Logistics Mismatch Pushing Costs Upward

Due to the imbalance in world trade flows, shipping lines have changed their routes and prefer to move empty containers to Asia, a situation that generates shortages and causes increases in freight rates and raw material prices.

Friday, March 5, 2021

In this scenario of new commercial reality, the operating costs of maritime freight have been impacted, since due to the restrictions imposed in several countries around the world, containers have been stranded.

In the last few weeks, trade flows have started to become more dynamic, however, there is a deficit of containers, since they are being transported empty to other parts of the world.

Julio Yon, member of the Board of Directors of the Council of International Transport Users of Guatemala (Cutrigua), told Prensalibre.com that "... 'the shipping lines are changing their routes because they prefer to move empty containers to India or China than to move other types of products, they have even changed the trend to products that were generalized, now they have prioritized perishables'."

In December 2020 CentralAmericaData predicted that in the first quarter of this year there would be a shortage of containers, a situation that was generated by the imbalance of global trade flows, which are still affected by the health and economic crisis caused by the spread of covid-19.

Paulo De Leon, director of Economic Intelligence of Central American Business Intelligence (Cabi), said that in this context "... the increase in the price of raw materials is global and the impact is transversal, because it is affecting raw materials such as resins, copper, iron, aluminum, agricultural products -corn, wheat, sugar- and wood. In the last three weeks, it was observed that prices are at the same level as four years ago."

Enrique Lacs, executive director of the Guatemalan Chamber of Food and Beverages, explained that "... the increase in raw material prices already has an impact on end consumer prices, because from December 2020 to February 2021 the food and beverage industry absorbed the rise, but 'they can't anymore'."

The latest FAO report highlights that during the second month of the year, the index that measures global food price levels reported a year-on-year variation of 17%, a rise that is explained by the behavior of prices of dairy products, cereals, vegetable oils and sugar.

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