Posted on April 15, 2024
Malaysia’s largest port, on the major sea route of Malacca Strait, plans to double its capacity over the coming decades, chasing neighboring hub Singapore as the shift in global supply chains adds to the competition in Southeast Asia’s logistics sector.
Port Klang, the world’s 12th-largest port and second only to Singapore in Southeast Asia in terms of capacity in 2021, plans to increase its annual capacity from 14 million twenty-foot equivalent units — a standard measure for container volume — to 27 million TEUs, with operator Westports Holdings investing 39.6 billion ringgit ($8.34 billion) over the coming decades.
“The whole expansion will take over 40 years, and the starting point is 2024,” Ruben Emir Gnanalingam, the executive chairman and group managing director of Westports, told Nikkei Asia in an interview. “Funding comes mostly through internally generated funds first, and then we’ve upsized our sukuk (Islamic bond) program to about 5 billion ringgit.”
Westports is a prominent port operator in Malaysia, with its net profit increasing 11% to 779.43 million ringgit in 2023. In December, Westports extended the concession period at Port Klang by 58 years, from 2024 to 2082.
The federal government approved Westports’ Port Klang expansion plan last August. The project at the port just southwest of Kuala Lumpur will include land reclamation along the coast to increase container terminal facilities from the current nine terminals to 17.
Reflecting Malaysia’s position as one of Asia’s manufacturing and commodity hubs, Port Klang handles products from electronics and palm oil to petrochemicals and automobiles. Its strategic location along the Malacca Strait is a significant advantage due to its proximity to the region’s main shipping route and its ability to accommodate large vessels owing to natural deep-water berths.
The expansion comes as companies rebuild their supply chains, including diversification away from China, to minimize risks arising from geopolitical tensions. “We believe the realignment will be focused on Southeast Asia, so the focus here is to expand [Port Klang] and to make sure we have the capacity for that growth,” Gnanalingam said, stressing that the region is one of the destinations for “China plus one” strategies of adding options outside China.
Gnanalingam noted the growing competition from neighboring countries along the strait like Singapore and Thailand. For example, Singapore’s Tuas Port was officially opened in 2022 and is set for completion in 2040 with a capacity of 65 million TEUs annually.
“We’ve been competing with [Singapore and Thailand] for the last 30 years. It’s no difference going forward. We have our advantages, they have their advantages,” he said, stressing that ports in Malaysia are more affordable in terms of the cost per container than some of their rivals.
The planned 665-kilometer-long East Coast Rail Line (ECRL), which will be completed by the end of 2026 and connect the port and the east coast of the Malay Peninsula, could also make Port Klang a more important hub in the country. On April 3, Malaysian Transport Minister Anthony Loke said the construction of the line is 64% complete.
Ruben Emir Gnanalingam, executive chairman and group managing director of Westports Holdings, speaks to Nikkei Asia during an interview.
To Gnanalingam, the ECRL will help spur the growth of the east coast states in peninsular Malaysia by placing more industries there. “Those industries will then have an outlet to send the cargo to Port Klang,” he said.
“We see the growth coming from ECRL, mainly from the industries that we’ll be setting up along the lines of the tracks. It will create lots of jobs but also create cargo, which can then be sent out to Port Klang,” he added.
With regard to Thailand’s land bridge proposal, which could potentially change the logistics landscape in Southeast Asia if realized, Gnanalingam said the project is not relevant and none of his customers seems very interested, so he does not believe it will pose any threat to the shipping market at the Malacca Strait.
“To use that as a … mode of logistics is totally illogical. The time it takes to unload, transport across and load again will take seven to eight days, so saving time is not there. The cost of unloading and reloading on the other side … is far more expensive than the vessel going around the peninsula,” he said.
“From a sustainability perspective, the carbon emissions you create by unloading, railing and reloading again is multiple times higher than the savings across. … None of our customers seem to be very bothered, because it won’t save them time, costs and carbon emissions.”
