“The situation of containers is bad because the evolution of global trade is good”. This phrase, which a few months ago would have been celebrated by exporters and importers in full collapse of trade, today it is the central theme of one of the problems that worries all industries, cDark clouds over the economic recovery and puts world trade in check.
The phrase, by Alessandro Nicita, economist at the UN trade agency (Unctad), explains how it is the strong recovery of exports in the world that is generating a real shock, because as he adds, “if trade were depressed, there would be no crisis”.
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And is that Container shortages and high prices for transporting goods are among the reasons that are driving up inflation rates, in some cases at worrying levels, while generating a lack of inputs for almost any sector, from livestock feed to electronic equipment chips and cars, through manufacturing components, all kinds of raw materials and intermediate goods that are essential for reactivation.
This situation exists today and has been dragging on for months, but it originated in 2020. According to Javier Díaz, president of Analdex, “world trade has been facing a new shock due to the pandemic. The border closures, curfews, quarantines and other containment measures generated a disruption in global value chains and an impact on the logistics cycles of containers ”.
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As Díaz highlights, this situation has generated a shortage of containers, non-compliance with itineraries and an accelerated increase in transport costs. A) Yes, the average freight for 20ft units from China to Latin America, for example, they are today almost five times higher than the average of the last 12 years.
The consequences of this silent crisis, which are not so clearly reflected in the indicators, already have consequences. This is stated by Diego Mauricio Gaitan, manager of the ZFB Group Developer of Free Zones, who points out that “the rapid recovery has brought a shortage of raw materials, over costs and long delays in a large number of industries that, in some cases, has led to the temporary or permanent closure of some plants, due to not having timely inputs for their production”.
Under this scenario, world trade is the one that is directly suffering the consequences. For example, as shown by the SFCI index, which is the most used indicator to measure maritime freight rates and analyzes the costs of routes with China for 20-foot containers, this has gone from just over 700 points on these dates of 2019, at more than 4,500 points at the end of August, that is, a growth of almost 530%. This data is higher on some routes.
And this, of course, ends up affecting the consumer. As a Untad report indicates, “the current level of freight costs equates to values between 0.35% of the retail price for high-end clothing and 63.55% for low-cost, large-size furniture”.
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A LOCAL PROBLEM
Although this situation can be read internationally, Colombia does not escape this reality. According to Gaitan, “freight costs have risen 4-5 times. A container from China to Colombia that was contracted between US $ 1,500 and US $ 2,000 before the pandemic, today is US $ 13,000 to US $ 15,000 if availability is obtained in the shipping company, since they prioritize routes to the east and could begin to close routes to South America, or else you have to wait in port paying for storage”.
This panorama is complemented by Javier Díaz from Analdex, who points out that “In the Colombian case, the impact is very large, mainly in primary products such as coffee and sugar, which currently present difficulties due to the shortage of containers and non-compliance with itineraries in Buenaventura. This has caused exports to be diverted to ports on the Caribbean coast, generating additional cost overruns of between 30-70%.”.
Given this, the Ministry of Commerce He says that “foreign trade operations in Colombia are developing normally. However, the global situation of shortage of containers and decrease in the frequencies of ships’ trips could at some point affect the flow of regular foreign trade that we have in the country ”.
From within the sector, the crisis is the order of the day. This is stated by Maersk, a company that, when consulted, explained that “the pandemic created major bottlenecks and capacity problems at all levels of the chain caused by an interaction of factors beyond the control of any actor “, to which he added that” since the financial crisis, the commodification of maritime transport has led so that price optimization is at the center. All the players have been too ‘skinny’ in their operations. This approach might work when all functions are clockwork, but not when supply chain pressure is applied.”.
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Thus, for many, this situation can put the recovery of trade in check, which, although it is progressing, is not without risks. This is stated by the World Trade Organization (WTO): “Prospects for trade continue to be clouded by deterioration risks, such as regional disparities, persistent weakness in trade in services, and delays in vaccination plans. Although covid-19 continues to pose the greatest threat to the outlook for trade”.
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RUBÉN LÓPEZ PÉREZ
Portfolio General Editor