Impact of Higher Sea Freight Costs on Exports to Singapore

Mr Saktiandi Supaat asked the Minister for Trade and Industry as sea freight costs are rising around the world (a) how will this affect the prices of exports to Singapore; (b) what impact will this have on our supply chains; and (c) whether the Government will help to mitigate the increased costs by reviewing port charges.

Mr Speaker, Sir, sea freight charges have been rising due to the confluence of factors globally, including the COVID-19 pandemic, reduced vessel capacity, imbalance in the supply of containers and volatility in consumer demand. In our engagement with businesses, we understand that some have absorbed the higher freight costs in the near term, while others are considering passing on the costs.

For supply chain resilience, we have adopted a multi-pronged strategy involving import diversification, local production and stockpiling. Import diversification allows us to ensure a continuous supply of goods at competitive prices should any of the sources be disrupted. We have also been working with local companies to strengthen their business continuity plans to better cope with possible supply chain disruptions.

Specific to port charges, ships calling at Singapore pay port charges to the Maritime Port Authority of Singapore (MPA) and to terminal operators for port-related services, such as vessel traffic management and cargo handling. However, Singapore’s port charges, which have remained unchanged during this period, are unlikely to impact sea freight charges, as these are set by shipping lines based on market supply and demand. PSA has also worked with shipping lines and businesses to manage possible shipping delays by better anticipating and minimising congestion at the port.

Mr Speaker, I would like to thank the Minister of State for her answers. I have two supplementary questions.

First, the Minister of State mentioned about the factors being the container shortages affecting the sea freight prices, going forward. Can the Minister of State share whether that trend is likely to continue, going forward?

Second, how is the Government working with local businesses to maintain supply resilience and manage freight costs? That is quite key, especially in view of Malaysia's latest movement control order (MCO) that we just found out about.

Mr Speaker, I would like to thank the Member Mr Saktiandi Supaat for his supplementary questions and I would like to assure the House that the Government has put in place very robust strategies to ensure supply chain resilience and also to ensure that we facilitate the movement of our goods efficiently.

I have highlighted the four contributing factors. For example, one of the contributing factors is reduced vessel capacity. Earlier on, Second Minister Tan See Leng also mentioned that some of that could be because of an uptick in COVID-19 cases and because they would have instituted lockdowns and some of this capacity constraints would come about because of that. So, the situation remains fluid and dynamic.

But having said that, I want to reassure the Member that to cushion Singapore's supply chain against the present global volatility, the Government has strengthened our efforts on several fronts, mainly three.

Firstly, for essential supplies, we have adopted a three-pronged approach: first, import diversification; second, local production 30 by 30; third is our stockpiling.

Import diversification is important because it allows us to ensure that we have a continuous supply of goods at very competitive prices should any of the sources be disrupted.

The second important strategy is MPA works very closely with our port operator, PSA, to anticipate and minimise congestions at the port. This is to make sure that we can turn around and facilitate the movement of the goods efficiently and, at the same time, also to minimise the freight costs for businesses.

Thirdly, industrial supplies are critical. So, for industrial supplies, we have been working with our companies based in Singapore on their BCP plans to better cope with possible supply chain disruption.

I will give a quick example of how we are going the extra mile in the Ministry of Trade and Industry and Enterprise Singapore by working closely with MPA and PSA to support our local companies through our trade associations and chambers (TACs). For example, a few months back in anticipation of Chinese New Year, Enterprise Singapore facilitated the discussions between the Meat Traders Association with PSA and the Singapore Logistics Association during the peak Chinese New Year period to better manage the perishable stocks coming in.

We will continue to lend a hand by facilitating conversations between businesses and also the trade and industry associations with the shipping liners and also freight forwarders on how to optimise supply chain flow.

One way we can do that is that the TACs can secure container capacity; also, the second approach is to consolidate the container volume demand amongst key industry players to maximise the container capacity and thereby manage cost.

On the second question regarding yesterday's announcement by Malaysia on its MCO, allow me to quickly recap. One year ago, in March, when Malaysia first implemented their MCO, we were able to work closely with them to secure the continued supply of fresh foods from the country. Most of our wholesalers and retailers received their goods without significant disruptions to their operations.

Malaysia's announcement yesterday on the MCO covers predominantly social activities. Prime Minister Muhyiddin emphasises that all economic activities are permitted to operate during the MCO. Given this, farms and factories in Malaysia will still be able to run and logistics companies can continue to service our imports of goods and services. Hence, we do not expect our supply chain to be significantly disrupted by the MCO at this time. We will continue to monitor the situation, work very closely with our businesses and our counterparts in Malaysia to mitigate any possible disruptions.