Higher freight rates could see further rise in food prices

Sky-rocketing freight rates will now add to the already high prices of goods initially triggered by global supply chain disruptions.

Freight costs went from US$4,000 for a 40-foot container to US$20,000 per container and without Government intervention, it is the consumer that will have to bear that cost.

On Wednesday, Prime Minister Dr Keith Rowley confirmed that Trinidad and Tobago will be impacted by the global supply chain disruptions and clogs and yesterday, members of the food distribution and business sector weighed in on the adverse impact of the bottlenecks, saying there could be higher prices and even difficulty for consumers to access goods.

The diverse group agreed that left unchecked, spiralling freight costs will only add to the already heavy financial burden being placed on the consumer.

Head of the Food Distribution Association, Gerard Conyers, said the Guyanese government waives the increased cost of freight and only collects revenue on the normal and uninflated cost to help ease trickle-down costs to the consumer.

That is not being done here.

Both the head of the T&T Chamber of Industry and Commerce Gabriel Faria and Downtown Owners and Merchants Association head Gregory Aboud, said that freight costs have gone up some 400 per cent in the last year and neither of them could say why.

Aboud added that although empty containers were being returned, the shipping cost was still high.

“The freight rate continued to escalate, there is no logical explanation and also there is no need for any shipping line to charge US$20,000 to bring a container from the Far East to Trinidad. That is an exorbitant rate which is irrational. It doesn’t make any sense,” Aboud said.

Aboud said it was cheaper to fly first-class to Japan than it was costing to bring a container on a boat.

“It just does not compute,” he said.

Aboud said one of the reasons for the high cost could be the slow rate of return because of the clogs at various ports around the world.

“There also seems to be congestion in trans-shipment points at Kingston and Panama, which is going to affect T&T in a more significant way than the congestion in Los Angeles,” he said.

“Another issue developing now that is worrisome for those of us that depend on Asia, which all of us do for supply line components.What use is there in having fabric to sell and no thread to sew it?”

He said there is also a new issue with the fuel supply in China. According to international reports, China has begun rationing diesel because of shortages.

“So first, there was no space on the boat to put your container unless you have US$20,000 in freight, now today what they are saying is there is also no truck to bring it from the factory to the boat because the trucks have no diesel,” he said.

“All of these issues affect the overall cost of operations and also disrupt the supply.”

But despite the overarching issues, Aboud is confident that T&T will be okay.

“By and large, the T&T business community is reasonably well-stocked, that is my opinion,” he said.

As a result of this, Aboud said there was no need for panic.

“I believe there is enough residual merchandise in the country, yes there may be some shortages and maybe there would be some items in scarce supply, but by and large I believe that T&T is reasonably well-stocked,” he said, adding the country should be okay for the next quarter.

Faria said supply chain disruptions are not new and affects everyone. He described the current situation as a “double whammy.”

“We are seeing the commodity themselves go up and we are seeing the freight go up. Freight has gone up, in some instances some 400 per cent,” Faria said.

“I have a hard time rationalising the justification for the increases.

“All the inputs that are moved have an increased cost.”

Faria said while there have been increases in the cost of goods locally, it was nowhere near a 400 per cent mark-up.

Conyers warned that while consumers will be able to access the usual Christmas goods, they must understand that the variety would not be available and the prices would be higher.

He said that COVID-19 had caused shutdowns in the customary supply countries and supply chains have dried up.

“A lot of our foodstuffs comes out of the US, our packaged foods and they themselves are suffering,” he said.

Conyers said that it is not just the Christmas goods affected but good across the board.

“You will get it but you will not get it in the quantities and it would definitely be more expensive and you would not get the range,” he added.

“For the next year, consumers should expect that things they usually buy every week in the supermarket, you might come one week and it wouldn’t be there but it would be there the next week.”

Conyers advised consumers to have patience and called on the Government to expand the list of essential items.

Chief Executive Officer of the American Chamber of Industry and Commerce, Nirad Tewarie, meanwhile said the country is already seeing the impact of those higher prices.

“While companies are taking individual measures to mitigate the impact, we all are already seeing the impact of the increase in prices, as cost for landed finished goods and inputs increase.

“If ever there were a time to pivot and take advantage of initiatives led by organisations such as the IDB and the stated strategy of the US government to encourage nearshoring, it’s now,” Tewarie said.

He added, “Our Government should work with the private sector to aggressively eliminate the barriers to attracting investment as companies bring production and jobs back to this hemisphere.

“Finally, the importance of continuing the reforms at Customs to reduce the time taken to clear goods cannot be underscored. We appreciate the work already being done by Customs and look forward to expanding the trusted trader or voluntary compliance programme underpinned by a fully electronic clearance system, as promised by the Minister of Finance in his budget presentation.”

Gas suppliers confirmed and secure

Meanwhile, Paria Fuel Trading Company chairman Newman George sought to dispel any concerns about a fuel shortage based on the supply chain bottlenecks.

George said he held a meeting yesterday with the suppliers to get the assurance that the local supply of fuel would not be affected.

“So far, we have not been affected and we do not foresee being affected based on assurances from our suppliers,” he said.

George said T&T’s fuel suppliers have the “ability and flexibility” to get fuel from various sources.

“I hasten to add that only today (yesterday) we met with our suppliers, who reconfirmed that our supplies are not expected to be affected,” George said.

And while that is welcome news, it may be the only bright spot.

TTMA: exporters can’t source shipping containers

Head of the T&T Manufacturers’ Association (TTMA) Tricia Coosal said while exports have not been significantly affected, some companies have experienced difficulty getting containers for exports.

“Since manufacturers require that their goods are exported in a timely manner and there is a shortage of containers, some manufacturers have experienced increased costs to ensure that the products are exported on time for fear of losing their customers,” Coosal said.

But that is not the only challenge for manufacturers.

“The increased costs per container (20 foot or 40 foot) require additional access to USD by the local manufacturers (since shipping lines are requiring that the charges are paid in USD).

“Furthermore, it requires manufacturers to review their inventory management processes, to ensure that enough raw materials are always available and that there is enough inventory for export to their customers.”

She added, “These reviews of their logistics is especially important now, since there tends to be an increase in the volume of imports (and exports) during November and December. These disruptions, coupled with the checks and balances by the various Government agencies (including Customs and Excise Division), can inadvertently increase costs (e.g. increased port rent and demurrage) to the manufacturer.”

Head of the T&T Shipping Association Hayden Alleyne yesterday told Guardian Media he was unavailable and would speak to the issue today.

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