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[SINGAPORE] Ports across South-east Asia are riding a second wave of a “great reroute”, buoyed by a fresh swell as businesses give Beijing a wide berth to dodge US tariffs – adding to earlier gains when companies adopted the China-plus-one playbook.

US President Donald Trump’s latest tariff blitz, albeit dialled-back temporarily, has sent businesses rerouting their shipments, with pundits The Business Times spoke to agreeing that ongoing supply chain shifts are putting wind in the sails of South-east Asia’s ports – the backbone of global trade.

But the region’s rising shipping volumes are straining ports, with infrastructure gaps and pandemic-era congestion resurfacing as shippers rush to beat the tariff clock.

S&P Global Ratings analyst Yang Shanshan noted that since the tariffs were introduced, the China-US throughput has naturally faced the largest drops, while the largest boost was seen on routes between China and South-east Asia.

Ports in Vietnam, India and Malaysia are clear beneficiaries, recording double-digit volume growth, said Praveen Gregory, senior vice-president for ocean freight at DHL Global Forwarding Asia Pacific.

“Smaller ports like Thailand’s Laem Chabang are also gaining traction for niche sectors like automotive parts,” he highlighted.

Earlier, the US slapped on China goods an overall tariff of 145 per cent, which has since been cut to 30 per cent after a trade deal was brokered from weekend trade talks in Geneva.

South-east Asia earlier faced levies ranging from a baseline 10 per cent to as high as 49 per cent, until Trump on Apr 9 announced a 90-day pause on these reciprocal taxes.

While some companies adopted a wait-and-see approach by utilising existing inventory to meet demand or frontloaded orders to ensure sufficient stock on hand, others are changing their sourcing networks where possible, in the short term, added Gregory.

“This can be seen from the surge in demand for alternative sourcing hubs like Vietnam, India and Mexico,” he noted. “We have also seen an increase in transhipment through South-east Asian hubs like Malaysia.”

Despite an additional one to three days in transit times, companies are still pivoting to such regional transhipment hubs as they hunt for alternatives to bypass direct China-US routes, said DHL’s Gregory.

Similarly, Flexport’s vice-president for global ocean procurement Nerijus Poskus pointed out that the tech-focused logistics management firm is seeing a “notable increase” in requests for quotations originating from Vietnam, Cambodia, Indonesia, Malaysia and Thailand.

“Haiphong is experiencing an increase in direct service offerings, particularly on Transpacific routes,” he said of the Northern Vietnamese port city.

Transpacific Eastbound trade lane

Poskus added that the wider China’s market share of US imports along the Transpacific Eastbound (TPEB) route – a trade lane that stretches across the Pacific Ocean between Asia and the US, and arguably the most important to American importers – has gradually been declining.

The market share of China, Hong Kong and Taiwan combined fell to 61.7 per cent in the year to date, from 62.8 per cent last year and 74.6 per cent in 2016, he said.

Meanwhile, Vietnam’s share of the TPEB market grew to 15 per cent this year from 6.2 per cent in 2016. Poskus noted that Vietnam has more than doubled its share to become the second-largest source of US imports.

Thailand’s market share increased to 5.5 per cent this year so far from 3.1 per cent in 2016, he added.

Indonesia also achieved “modest growth” to 2.9 per cent in the year to date from 2.4 per cent in 2016, and Flexport has recently received “a lot of interest” in the largest South-east Asian economy, said Poskus.

Congested ports

But increased throughput comes with a price tag for the region, and its perennial struggle with infrastructure financing gaps is coming back to bite.

South-east Asia is experiencing a level of port congestion not seen since the pandemic, said Lockton Singapore’s head of protection and indemnity, Freddie Hawke.

“In Thailand, Indonesia and Vietnam, we’re seeing a surge to expedite cargo within the 90-day implementation window (and) we expect to see further congestion for ports in this region as importers look for alternatives to Chinese suppliers,” he noted.

Said DHL’s Gregory: “Infrastructure gaps remain a challenge (for regional ports), and congestion resurges where capacity lags demand.”

The global story

Observers across the board maintain that the outlook for the shipping industry remains murky, with much hinging on the trajectory of trade and tariff policies in the coming months.

The shipping industry is often seen as a proxy for global economic growth, and freight rates are viewed as a barometer of the sector’s health.

Jayendu Krishna, director – head of maritime advisers at Drewry, noted that freight rates from Malaysia and Vietnam to the US have “increased considerably, (which) is reflective of surging volumes”.

Then again, that of other major US-bound routes have been falling, he added. “It tells a global story of a steep decline in freight rates, mainly because of oversupply in the container shipping market,” warned Krishna. “With a fall in US-bound trade, container shipping may be facing a double whammy.”