Favorable outlook for Malaysia’s shipping sector in 2022

Freight rates will remain high.

The outlook of the Malaysia’s shipping sector for 2022 is favorable especially for container, dry bulk, tankers and offshore support vessels (OSV) segments, said newly-appointed chairman of Malaysia Shipowners’ Association Mohamed Safwan Othman.  

Mohd Safwan attributed the positive outlook of the sector for next year to several factors.  According to him, demand for containers, drybulk carriers, tankers and OSV segments is increasing despite concerns about the rapid spread of the Omicron coronavirus variant globally. 

“The market is picking up even though there was a slight bump caused by the fear of Omicron variant. We predict it (Omicron variant) will have minimal impact on the shipping sector,” he told Maritime Fairtrade.

Mohamed Safwan Othman, chairman of Malaysia Shipowners’ Association.

As the supply of vessels is still low, this situation creates a shortage of vessels in the container, dry bulk, tankers and OSV segments.  Hence, he predicted that freight rates will remain high, firm and strong next year but will be quite the same from 2021. “Most likely the rates will still be high but quite stagnant from 2021,” he added. 

On the challenges for the shipping sector in 2022, Mohd Safwan said that the main one would be to increase the number of vessels in the market as it will be difficult to secure financing, particularly with stricter environmental criteria.

“The main challenge is to get more vessels in the market as financing will be tough especially with the ESG requirements,” he said.

Mohd Safwan also said that the high freight rates in 2021 is expected as the supply of vessels are limited. He noted that the disruptions in the supply chain due to the Covid-19 pandemic has also been a contributing factor to the surge in the freight rates this year. 

“It is quite expected. But I’m quite surprised by the rapid increase of rates for 2021,” he added.

Mohd Safwan, who is also the president and group managing director of Dinastia Jati, said that the company plans to acquire dry bulk carriers in the near future. According to him. Dinastia Jati currently owns a substantial number of OSVs.

“Our plan next year is to focus on our expansion in the OSV area and dry bulk segments,” he said. 

High freight rate, strong demand

Meanwhile, industry players foresaw that the dry bulk and container markets may remain stable in 2022 and container rates are likely to remain high until at least the first half of 2022.

Harbour-Link Group foresaw the freight rates for both domestic and Intra Asia Trade to remain stable throughout its financial year ending 30 June 2022. 

“Container liner service shall remain as our key contributor to our shipping and marine division. Based on current strong domestic demands and favorable freight rates, we are likely to maintain favorable results in this financial year,” it said in a filing to Bursa Malaysia last month. Harbour-Link provides container shipping liner service within the Malaysia and Intra Asia market. The company has a total number of 12 container vessels with a total capacity of 6,200 TEUs. 

MISC said in a filing to Bursa Malaysia last month that the prolonged impacts of the Covid-19 pandemic and OPEC+ production cuts continue to have an adverse effect on the petroleum shipping market, especially in the crude sector. The company added that the tanker market is expected to see some modest improvement towards winter, although risks to the market outlook still remain.

MISC also said that the medium-term prospects remain positive for the tanker market, with likely improvements focused towards the second half of 2022 whereby tanker demand is projected to return close to 2019 levels, driven by OPEC+ phased supply increases and continued economic recovery. 

Malaysian Bulk Carriers expected freight rates to remain volatile next year with global growth likely to slow down from that of the current year. “Whilst port congestion and logistics inefficiencies are still present, we expect freight rates to remain volatile going into 2022 with global growth likely to slow down from 2021 levels,” it said in a filing to Bursa Malaysia last month. 

The company also said that seaborne dry bulk trade is expected to grow at 1.7 percent in 2022. “This rebound in the dry bulk market has seen freight rates hit a decade high and this has been exacerbated through stringent Covid-19 protocols enforced at various ports, particularly in China, creating supply chain bottlenecks,” it said. 

However, the company said dry bulk charter rates have softened notably since late October, with China restricting steel output as well as imposing a cap on coal prices for domestic suppliers.  

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