Shipping out

COVID restrictions and congestion at Yantian felt in Latin America.

The shipping industry is facing a global congestion crisis due to COVID-19 restrictions. The situation is particularly critical in the Yantian International Container Terminals (“YICT”) port in China, the third biggest port in Asia. This has resulted in increasing inflation pressures, delivery delays and export restrictions.

An executive in the freight industry in Panama observed the impact on Latin America, “A shortage of goods is expected to result from these delays in the supply chain. Latin America and Panama are already being affected and a negative impact on merchandise purchases and imports is expected for the end of year holidays.”

“Latin America and Panama are already being affected and a negative impact on merchandise purchases and imports is expected for the end of year holidays.”

Executive in the freight industry, Panama

YICT had said that operations were expected to return to normal by the end of June, but it could take months before the global shipping industry stabilises. Some international commentators believe that despite the multiple collateral effects for international logistics, the current restrictions will only have a very limited impact in trade flows to Latin America, as the Chinese government diverted YICT activities to the ports of Shekou, Shenzen, Hong Kong and Nansha. Our sources disagreed, “The delay at Yantian have affected the flow of goods more than the Ever Given crisis in the Suez Canal – it has caused serious delays in the supply chain and the delivery of goods across Latin America.”

The potential impacts could be wide reaching, according to the former president of the Panama Maritime Chamber, “The most affected will be the importers and exports, who have seen maritime freight from China rise from USD 3,000 to USD 15,000. For exporters who import raw materials from Asia or India, freight has become a cost that equals or exceeds the cost of the raw material itself.”

“For exporters who import raw materials from Asia or India, freight has become a cost that equals or exceeds the cost of the raw material itself.”

Former president of the Panama Maritime Chamber

Earlier in 2021, the region suffered the impact of delays from operational constraints in North America. These bottlenecks resulted in freight surcharges and cargo rolling, when a container fails to get loaded onto its cargo vessel. Congestion issues in the US resulted in Latin American cargo being quarantined at US ports, vessel delays and void sailings to recover schedule reliability.

This uncertainty impacts economic forecasting for maritime companies in Latin America as forwarders can only confirm the final freight rate to customers once space is locked in. Furthermore, port delays cost time and money for cargo owners but also for terminal operators and a number of stakeholders in the regional supply chain.

If the disruption continues, we could start to see a reduction in imports, substitution of suppliers, a shortage of goods and ultimately a rise in inflation – not what Latin America needs as it attempts to recover economically from the COVID-19 pandemic.

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