On worsening supply chain, logistics constraints
Exporters are seeking “very urgent” government assistance to cope with worsening supply chain and logistics constraints, including lack of vessel space, soaring freight rates and container shortage, resulting in shipment delays and huge losses.
In a series of emails to the Philippine Exporters Confederation Inc. (Philexport), exporters lamented the increasing difficulties in getting their shipments on board international shipping lines to their customers overseas.
Philexport President Sergio Ortiz-Luis, Jr. said that while this maybe a global issue that may be beyond anyone’s control, he called for a government and private sector solution to effectively address the logistics constraints hounding exporters.
“The logistics problem of our exporters has been worsening and appears much deeper than what has come to our attention,” Ortiz-Luis said. This includes non-availability of shipping space; exorbitant shipping costs, and long waiting time, even as market demand continues to improve especially for domestic food exports.
The executive emphasized the urgency of addressing this problem now “before it morphs into a crisis worse than the recurring port congestion and a further hindrance to recovery and employment.”
Ortiz-Luis explained that because of the pandemic several international shipping lines have reduced operations and even cut their manpower. As more economies have opened up, the fewer number of vessels prioritize the US, EU and other major markets where there is huge volume.
Shippers also from these developed economies “hijacked” these vessels by offering “double” the rates, especially for reefer vessels, so they can be prioritized. As a result, the Philippines has been left out considering its low volume and price constraints.
Ortiz-Luis also said that it is not just exports that are facing delays, but also arrival of imported materials and inputs for export products.
A Philippine food and beverage company described the hardships in securing vessel space on ships resulting in stocks being piled up in their warehouses. “Before once we produce we can load in 1-2 days, stocks are ageing in warehouse as it now takes 1 to 2+ months before we can ship out. Customers can’t re-order due to the stocks they previously ordered have not been shipped out,” the exporter said.
In addition, “freight rates are too high,” almost triple or quadruple the usual rates especially to the US, and securing vessel space is difficult going to the US, Middle East and Canada.
Another exporter said Philippine cargoes are at a big disadvantage and are “not getting priority” and being “shut out/bumped off from whatever available space,” while freight costs have soared because of the tight market.
What is sad, he added, is there is now market demand, especially for food and furniture and other products since major markets have reopened, “but we are still constrained by supply chain and logistics issues.”
Logistics hurdles are not just confined to US-bound exports. Philexport also received a report from a fresh fruit exporter whose shipping cost has increased three times to $12,000 per 20-foot container to the UK.
Ortiz-Luis said they are not even asking for government subsidy because they don’t know what kind of government help can be extended to exporters. But he said that government can initially allow those local shipping lines to ply regional routes.
To address vessel space and container shortages, Dr. Enrico L. Basilio, Chairman of the Export Development Council Networking Committee on Transportation and Logistics, called on the Maritime Industry Authority (MARINA) to encourage a few of the domestic shipping lines to operate regionally.
He also called for support for bareboat chartering by the Filipino Shipowners Association (FSA). He said FSA can charter ships staffed with Filipino seafarers that can be operated as a Philippine flag.
Ortiz-Luis said that at least the local shipping lines can serve the exports to Asia, particularly China.
The affected exporters, for their part, are seeking dialogues and discussions with industry players and relevant government agencies to find the way forward with their concerns.
“It is going to be worst that could lead to port congestion and stop the recovery of the domestic economy,” he said. Philippines exports of goods and services as percentage of GDP is 31.68 percent and imports of goods and services as percentage of GDP is 44.37 percent.