KUALA LUMPUR (Jan 15): The Federation of Malaysian Manufacturers (FMM) advised Malaysian importers and exporters to brace for potential challenges, such as limited supplies of empty containers, due to the escalating security crisis in the Red Sea.

FMM president Tan Sri Soh Thian Lai, in a statement issued on Monday, expressed deep concern over the Red Sea situation that led major shipping firms to reroute vessels around the southern tip of Africa.

Soh said this rerouting, and extending voyage times by one to two weeks, is expected to significantly raise freight rates, impacting exports to North Africa, the Middle East, and Europe, with anticipated delays in ships returning to Asia.

The year 2023 was not an easy one for businesses. With interest rate hikes up to 3% while inflation remained above its long-term average since the pandemic, businesses had to fight against currency fluctuation and gain a competitive advantage in the market to survive.

Thus, Soh emphasises the need for Malaysian shippers to strategically adjust to safeguard supply chains and minimise the impact of the Red Sea situation to better meet customer demands.

Given fluctuating freight rates and uncertain transit times, Soh urges shippers to plan container bookings and shipping schedules at least one month in advance for affected markets.

For non-time-sensitive goods, Soh recommends waiting until the first few weeks of February during the Chinese New Year holiday, as freight costs are expected to decrease during this period.

Soh also calls on shipping companies to honour pre-booked freight rates for Malaysian shippers without adjustments.

"Any announcement of new increases in freight rates or introduction of surcharges should be communicated transparently and negotiated directly with shippers to allow exporters to plan and negotiate with their importers," he said.

He also encourages manufacturers to shift dependence to Asean through nearshoring and sourcing within the region. He suggests that manufacturers consider combining different modes of transportation, including sea, air, rail, and road, to optimise shipping routes, reduce delays, and lower shipping costs.

Soh added that potential disruptions to shipping, coupled with other threats like extreme weather events or geopolitical tensions, may further impact global supply chains in 2024.

Thus, he urges the Malaysian government to monitor the situation closely to prevent escalated impacts on businesses and the economy, and Malaysian manufacturers should remain vigilant and proactively plan their operations.

https://www.theedgemarkets.com/node/697345