Malaysia sees container spillover as shippers reroute from China

KUALA LUMPUR: Malaysian ports are expected to maintain high container volumes in the coming months, despite a 90-day 'grace period' granted by the United States to China for tariff renegotiations.
Maritime scholar and commentator Nazery Khalid said Malaysia has experienced positive spillover effects from US tariffs on China, particularly at its ports.
These ports have benefited from the rerouting of containers carrying finished and semi-finished goods originally destined for the US.
He told Business Times that many American importers, especially small and medium-sized enterprises (SMEs), are cancelling orders or refusing shipments from China. Consequently, these containers are either unclaimed at US ports or sent back.
Nazery explained that faced with higher costs, these SMEs prefer to abandon the cargo rather than absorb the tariffs or pass the added costs to customers, which could harm their businesses.
Concurrently, containers turned back or those that never leave China for the US are redirected to other countries, including Malaysia, which also imports many finished and semi-finished goods from China.
"This has resulted in several Malaysian container ports reporting an increase in throughput volumes in the months following the announcement of US tariffs on China.
"A large share of these containers comes from intra-Asian trade, mainly from Chinese ports, which dominate the list of the world's top 20 busiest container ports by volume," he added.
Nazery said while a rebound in US-bound containers from China is expected once the grace period ends, it is likely to occur towards the end of the third quarter of this year.
This is because shippers and shipping companies sailing from China to the US are 'frontloading' their cargoes and services ahead of the 90-day 'breathing period' expiry.
In the interim, he said Malaysian ports are likely to continue handling higher-than-usual container volumes over the next two to three months, until seaborne trade between the US and China stabilises following the disruption caused by the tariff standoff.
He noted that the 90-day window granted by the US expires in mid-August, making it unlikely for normal trade flows between the two economic superpowers to resume before then.
However, due to US President Donald Trump's unpredictability, it remains unclear what he will do after the 90-day trade embargo against China ends.
"Should he stick to his 90-day timetable, container bookings, shipping services, and freight rates in the Trans-Pacific trade between China and the US can be expected to rebound from current lows.
"Malaysian ports will likely cease to enjoy the purple patch of container spillover and return to handling normal container throughput volumes once order has been restored between the US and China," Nazery said.
*Seizing opportunity amid uncertainty*
Malaysia's maritime industry could face both challenges and opportunities if global supply chains shift due to US-led efforts to reduce reliance on China.
Nazery said Trump's administration could push American firms to "re-shore" production closer to home in a bid to revive domestic manufacturing and reduce their reliance on China.
He said that while such a change would take time, given the well-established global supply chain order that has taken decades to build, Malaysian exporters and logistics providers risk losing long-standing business with US companies seeking shorter, localised supply chains.
"Our ports and logistics service providers could also find themselves handling fewer US-bound cargoes should the re-shoring shift of suppliers from Asia Pacific or Southeast Asia to the US or to neighbouring countries or regions materialise," he added.
However, Nazery said the disruption could also drive Malaysian firms to innovate and climb the value chain. Rather than producing low-cost goods easily replaced elsewhere, he said local companies may focus on higher-value, specialised products.
"The US-China tariff war could also motivate Malaysian ports, shipping companies, and logistics service providers to upgrade their infrastructure and strengthen their human capital.
"This, in turn, would help them improve efficiency, productivity, service quality, and cost competitiveness, ensuring they remain relevant and are not bypassed, regardless of future developments," he added.
Regionally, Nazery said Malaysia can use its Asean chairmanship to drive several key initiatives.
These include boosting intra-Asian trade, deepening economic integration, and enhancing Asean's appeal as a destination for foreign direct investment.
He added Malaysia can also work to strengthen governance, reduce trade barriers, harmonise trade rules, and promote good regulatory practices and transparency.
"The decoupling of the US economy from China could become a powerful force that reshapes Asean," Nazery said.
"It may allow the region to fully realise its potential, assert itself as a significant player on the global stage, and demonstrate its readiness and resilience in facing shocks such as the tariff war and its geopolitical impacts."
*Strategies to boost maritime competitiveness*
To remain competitive in today's increasingly borderless, hyperconnected, and digitalised global economy, Nazery said Malaysia must transform into a more value-adding, knowledge-based, and innovation-driven economy.
He noted that despite Malaysia's strategic location and access to major shipping lanes, the country's economy remains heavily reliant on assembling low-value goods and exporting raw materials, missing out on downstream opportunities.
He cited national initiatives like the National Smart Manufacturing Plan under the New Industrial Master Plan 2030 and the National Fourth Industrial Revolution Policy as positive steps to automate and modernise manufacturing and enhance industrial capabilities.
However, he stressed that the critical success factors identified to attain the objectives of those plans must be executed steadfastly to ensure they are met.
These include establishing a supportive ecosystem that offers incentives, improves infrastructure, develops human capital, and promotes the adoption of Industry 4.0 technologies and solutions.
He added that policymakers, ports, shipping companies, logistics service providers, shipyards and other maritime industry players must work more closely together.
Their collaboration is essential to keep Malaysian ports attractive to global shipping lines and to strengthen the country's integration into global supply chains.
"In this way, we can shield ourselves better from the vagaries of the VUCA (vulnerabilities, uncertainties, complexities, and ambiguities) landscape and minimise the impact of game-changing global events like the tariff tiff, or even position ourselves to benefit from them.
"All these must be done without compromising the need to safeguard the environment, practise good governance, and adhere to international standards and rules, as long as they do not conflict with our policies and our national and strategic interests," Nazery said.

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