63% decline in average container prices from $5250 in February 2022 to $1930 in June 2022

Hamburg, Germany, 26 August 2022: Malaysia is witnessing a record dip in average container prices as the trade continues to show strong growth in the country. According to the Department of Statistics, the trade flow in Malaysia unanticipatedly saw double-digit growth in imports and exports of 37.3% and 30.5% y-o-y respectively, contrary to the subdued growth it saw last year. This is a great development for the container logistics industry as shippers and exporters could benefit from these declining container prices and leasing rates while the trade grows.

“The growth of containerized trade in Malaysia indicates a favorable trade environment for shippers and exporters in the country. This comes at a time when the industry witnessed perils of reliance on linear supply chains over the past two years. For global container shipping companies that are looking to diversify their cargo trade lanes from linear to more distributed (diversified) routes, Malaysia becomes a strong contender, more so for a China plus one strategy in the long term” said Christian Roeloffs, cofounder and CEO, Container xChange.

“The growing possibilities of adding more countries like Malaysia to container trading routes will reduce the dependence of container trade on only one or two countries, therefore reducing the risks of geopolitical and economic volatility on supply chains. These risks have so far been the cause of supply chain disruptions over the past two years. Therefore, it is at a very opportune time that Malaysia is emerging to become a strong contender for a China plus one strategy to build more resilient supply chains. This is helping in distributing the risks and at the same time source the same component from multiple regions which will further split up the supply chain demands.” he further added.

Riding on the wave of increasing trade volume in the country, local logistics companies saw promising growth indicating a strong diversification and dilution of dependence on bigger shipping and logistics firms. The adoption of end-to-end logistics solutions by local firms has provided them an opportunity to put themselves on the preferred trade partners’ map.

Peak Season shipping picking up pace; small trade networks to ease the chaos

While China-US trade routes will still be significantly massive, smaller trade networks will increase to other countries in Southeast Asia, countries potentially in Africa and South America, who will pick up some of this uncertainty and some of the volume that now gets diverted from the big supply nations. This will be a very gradual process. And again, it doesn’t mean that freight demand from China will decrease now, but it might not grow as much anymore.

The implications of the emergence of smaller trade networks will decrease the importance of the model of a few stops in China, then crossing the Pacific, then a few stops in the US, and then going back.

“For example, more stops in Southeast Asia, then all of this goes into, let’s say, Singapore or Hong Kong in a major hub and then re-export to across, for example, the Pacific. That again, not only increases intraregional traffic but also increases the importance of these transit hubs, which will need to build up further capacity to cope with the demand. And then lastly, it will increase the importance of smaller players in the market, and that can be smaller feeder operators and can be smaller who basically pick up this intra-regional traffic or even the transpacific traffic. But that doesn’t start from the big hubs, depending on the network model of the carrier.” added Roeloffs.