Two Philippine companies announced recently that they will launch direct shipping routes to the United States, which are expected to bring relief to exporters who cannot find vessels due to the global shipping crisis. Davao-based Reefer Express Line Filipinas said it will ship goods from Mindanao to the US at lower rates (See, “Direct Mindanao-US shipping route will reduce costs, time,” in the BusinessMirror, August 9, 2021). Logistics firm Royal Cargo Inc. said it will also ship agricultural products directly to the US (See, “All set for RCI direct PHL-US sea route,” in the BusinessMirror, August 23, 2021).
These initiatives would certainly help ease the difficulties being experienced by Philippine exporters in finding ships that will transport their products to major export markets, such as the US and European countries. In March, the Philippine Exporters Confederation Inc. (Philexport) said delays in shipments being experienced by local exporters and manufacturers range from two weeks to a month. Two months after, Philexport said the delays had stretched to more than two months.
However, traders and manufacturers need more shipping companies to transport their goods to major export markets (See, “Exporters seek more US lines amid delays,” in the BusinessMirror, August 23, 2021). Two groups—Philexport and the Supply Chain Management Association of the Philippines—revealed that bulk of the pending cargo are West-bound. Some shipments have already been delayed by nearly six months due to the lack of vessels and the surge in freight rates.
The Covid-19 pandemic remains as the biggest single factor that impedes the flow of goods and international trade. Mobility restrictions put in place to stop the virus from infecting more people and the emergence of Covid-19 variants are exacerbating the shipping crisis. For instance, the Meishan terminal at Ningbo port in China—the world’s third busiest port—was forced to shut down recently after a worker was infected with the Delta variant of Covid-19.
The partial closure of the Chinese port has driven international freight rates to record-highs. Prior to the shutdown of the Meishan terminal, freight rates have already jumped to as much as $20,000 per twenty foot equivalent unit, from just $1,000 per TEU before the pandemic. These rates are simply beyond the reach of Philippine exporters, particularly those exporting farm products that incurred losses due to the lockdowns and tough quarantine restrictions imposed by the government last year. Now that demand for their products is starting to pick up, they cannot take full advantage of this because of the shipping crisis.
The government, shipping lines and exporters need to find a viable workaround for this dilemma that also bedevils other exporters in the region. Local exporters and manufacturers would be hard pressed to help the government hasten economic recovery if shipment delays persist. Losses incurred by manufacturers and traders could force them to lay off more workers or reduce their work hours, a development that could expand the ranks of the unemployed and the poor in the country.