By Victoria “NIKE” De Dios
Image by THEPHILBIZNEWS
After a challenging 2020 setting back a broad spectrum of businesses especially in the logistics that cover both export and import needs of the country, the hope for recovery that was expected to happen early this year was stalled.
While the Philippine trade volumes are slowly recovering from the impact of the pandemic, recovery is being derailed by worsening supply chain issues, foremost of which is lack of available vessel space, according to a new survey report from the Philippine Exporters Confederation, Inc. (PHILEXPORT).
PHILEXPORT unveiled on July 1 the results of the survey conducted among its member exporters on their top shipping challenges. The poll is part of the trade association’s initiative to address shippers’ cry for help over the widening logistics and supply chain issues.
The initiative is being carried out in partnership with the Export Development Council (EDC) and Philippine-based logistics solutions provider Royal Cargo.
Nearly 100 companies responded to the survey, about 84% of them micro, small and medium enterprises (MSMEs), and mostly belonging to the food (31.6%), housewares (19.4%), furniture (13.3%), holiday décor and giftware (11.2%) sectors.
Survey findings showed that shippers’ top three shipping challenges today are lack of space on international shipping lines (90% of respondents), higher freight rates (56.3%), and lack of containers (45%).
Notably, some 51.2% of the products are shipped weekly, while 32.5% are shipped monthly, and the rest are shipped quarterly. Most of the routes are westbound, with the US and European countries as the main target destinations.
An earlier survey with 65 respondents showed similar results, with pending cargoes including processed food, furniture, housewares and activated carbon reaching about 30,000 TEUs already.
“As quarantine guidelines are eased globally and vaccination programs are successfully implemented, we project this volume will double or even triple, sizable enough for shipping lines to take notice,” said Sergio R. Ortiz-Luis Jr., PHILEXPORT president.
No space for exports
Meanwhile, in the latest survey, 80 of the respondents, or 81.6% of the total, reported they currently have products ready to be shipped but could not do so due to lack of vessel space.
Among them is an exporter of banana chips, virgin coconut oil, coco flour and similar products who regularly exports about 500 twenty-foot equivalent units (TEUs) of containers each month to customers in Asia and the Americas.
Another, a ceramics company, ships out about 30 forty-foot equivalent units (FEUs) of decorative earthenware each month to the US and Europe, while a forwarder of decorative items, furniture, handicrafts and dried foodstuff is ready to export a 100 TEUs each month to Europe, the US, UK, Australia, China and the UAE.
One company said it ships out 40 high-cube containers of holiday décor, tabletops, dolls, and giftware each week to the US, Europe and Oceania. A big manufacturer of mattresses disclosed it exports about 120 FEUs of products every month to the US.
Another firm exports 85 full container loads of tropical fruit preserves, frozen fruits and vegetables, bagoong, dried and smoked fish and consolidated FMCG products every week to several destinations including North America, Middle East, EU, UK, Asia, Australia and New Zealand.
“With our huge export market in these regions, it is reasonable to foresee that the export industry will incur huge losses if this issue goes unresolved,” warned the report.
In a dialogue a few days ahead of the findings, Dr. Enrico L. Basilio, chair of the EDC Networking Committee on Transport and Logistics; PHILEXPORT’s assistant vice president Ma. Flordeliza Leong; and Michael Kurt Raeuber, CEO of Royal Cargo, stressed the importance of public-private sector cooperation to address these issues.
They agreed that the poll confirms the significant size of the Philippine export and import market, as they called on international carriers to provide the country sufficient attention. They pointed out that cargo volumes are expected to further expand as the peak season approaches, and are forecast to rebound once the pandemic subsides.
The three organizations have been holding meetings to discuss the issues of unavailable vessel space and soaring freight rates and come up with recommendations to the government.
As part of the intervention, Basilio has called on the Maritime Industry Authority (MARINA) to encourage domestic shipping lines to operate regionally. Also suggested is for MARINA to facilitate the issuance of a Certificate of Public Convenience so domestic ships can go ahead and provide the needed regional service.
Leong, meanwhile, earlier committed that PHILEXPORT would conduct a survey to identify the challenges in shipping and map the priority routes where domestic vessels can focus their operations.
For his part, Royal Cargo’s Raeuber agreed to help ease the space constraint by providing its ships to transport export cargoes to their ports of destination in the region.
Recent media reports have highlighted the growing issues with supply chain disruptions, not just in the Philippines but around the world, the result of factors such as a surge in global demand, the early resumption of manufacturing in China, port congestion, and the reduction of capacity by carriers in response to lockdowns early in the pandemic.
PHILEXPORT has beseeched the government to intervene and implement measures addressing these issues, which are resulting in shipment delays and huge losses for exporters and importers.
PHILEXPORT president Sergio Ortiz-Luis, Jr. earlier said that while these are global issues that may be beyond anyone’s control, the government and private sector must still work closely together to effectively address them.
Exporters’ shipping ordeals
Over the past couple of months, PHILEXPORT members have lamented the increasing difficulties in getting shipments onto international shipping lines to their customers overseas.
A food and beverage company said they used to be able to load their products one to two days after production, but now “stocks are aging in the warehouse as it now takes one to two or more months before we can ship out.”
Moreover, it said 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.
Robert Young, PHILEXPORT trustee for the textile sector and president of the Foreign Buyers Association of the Philippines, said the garment industry is incurring millions of dollars in losses due to the supply chain squeeze.
“The issue of vessel space availability is a huge one for us and our clients. Delay is between two weeks to almost two months,” confirmed a garment company. “We are seasonal holiday heavy and [it is] very critical that goods move on time as they have a short selling period.”
A furniture exporter stressed that these issues needed to be resolved soon as the worst is yet to come. “The third quarter and fourth quarter surge of exports might be a nightmare with this current setup.”