EDITOR'S COMMENT
OILS & FATS INTERNATIONAL
VOL 37 NO 6 JULY/ AUGUST 2021
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2 OFI – JULY/AUGUST 2021
Comment July.Aug.indd 1
Navigating the storm Global shipping has experienced an unseen level of turmoil in the past year and further disruptions, as well as high freight prices, are still expected. More than 80% of global trade is moved by sea and producers and processors have almost taken it for granted that feedstocks will arrive from across the globe, and that they can deliver their product on time to customers in other parts of the world. Then came COVID, with China locking down hard in February/ March last year, shutting down ports and stranding containers, Martin Herrington of IP Specialities told the recent 13th ICIS World Oleochemicals Conference (see Renewable News, p12). Since then, port capacities around the world have shrunk, due to COVID restrictions and sick or quarantining staff unable to work. Congested ports have meant vessels waiting to unload and unable to take on their next cargo, leading to a shortage of containers and ships. Winter storms in the USA, the Suez Canal blockage in March and bottlenecks at gateways in southern California and China’s Yantian port have also tied up ships and containers. The results have been stark. A year before the COVID crisis, the cost to move a container from East Asia to the US West Coast was fairly stable at US$1,500, Herrington said. As of 1 July, the average price to ship a container was US$8,399, Wall Street Journal (WSJ) reported Drewry Shipping Consultants as saying. Prices to ship from China to Europe and the US West Coast are closer to US$12,000 a container and some companies say they are being charged US$20,000 for last-minute agreements, the WSJ says. “Everyone is spending much longer on round trips,” Philip Damas at Drewry said in the WSJ report. “Containers are waiting at ports for much longer. Productivity in container shipping is deteriorating. Every failure is effectively creating ripple effects. It’s a vicious cycle.” It is worth remembering that vegetable oils are mostly shipped in bulk vessels and are less affected by disruptions in the container trade. However, dry bulk rates have also hit new highs, surpassing US$30,000/day for the smaller Panamax and Supramax vessels in which oilseeds are commonly transported (see Transport News, p10). These record rates have been spurred by strong soyabean exports from both the USA and Brazil to China, as well as grain exports out of the Black Sea. The disruptions are a reminder that most players in the oils and fats industry have long supply chains with the potential for many things to go wrong, and that logistics are equally important as raw materials. Many operators are now looking for increased buffers and stocks, evolving from a ‘justin-time’ to ‘just-in-case’ approach, the ICIS conference heard. Technology has also been the focus of companies such as Cargometrics and AXSMarine, which use software, data and digitilisation to analyse and streamline freight management. Existing agribusiness players such as the ‘ABCD’ giants – ADM, Bunge, Cargill and Louis Dreyfus Company – already announced plans back in October 2018 to work together to standardise and digitise global agricultural shipping transactions. In the meantime, Herrington advises companies to identify risk points in their supply chain and diversify sourcing. That means asking questions like whether different suppliers are actually in the same area and therefore subject to the same weather disruptions. And whether safety stock is in your tank or with your supplier. Good relationships are also key. “In reality, our supply chain relies on thousands of people – farmers, factory workers, truck drivers, sailors, retail workers and warehouse staff – showing up to work. Without them, nothing happens,” he says. Serena Lim serenalim@quartzltd.com www.ofimagazine.com
28/07/2021 09:02:43
