Red Sea Issues, US-China Trade Diversions To Continue Influencing Seaport, Logistics Sectors

KUALA LUMPUR, Jan 7 (Bernama) -- Kenanga Investment Bank Bhd has maintained its “neutral” stance on the seaport and logistics sector as the shipping diversion from the Red Sea continues to weigh down on global trade.

“However, we expect the domestic logistics sector to play a key role in connecting economies that benefited from the trade diversion due to the United States (US)-China trade tensions,” it said in a research note today.

The investment bank also noted that global trade would have to navigate stricter regulations on carbon emissions.

“Nevertheless, we continue to see a bright spot in the domestic logistics sector, benefiting from the booming e-commerce, the global tech upcycle driven by demand for artificial intelligence, and a resilient US economy.

“Apart from that, potential trade diversion amid US-China trade tensions and short-term surge in domestic ports’ container volume on frontloading activities ahead of potential US tariff revision would also benefit the domestic logistics sector,” it added.

The investment bank cited the World Trade Organisation (WTO) report in October 2024, where the WTO reduced its projection for 2025 global merchandise trade volume growth to 3.0 per cent from 3.3 per cent previously.

The projection was based on the lower water levels in the Panama Canal due to an extreme drought that has been disrupting the movement of shipping liners, and the potential escalation of Middle East conflicts.

Kenanga noted that the logistics sector is set to benefit from the e-commerce boom, with the domestically driven third-party logistics segment gaining a significant boost, being less vulnerable to external headwinds.

“The booming e-commerce will spur demand for distribution hubs and warehouses to enable just-in-time delivery, reshoring/nearshoring to bring manufacturers closer to end-customers, efficient automation system (including interconnectivity with the customer system) and warehouse decentralisation to reduce transportation costs and de-risk the supply chain.

“There is also strong demand for cold-storage warehouses on the back of the proliferation of online grocery start-ups,” it added.

It also noted that Malaysian ports’ container growth volume is expected to remain in single-digit growth due to China projecting slower economic growth in 2025, although this will be partially offset by the potential trade diversion amid US-China trade tensions.

-- BERNAMA