Containers, the Christmas gift

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Many people may not even know the phrase, but surely have seen or been in a “ghost traffic jam.” Do you know that slow-down on a road with no apparent reason, when there is no sign of an obstacle ahead, a collision of vehicles, or roadwork? Sometimes, one simple wrong move of an inattentive or inexperienced driver causes an impact wave that can result in severe levels of traffic jam. This is exactly what the world watched in March 2021, with the interruption at the Suez Canal, in Egypt, after the stranding of the Ever Given, one of the largest container ships in the world.

Far from a “ripple,” the blockade resulted in a queue of 422 ships, loaded with 26 million tons of products. The estimated loss to global trade, for the five days of stoppage, was about US$ 9.6 billion/day. The consequences of the traffic jam caused by the Ever Given impacted the whole world. Even Christmas shopping!

Vessels had to bypass the African continent, adding 26 days to normal travel time. Those who chose to wait for the channel to be cleared paid delay fees (US$ 15,000/day). Such costs, of course, were passed on to final consumers, causing inflation in the prices of fuel, clothing, food, and appliances. And this happened at a moment when the trade was already being harmed by disruptions caused by the novel coronavirus pandemic.

The adoption of restrictive sanitary measures to contain the spread of the virus, especially by China, affected international trade. Port activities were suspended, ships were held up indefinitely, and the lockdown – adopted in large cities – resulted in a lack of human labor for loading and unloading goods. Container entry and exit flows were altered and, as a result, the time of the transport of goods done by ships increased.

The complete cycle of a container was four trips per year, between the route of Asia and the East Coast of the United States. With the retention of this type of equipment throughout the chain, the cycle was reduced to 2.5 trips per year. The consequences were felt in the very short term. Until September 2020, the average cost of transporting 40-foot containers varied US$ 2,300. In one year, this value reached US$ 15,800, that is, the cost increased fivefold. If converted to reais, if one wanted to have access to a container, the withdrawal would be around R$ 85,000.

Traditional holiday shopping faces supply issues all over the world, resulting from chaos in international logistics. In the United States, according to the National Retail Federation, 97% of tradespeople in the country were affected by delays resulting from setbacks at ports or lack of space on merchant ships. More than 70% of retailers pointed that the average waiting time to receive products increased from 2 to 3 weeks. Moreover, as predicted, 75% of respondents said they passed on the cost increases to consumers.

Although the logistical problem is a global one, for Brazil the situation is
extremely severe. In terms of international trade, Brazilian transactions account for only 1.4% of the total. Therefore, Brazilian foreign trade operators have reduced ability to attract ships outside the US–China–European Union axis, where most of the trade is centered.

For Brazilian agribusiness, the moment requires attention. Such is the case as the sector is exposed to the increase in maritime transport prices, the decrease in the offer of services, and the exchange rate devaluation, as freights are calculated in American currency. The situation becomes even more complex when we consider that Brazil is the third-largest exporter of agricultural products in the world (behind the United States and the European Union) but has little participation as an importer.

Until October 2021, we exported US$ 102.4 billion in products and imported US$ 12.3 billion. This imbalance between export and import movement causes ships to dock empty at our ports so that they can return to international trade with Brazilian cargo. There are two unwanted consequences of this: high export costs and shortages of ships/containers. For small and medium-sized companies, which are unable to sign large transport contracts, the challenge is still greater. The wait for a window of opportunity is long: on average, one must wait months for the shipment of products.

The challenges of international agribusiness seem huge in 2022, and the future looks uncertain. New variants of the virus appear, and in some countries the vaccination rate is considered less than desirable and safe. In an optimistic scenario, the recovery or normalization of container costs – at levels close to pre-pandemic – is expected by mid- 2022 or early 2023.

It is relevant that these challenging moments do not result only in losses and high prices. Above all, they must promote changes that allow Brazil to be more competitive in international trade. Therefore, the importance of accelerating projects, such as the approval of the cabotage regulatory framework (BR do Mar), investments in port access infrastructure (increased depth and conditions to dock larger ships), the construction of more terminals along the coast, and development of the Brazilian port industry to reduce its major dependence on international logistics. It is also worth mentioning the need for greater commercial insertion of Brazil, through formalizing trade agreements that favor the opening of markets for Brazilian products, thus increasing the country’s participation in global trade.

The lesson to be learned by the consumers is that a ship ran aground on another continent or the simple shortage of “boxes” (containers) impact everyone’s daily life. These (invisible) “shock waves” and their implications felt in everyone’s wallet show how international trade is present in our lives, even unbeknownst to us. And if holiday shopping around the world is already undergoing the effects of logistical chaos, in Brazil we must seize the moment to make up for the losses. Negative experiences can be the best opportunity for positive changes!

Lígia Dutra is Director of International Relations at the Brazilian Confederation of Agriculture and Livestock (CNA)

Elisangela Pereira Lopes is Technical Advisor to the CNA Logistics and Infrastructure Committee

Source: Agência Estado/Broadcast

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