Container Shortage and Its Consequences

São Paulo – Due to the effects caused by the coronavirus (covid-19) pandemic, the foreign trade sector has been facing an unusual, if not rare, problem: a shortage of containers. This phenomenon is driven by the strong demand being recorded at the main exporting ports in the United States, Asia, and Europe. Since the prices paid by those ports are more profitable compared to ports in Brazil and other countries in the Southern Hemisphere, shipping companies are attracted to those markets, which end up taking priority in their ship routes.

Additionally, due to the global trade decline, container manufacturers reduced their production. It is only now, with the recovery, that they are increasing production. To exacerbate the situation, there is also the well-known issue of the lack of infrastructure at ports located in the lower hemisphere, meaning ports that do not have platforms to handle 40-foot containers, only 20-foot ones. Furthermore, these ports usually do not allow the docking of large vessels, leading to the cancellation of port calls.

This is the case with Santos, the largest port complex in Latin America, where the depth of its estuary channel does not allow the entry of large bulk carriers. Moreover, the lack of maintenance dredging combined with the silting of the channel has been reducing its operational draft at the Alemoa and Ilha Barnabé berths, which are intended for liquid bulk operations, such as oil and its byproducts.

On the left bank of the port, in Guarujá, the reduced draft has also prevented the mooring of large vessels at public berths, and one of the berths is primarily used by Petrobras. As a result, there is a demand for other berths, leading to ship queues. As is known, a stationary ship causes losses to the importer, who has to bear the cost of the daily stay rate, demurrage, prompting those involved to seek another port for unloading.

The problems do not stop here. The container shortage also occurs due to the inevitable sanitary measures that authorities were forced to implement to prevent the spread of the pandemic. In some cases, these measures can cause vessels to be detained for up to fifteen days if a crew member needs to be rescued and hospitalized in the port city.

In the case of goods stored in refrigerated environments with expiration dates, concerns increase because importers begin to question the quality of the shipped products. Obviously, all these obstacles result in losses for the sector, as freight costs also rise. All of this leads to a larger volume of export cargo being held up at the port.

A recent survey commissioned by the National Confederation of Industry (CNI) showed that among 128 surveyed companies and associations, more than 70% admitted to suffering losses due to the shortage of containers or large vessels. After all, many industries require imported inputs to manufacture their products. Also, exporters of food, especially those dealing with meat, fruits, coffee, and other products, have faced difficulties finding empty containers to ship their production, as they grapple with rising freight and logistics costs.

You don’t need to be an economist to conclude that many of these losses are passed on to consumers, which exacerbates the situation in the domestic market. It is expected that this situation will persist until early 2022, and a full recovery will only occur in the second half, provided there is no worsening of the coronavirus proliferation. For now, we can only hope that the government takes some short-term measures that can at least alleviate the adverse scenario.

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Liana Lourenço Martinelli, lawyer, postgraduate in Business Management and International Trade, is the Institutional Relations Manager of the Fiorde Group, consisting of Fiorde International Logistics, FTA Transport and Warehouses, and Barter International Trade. Email: fiorde@fiorde.com.br. Website: fiorde.com.br

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