Shipping Association Malaysia (SAM) vice-chairman Thum Hoong Yip.

This meant that Malaysian consumers should not worry at least until the Chinese New Year celebration in February next year, he said.

However, he warned that the crises at these two important canals would result in consumers bearing higher costs of goods, especially since Malaysia still relied on imported goods from the west.

“For the long haul, we will see a shortage of supply chains. There will be delays and we will have to bear higher costs since the trading route needs to be changed from the Suez Canal to other channels,” he said when contacted yesterday.

It was reported that shipping in the Red Sea is grinding to a halt, threatening the global economy.

Last week, over 100 container ships have been rerouted around South Africa’s Cape of Good Hope to avoid the Suez Canal.

This is a direct impact of the Israel-Hamas war, where Yemen’s Houthi rebels have attacked ships in response to Israel’s bombardment of Gaza.

On a yearly basis, about 19,000 ships navigate the Suez Canal, making it one of the world’s key routes between Asia and Europe.

And the Panama Canal, which is another vital ocean-to-ocean waterway, is being severely restricted by drought.

Reports revealed that water levels at the Panama Canal are too low for the transoceanic canal to function normally.

As a result, the drought is forcing transit reductions, thus impacting the supplies of a wide range of goods.

In normal conditions, Panama can take up to 36 slots a day for ships to pass the canal – but that number has been reduced to 22 in early December and 24 by mid-December, according to the Panama Canal Authority.

Thum said a prolonged drought in Panama and war in the Red Sea would see a similar crisis as what the world witnessed during the Covid-19 pandemic.

“The disruption (in shipping route) will create a shortage of supplies and the freight rate will go up again. Shortage, delays and higher costs, all these will have cascading effects.

“Going through other routes will result in longer sailing time, which means the cost will escalate because longer delivery time means higher cost, and this will create a vicious cycle.”

According to reports, the twin crises of Panama and Suez Canals saw freight rate increasing, with more than 180 ships rerouted away from the Red Sea while the reduced number of ships in Panama are causing delays in global supply chain.

Malaysia Shipowners Association chairman Mohamed Safwan Othman said shipping companies are coping with the situation as best they can although the geopolitical instability in the Red Sea has left many questions unanswered.

What’s more concerning, according to Safwan, is the “discrimination” of vessels that are allowed to pass through the Panama Canal.

“As a member of the Asian Shipowners’ Association (ASA), we have voiced our concerns back in August about the differing treatment of vessels passing through the (Panama) Canal according to their type.

“This surely is frowned upon as certain types of vessels must wait for a longer time,” he said.

As a result of the delays at both canals, Safwan said prices of goods would increase as any cost incurred in the supply chain would eventually be passed down to consumers.

“The ASA and International Chamber of Shipping (ICS), representing the industry, have relayed the displeasure of the toll pricing structure applied by both canal authorities, asking for a dialogue to address the situation.

“As industry players, we control what we can. The industry hopes for safe passage done smoothly at a competitive cost.”

Small and Medium Enterprises Association of Malaysia president Datuk William Ng said since most imports into Malaysia went through the Melaka Strait and exports were transhipped via Singapore, disruption in trade for the country was minimal – provided that the disruptions do not prolong well into 2024.

“Consumers will get to enjoy their Christmas and next year’s Chinese New Year celebrations as there is unlikely any major disruption in supplies.

“These (Panama and Suez Canal) incidents are another clarion call for businesses, especially SMEs, to diversify the source of their imports as well as their client base,” he said.

Consumers Association of Penang president Mohideen Abdul Kader cautioned Malaysian consumers about the continuous rising prices of goods.

He said this was unavoidable since Malaysia is depending on imported goods instead of being self-reliant.

“When ships are not able to go through the Red Sea, transportation cost will go up – which means prices of everything else will go up too,” he said.