KUALA LUMPUR (Sept 23): Penang Port's container throughput this year will likely be lower than expected as the ongoing Red Sea crisis continues to disrupt global shipping routes.

Operated by MMC Corp Bhd's Penang Port Sdn Bhd, Penang Port anticipates losing 50,000 to 60,000 twenty-foot equivalent units (TEUs) off its earlier projection of 1.55 million TEUs for 2024 due to the crisis. For 2023, Penang Port's TEUs stood at 1.44 million.

"We don't think [the Red Sea crisis will be] going to go on forever,” said its chief executive officer Datuk Sasedharan Vasudevan. “Once everything is restored, or if the northern region finds excess capacity coming into the market — more ships and more containers — we believe it may stabilise by next year."

The so-called Red Sea crisis began when Iran-backed Houthi militants in Yemen launched missiles and drones against Israel in October 2023 following the invasion of the Gaza strip in Palestine. Since then, Israel and Hezbollah have stepped up attacks on each other. 

The crisis, which intensified in April, has forced major shipping companies to reroute vessels around the Cape of Good Hope, bypassing the Red Sea, one of the world’s most crucial maritime channels that links Asia to Europe, the Mediterranean, and the east coast of the US via the Suez Canal.

The Red Sea accounts for around 15% of global trade, and the diversion of vessels has increased transit times and operational costs, affecting supply chains and port activity.

For this year, Sasedharan said Penang Port is exploring further alternative markets and shipping routes less affected by the crisis, which includes opportunities in the Bay of Bengal and North Sumatra, where the port has introduced incentives to attract transshipment business.

“We’ve seen significant growth in the Bay of Bengal this year, with transshipment activity doubling,” with the potential throughput of 8.1 million TEUs, Sasedharan said. “We are also looking to further tap into the North Sumatra market.”

Meanwhile on its tariff, the port operator said it has submitted a request for a further increase to help mitigate the rising operational expenses, but the approval process is still pending.

"One of the disadvantages is that our tariffs only get revised every five to seven years, so by the time the cost base has changed — like electricity prices going up and water costs rising twice this year — our margins are affected," Sasedharan added.