GEORGE TOWN: Consumers are staring down a major spike in prices of electronics and medical products with the war in Ukraine.
While most manufacturers of export products in the country do not do business in the conflict region, longer routes by air and sea to avoid Russian air space have escalated freight charges which are at an all-time high.
“We have no choice but to pass down the entire cost or partly to consumers as companies are grappling with unseen freight costs, the highest ever in the history of manufacturing,” said Federation of Malaysian Manufacturers (FMM) Penang chairman Datuk Lee Teong Li.
“Finished products such as personal computers, laptops and medical equipment and products such as pacemaker machines will cost higher as both contract manufacturers (those who supply parts to multinationals) and original equipment manufacturers (OEMs) are facing very high operation expenditures.”
Lee said the average freight charge for a manufacturer which was around US$150,000 (RM634,275) had increased to US$600,000 (RM2,537,100) a month, an unprecedented hike.
A full container of finished products being shipped to the United States costs US$24,000 to US$28,000 (RM101,484 to RM118,398) and the same sea freight to China is only US$1,500 (US$6,343) due to the distance.
The pre-pandemic figures were US$3,800 (RM16,038) from Penang to the United States and US$200 (RM846) from Penang to China.
Thus, a container operator will give priority to a shipment to the United States rather than China, as container shortages – due to many not returning – have hit the industry badly.
China’s zero-Covid-19 policy, where if there is a single case at the port, the entire port is shut down for days, has affected world container movements to this region.
It is a double whammy for manufacturers who are still reeling from the pandemic, which had pushed freight charges to an all-time high over the last one year, and the Ukraine-Russia war has made the situation worse.
“Many of our members import raw materials from all over the world and semi-finished and finished products are exported, and with the conflict going on, we have to take longer routes to reach the destination,” said Lee.
“It also depends, as while imports of raw materials can be brought through sea, high-end finished products such as microchips are usually sent by air due to their value.
“Global container freight charges and the cost of shipping a container from one place to another via sea have doubled and quadrupled due to pandemic-related factors.”
Another major issue, said Lee, was basically the increase in oil and energy prices, when it breached the US$100 (RM423) mark, disrupting supply which has driven up the global price of gas and coal.
“Thus, it increased the cost of raw materials, logistics and commodities prices, like copper and aluminium, which has had an impact on some manufacturers, especially those in the electrical and electronics sector,” he added.