PETALING JAYA: The outlook for the domestic freight and logistics sector has turned more constructive, supported by easing geopolitical tensions following the extension of the US-Iran ceasefire and resilient intra-Asia trade flows.
Analysts and industry players, while still cautious about the fragile situation in the Middle East, said risks remain manageable for now, underpinned by higher freight rates that are expected to benefit logistics players, as increased fuel costs are typically passed on to customers via surcharges.
GDEX Bhd
managing director and group chief executive Teong Teck Lean acknowledged that domestic express delivery has been affected by the war, with a reduction in delivery volume.
“In addition, it is also more costly for air freights as airlines have passed on their fuel surcharges to us.
“So for international and Sabah and Sarawak deliveries, we have had to impose additional surcharges to cover the higher costs,” he told StarBiz.
That said, he believes the impact on the group’s business is limited, as fuel costs for GDEX are still subsidised under fleet cards, which help to reduce the burden of rising diesel prices.
Moreover, Teong said most of GDEX’s freight cargo to Malaysia comes from Saudi Arabia, as the group handles haj shipments.
“There are some cost increases due to fuel surcharges from airlines, but operations are not affected.
“There has also been rerouting of air freight shipments due to war, and margins will be slightly affected as we may not be able to pass on all the costs to customers,” he added.
Echoing Teong’s views, RHB Research said that while geopolitical risks remain a key overhang – with the Middle East conflict causing an 18% increase in freight rates across major routes – their direct impact on Malaysian port operators appears limited.
In a note to clients yesterday, the research house cited Westports Holdings Bhd as an example, noting that it derives only about 5% of its container volume from the region, leaving it relatively insulated from disruptions.
RHB Research said the company continues to benefit from its strong positioning in intra-Asia trade, which accounts for roughly 62% of total volumes, as well as steady yard utilisation levels of 70% to 80%.
The brokerage maintained its 2026 container volume growth forecast for Westports at 4.5%, in line with Malaysia’s projected gross domestic product (GDP) growth of 4.7%.
It also noted a strong historical correlation of 0.89 between container throughput and national GDP, suggesting that domestic demand and export performance – particularly in electrical and electronics (E&E) – will remain key drivers.
Meanwhile, with freight rates having risen by about 18% across major routes since the onset of the Iran war, it said plans by shipping lines to resume Suez Canal transits are likely to be delayed, which could sustain elevated freight rates.
This trend is expected to benefit logistics players, as higher fuel costs are typically passed on to customers via surcharges, although rising fuel prices remain a concern, RHB Research said.
Rakuten Trade head of equity sales Vincent Lau believes that higher fuel and transport costs remain manageable for the logistics industry, especially with the United States and Iran currently observing a ceasefire, albeit a fragile one.
“Businesses can still opt to pass on higher costs, and for most of our logistics players, diesel makes up about 20% to 30% of expenses.
“On a brighter note, logistic players are still benefitting from government diesel subsidies, hence the impact is still contained, ” he told StarBiz.
However, players with higher diesel cost exposure will be more affected, Lau added.
Universiti Kuala Lumpur’s Business School economist and associate professor Dr Mohd Harridon Mohamed Suffian is more cautious.
He projects that if freight rates jump by more than 25%, freight companies could see a meaningful reduction in business volume, leading to depleted margins.
“We may observe the normalisation of demand in the coming months, but companies have to weather the financial storm for now before this takes effect,” he said.
Mohd Harridon added that the rerouting of shipping routes would lead to higher fuel consumption and, consequently, increased operating costs, making route optimisation essential to balance expenses and revenue.
He also noted that local ports could remain competitive by offering favourable services or policies to attract freight players to Malaysia.
Mohd Harridon said the transport and logistics sectors had undergone numerous global economic challenges in the past, and are likely to have the resilience needed to overcome current conditions.
On the other hand, he said should geopolitical tensions be prolonged, normalisation would take much longer.
“If the conflict in the Middle East goes on beyond one year, it would affect Malaysia’s energy security, and there would be a new financial norm where elevated prices dictate the demand and supply curves of the transport sector.
“Consumers would have to bear higher prices for a prolonged period, which would eventually weigh on GDP, with ripple effects such as reduced economic vibrancy and higher inflation,” said Mohd Harridon.
On this note, RHB Research said the Bursa Malaysia Transportation Index is trading slightly below its five-year average at 15.3 times price-to-earnings, reflecting investor caution over trade activity and economic growth.
Nevertheless, the research house sees selective value, naming Westports and Tasco Bhd as its top picks, supported by earnings visibility, expansion plans and potential upside from current levels.
It said key risks to the outlook include a prolonged escalation in geopolitical tensions, which could drive oil prices higher and dampen global trade.
In a downside scenario where elevated energy prices persist, RHB Research said Malaysia’s GDP growth could ease to around 4%, with a corresponding moderation in container throughput.
