THE Philippines could be facing a looming “food shortage” and anemic export performance in the coming months due to global supply chain problems, such as rising shipping costs and lack of vessels, industry players warned.
Royal Cargo Inc. (RCI) COO Jet B. Ambalada told the BusinessMirror the country is not spared from the global shipping and logistical problems that arose as complications of the Covid-19 pandemic.
Due to the container imbalance, lack of vessels, and congestion at transhipment ports, importers and exporters are now experiencing delays and high shipping costs for their shipments, according to Ambalada.
“We are facing shipping and logistics problems. For example in Europe, there are a lot of delays due to Covid-19 problems and challenges such as lockdowns. We are now encountering two weeks to a month delays in our arrivals,” Ambalada said.
The problem in the global shipping industry stemmed last year when Covid-19 forced the global economy to halt to curb the spread of the virus. Due to the lockdowns and lack of drivers, vessels and containers were docked in major ports like those in the US and Europe, Ambalada explained.
When the global trade gained a bit of momentum last year, the shipping industry was overwhelmed with orders from developed countries like the US and China, resulting in a container imbalance with countries that are not a major shipping point or route, like the Philippines, at the losing end, he said.
Ambalada added that container turnaround is also delayed due to lack of drivers in Europe, which is experiencing its third wave of Covid-19, with the spread of more transmissible variants.
Ambalada said huge economies like China, Singapore and US have been more aggressive in terms of imports and exports, thus concerning the bulk of the available vessels and containers in the world.
“The major problem is that our transshipment points are already congested. For example, Singapore and China ports are congested since these countries are sourcing a lot of raw materials,” he said.
Soaring costs
Due to this situation, shipping costs for exports have increased by “10-fold” with outbound shipments being delayed by a month to three months at worst, Ambalada pointed out.
Ambalada said the cost of shipping one dry container from Manila to the European Union has ballooned to $5,000 from the usual $800; one 20-foot container from Manila to US West Coast only used to cost about at maximum of $1,000 but is now hitting $5,000.
Inter-Asia shipping rates have also ballooned to unprecedented levels with Philippines to China costing now as much as $2,000 from the usual $200 since we are outside the “preferred routes” of shipping companies, Ambalada added.
“We are being outbidded by our neighbors who can afford $5,000. The question is, who can bite the bullet among our exporters? Instead of catering to the Philippines, the vessels will just go to China en route to Europe since they can pay higher,” he explained.
Increase in shipping costs of importing goods from Europe and the US to the Philippines “is not significant” since there’s available containers and vessels from these areas, Ambalada said.
Ambalada said they started to experience the problem in the last quarter of last year after countries like China started to buy more imports and were able to jump-start their economy again amid the pandemic, hence, exporting more goods than any other country.
Ambalada also noted that domestic shipping costs are at “all-time high” since local firms, some of them exporters, have opted to sell their goods domestically instead of exporting them due to high costs, such as banana producers.
At the other side of the trade, import-dependent manufacturers have started to source raw materials locally to avert price increases, he added.
Felix Ishizuka, president and CEO of Reefer Filipinas Express Line Inc., said it is undeniable that the industry was overwhelmed when demand surged in the latter half of last year.
“It is always supply and demand. Obviously, the demand went up and the container supply is scarce in every port due to congestion,” Ishizuka added.
Also contributing to the delays, he said, are the rules of countries to quarantine cargo and shipments in a bid to prevent the spread of Covid-19.
“China, for example, is getting heavy congestion for fresh produce. Normally they do not quarantine these but now every container must undergo a minimum of three days. That is obviously going to pile up,” he said.
Ishizuka said the unavailability of space is felt across all segments of the shipping industry from dry cargo containers, break bulk to reefers.
Ishizuka pointed out that the cost of renting a reefer ship has now skyrocketed to $25,000 per day from the $9,000 to $10,000 per day recorded in June of last year.
“Freight cost is crazy right now; it is now at a level never seen before. Never seen these reefer ship prices in the last 15 years of the industry. The most affected businesses are the small players who ship 5 containers at maximum,” he said.
“The cost of moving used cars from Japan to the West Coast, say South America, is now at $5,000 per container from $1,000,” he added.
Due to lack of certainty that unloaded imported cargo would have an export replacement, Ishizuka said importers are now shouldering additional costs in the form of prepositioning fees.
Food security
However, Ambalada, who is also a director of the Philippine Association of Meat Processors Inc., warned that the current shipping and logistics problem is worsened by the challenge of sourcing raw materials for food manufacturers, like processors. Furthermore, delays in arrival of imported goods may pose food security problems for the country, Ambalada added.
For example, meat processors are now struggling to import mechanically deboned meat of chicken since the country lost about 60 percent of its import source after the government slapped temporary blanket bans on European countries over bird flu concerns, he explained.
“This is really a perfect storm. If this won’t be eased or resolved, then we’re up for a looming major food shortage. Take, for example, processed meat products. What will be our alternative protein source if we lose processed meat products or they hike their prices amid rising pork and chicken retail prices?” he said.
Image credits: AP/Damian Dovarganes
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