Recap of INC's Latest Webinar on Shipping Challenges and Inflation

To round out 2021, the INC hosted a webinar on one of the hottest topics in the industry, shipping and inflation which was attended by over 150 participants from more than 30 countries. Joining the webinar were expert speakers, Indika Dassanayake, Head of Global Accounts and Commercial for CMA CGM Asia Regional Office in Singapore, Bill Rooney, VP of Strategic Development for Kuehne + Nagel from the USA, Peter Friedmann, the Executive Director for the Agriculture Transportation Coalition, the voice of US Agricultural exporters in transportation policy, and INC member Vittavat (Prince) Ponphaisan, Executive Vice President of Heritage Group from Thailand, leading exporter to over 60 countries globally.

The session was moderated by Emiko Terazono, Commodities Correspondent for the Financial Times, and INC Executive Committee Members Pino Calcagni and Giles Hacking joined in for the group discussion.

For INC Members who weren't able to view the live session, the webinar is now available to stream on the INC TV Channel.

The webinar kicked off with Indika Dassanayake from CMA CGM, a world-leading container shipping company. His presentation focused on how the industry has gotten where it is today, mainly through an imbalance of supply and demand. He mentioned how the booming demand of consumers was partly a result of people not being able to spend on leisure and travel, while various supply restraints effectively reduced the capacity for ocean shipping. The rate increases can be linked to these imbalances in supply and demand. Looking to what CMA CGM is actively doing, Indika discussed the purchase of more vessels, and the efforts to increase CMA CGM’s hardware to offset the supply shortages. CMA CGM also decided to freeze spot rates, attempting to give the industry some stable predictable prices.

The second speaker of the webinar, Bill Rooney, VP of Strategic Development for Kuehne + Nagel in the USA provided more of a background in and explanation for how the current shipping situation has come to happen. His presentation highlighted the shipping industry's margins, their alliances, the rates compared to historical rates, global trade outlook, container ship fleet growth, and contract labor tensions on the West Coast of the US. Bill reiterated many points that were touched on by Indika such as the strong demand paired with lower supply. Looking forward to 2022, the expected container ship fleet growth is just 3% of the existing fleet, meaning rates may not drop as much for the coming year. Lastly, Bill highlighted the potential disruption of contract negotiations between the labor union and employers at the West Coast ports.

After hearing from the representatives of the shipping industry, Peter Friedmann, Executive Director for the Agriculture Transportation Coalition, shed some light on how agriculture exporters are being affected by the shipping situation. He opened his presentation explaining the difficulties that face US exporters, mainly that if due to high shipping rates and delays, exporters are not able to affordable and dependable deliver on contracts, foreign customers will begin to look to other providers. This means US exporters could face not only loss of sales but the loss of customers, as Peter described the struggle of “winning” back a customer once lost. Peter highlighted the stark difference between the shipping service providers and the exporters with regards to margins and how the current situation is simply not sustainable. He finished his presentation by mentioning that many nut companies in California who are exporting are absorbing the extra costs and making sales in the red just to keep customers.

Later on, Prince Phonphaisan, the Executive Vice President of Heritage Group in Thailand's added to the discussion, sharing the perspective of the Pacific rim. He shared that many regions in Asia are starting to ease restrictions from some of the world’s harshest lockdowns, however fear and uncertainty from new COVID-19 variants may suppress the process of reopening, as some countries like Japan have already implemented new restrictions. Prince mentioned that while China has no problems with exporting their products, they too are suffering when empty containers come back to port, as they can have trouble getting raw materials which later turn into Chinese exports. Prince pleaded for both sides and the governments to work together to find solutions and bring back some sort of normality.

INC representatives Pino Calcagni and Giles Hacking from the INC Executive Committee then joined in the discussion to give their perspectives. Pino Calcagni highlighted that this shipping crisis with high prices and delays was the result of an already strained supply chain. He also discussed that it is not only logistics that is putting pressure on the nut and dried fruit industry, but also the rising energy costs. Following up on Pino’s points, Giles Hacking brought up that eventually retailers will not be able to escape the rising freight costs, and they will be forced to build these extra costs into their prices, leading to increased prices on shelves. He also added that this is not solely a problem caused by freight rates, but rather a combination of all production costs, and inflation could be expected throughout the world.

After a group discussion, the panelist all gave an outlook for the upcoming year. Some of the highlights included that the upcoming year cannot be just focused on ocean shipping, but also land transportation as struggles in this sector are also stressing the supply chain. If a solution cannot be found, more and more agriculture players will continue to suffer and ultimately leave the business. Additionally, with low incoming capacity by means of new vessels and continued strong demand, the outlook, at least in the short-term is that shipping rates will stay consistently above pre-pandemic times. And lastly, as the upcoming year is looking to present some more logistical struggles, all supply chain players need to do their part to come together and find a sustainable solution.