Timber industry affected by high freight rates

The timber industry is adversely affected by the unstable and high sea freight rates from Port Klang to Europe, says Timber Exporters’ Association of Malaysia vice-president Low Ching Cheong.

Low Ching Cheong ... ‘It is hard to pass the increased cost to clients as companies might face the risk of losing sales.

He said the freight rate to major European ports was currently about US$2,800 per 40-footer container and was expected to increase after the summer holidays due to peak season surcharge.

“The average freight rate to main European ports was about US$1,800 per 40-footer container in 2008. It went down to US$600 in June 2009 due to economic crisis but went up to US$3,200 in March before falling to the current level,” he told StarBiz.

Low said the freight rate to Middle Eastern countries had also increased due to the coming Ramadhan.
Low Ching Cheong ... ‘It is hard to pass the increased cost to clients as companies might face the risk of losing sales.’

“It is hard to pass the increased cost to clients as companies might face the risk of losing sales,” he said, adding that the timber industry was also suffering due to low demand.

He said the strengthening of the ringgit had also affected demand from Europe, which is among the key importers of Malaysian timber.

“The association hopes shipping companies will fix their freight rate every three months and stabilise it so that timber exporters can price it in their quotation to clients,” he said.

Century Logistics Holdings Bhd deputy managing director Dr Mohamed Amin Kassim said that 2009 was a tough year for the shipping industry as trade dropped dramatically and major shipping companies recorded heavy losses.

“Many shipping companies scaled down their operations last year to cut cost due to lower demand,” he said. When world trade started to pick up in November last year, shipping firms saw recovery and this resulted in the rise in freight rates.

Amin said traders that had benchmarked their costing based on last year’s freight rate would have to readjust their quotation. “This is a cycle in the shipping industry which has been happening over the last 50 years,” he said.

A spokesperson for a local timber firm said the company was still able to increase the selling price of its products due to the shortage of timber products and the increase in freight rates.

“The rise in freight rates has affected margins but can be covered by price adjustments,” he said.

By LEE KIAN SEONG
lks@thestar.comy