Navigating the storm

OILS & FATS INTERNATIONAL VOL 37 NO 6 JULY/ AUGUST 2021

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Global shipping has experienced an unseen level of turmoil in the past year and further disrupti ons, as well as high freight prices, are sti ll 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 ti me to customers in other parts of the world.

Then came COVID, with China locking down hard in February/ March last year, shutti ng down ports and stranding containers, Marti n Herrington of IP Specialiti es told the recent 13th ICIS World Oleochemicals Conference (see Renewable News, p12). Since then, port capaciti es around the world have shrunk, due to COVID restricti ons and sick or quaranti ning staff unable to work. Congested ports have meant vessels waiti ng 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 bott lenecks at gateways in southern California and China’s Yanti an port have also ti ed 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 waiti ng at ports for much longer. Producti vity in container shipping is deteriorati ng. Every failure is eff ecti vely creati ng ripple eff ects. It’s a vicious cycle.”

It is worth remembering that vegetable oils are mostly shipped in bulk vessels and are less aff ected by disrupti ons 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 disrupti ons are a reminder that most players in the oils and fats industry have long supply chains with the potenti al for many things to go wrong, and that logisti cs are equally important as raw materials.

Many operators are now looking for increased buff ers and stocks, evolving from a ‘justin-ti me’ to ‘just-in-case’ approach, the ICIS conference heard. Technology has also been the focus of companies such as Cargometrics and AXSMarine, which use soft ware, data and digiti lisati on to analyse and streamline freight management. Existi ng 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 digiti se global agricultural shipping transacti ons.

In the meanti me, Herrington advises companies to identi fy risk points in their supply chain and diversify sourcing. That means asking questi ons like whether diff erent suppliers are actually in the same area and therefore subject to the same weather disrupti ons. And whether safety stock is in your tank or with your supplier. Good relati onships 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.