KUALA LUMPUR: Container shipping industry is expected to have continuous downside risks due to supply and demand imbalance which is not expected to end anytime soon, said Maybank Investment Bank Bhd (Maybank IB).
The³ firm maintained its cautious stance on the near-term outlook, despite the recent boost in contained freight rates.
Maybank IB said WCI composite has been increasing steadily since July 2023, underpinned by the peak shipping season.
The WCI composite rose 12 per cent week-on-week (w-o-w) to reach US$1,761 which marked the highest since May 2023.
"Peak season demand is expected to be subdued in the second half of 2023 (2H23) due to high US inventory levels which are expected to prolong destocking activities.
"Additionally, the market is facing a capacity explosion with a significant increase in the container fleet, putting further pressure on shipping rates," it said.
Maybank IB, however, cast a positive outlook on Westports Malaysia Bhd as the company's 2023 container volume growth guidance had gone up on strong gateway cargoes and market share recovery.
"We are projecting its container volume to grow by 6 per cent year-on-year (y-o-y) in 2023, compared to its revised internal growth projection of high-single digit compared low-single digit previously," it said.
The firm maintained its "Neutral" call on the sector, while expecting the gateway volume strength to support Westports' near-term container throughput growth and remained cautious due to slower global economic growth.
"Other risks include rising costs, and for Westports in particular, an unfavorable concession agreement for Westports 2.0. Positive upsides are stronger gateway volumes and an earlier end to destocking," it added.
The firm maintained a "Hold" call on Westports with target price of RM3.68.
