Global shipping costs continue to rise with charter rates expanding by 65 percent this second quarter, dimming the situation for food importers, such as meat processors, reports Business Mirror.
Continuous surge in charter rates
Royal Cargo Inc. Chief Operating Officer Jet B. Ambalada told the BusinessMirror that charter rates and freight costs continue to rise with no immediate improvements in sight until a full vaccine rollout against Covid-19 is achieved.
Ambalada said charter rates kept rising due to continuous lockdowns imposed by countries that are experiencing surges of Covid-19 cases like Brazil.
For example, charter rates in Asia have risen to $16,500 per 1,100 twenty-foot equivalent unit (TEU) vessel from $10,000 in the first quarter, he said. Charter rates for a 1,100 TEU vessel was only at $6,000 in the third quarter of last year, he added.
“It just keeps on increasing and we are not seeing any improvements any time soon,” Ambalada told the BusinessMirror. Due to this, freight costs continue to increase as well, going beyond the $5,000 per dry container level, Ambalada said.
Volatile freight rates
Ambalada added that global freight costs, due to lack of shipping vessels and container imbalances, have become so volatile that freight rates are only good for a week or two.
“The effectivity of freight rates now are just good for about 15 days. It’s rare that there is a 1-month rate. The market is too volatile today,” he said. “Before the pandemic, freight rates change on quarterly basis but now it changes every week up to two weeks. There’s no quarterly rates anymore.”
Shipping delays worsen
Ambalada pointed out that delays in shipping have further worsened this year with arrivals of goods from America and Latin America being delayed by as long as two months.
Ambalada, who is also a Philippine Association of Meat Processors Inc. director, noted that the worsening global shipping situation puts a huge pressure on the local meat processing industry, which has been scrambling to find supplies for their raw materials.
“Ships are still lined up at the port of Los Angeles in USA. It’s the same situation in Brazil. So, we’re looking at one to two months of delays from these areas,” he said. “Delays from Europe are still ranging from two weeks to 1 month. And this won’t improve until Covid-19 vaccines are all out. The lockdowns are really hurting the industry.”
Companies charter reefer
Industry sources told the BusinessMirror that some companies, especially big processors, have resorted to chartering one reefer vessel just to get mechanically deboned meat (MDM) of chicken from South America, which is about 20 percent more expensive than commercial shipping.
Ambalada disclosed that the rising freight costs and lack of suppliers have pushed the per kilogram price of chicken MDM from Brazil to $1.70 CIF (cost, insurance, freight), which is 41 percent higher than a kilogram of chicken leg quarter priced at $1.20.
“We cannot do anything about it because they know that we are not allowing Europe to supply us, which is our biggest supplier,” he said.
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Source: Business Mirror
