Industry Thoughts

Distributors and logistics providers have their say on supply and demand in 2021

Image courtesy of Porto do Açu

“The availability and cost of containers has been a significant issue. To illustrate how challenging this situation has become, there were times where we had to pay US$12,000 to rent a container, making the container cost more than the product being delivered. Tensions between the US and China created a lack in freight consistency, and with increased demands to rebuild inventories there are not enough containers to supply to this demand. The manufacturing of containers globally is concentrated amongst approximately four companies, which cannot necessarily rapidly increase production capacity.

It has been challenging to maintain margins, but we are monitoring freight costs and availability daily. Previously, we were updating our pre-pricing logistics costs every three months, but due to the situation we started to do it once a month and recently even once a week. We have also improved our focus on supply and demand planning. Inventory was usually not an issue, but now we have to make very careful decisions when buying due to varying prices.”

Rodrigo Gutierrez, CEO, GTM Holdings

“There have been severe consequences in the logistics sector, which I would separate into three phases. When the pandemic hit, there was a lot of uncertainty and strict lockdowns in countries such as Argentina, Peru and Ecuador that caused consumption across the region to decrease. The Brazilian market represents 80% of Newport’s Latam volume, and this also suffered during the pandemic, but less so than neighboring countries.

As we entered the third quarter of 2020, we began to notice a slow recovery in consumption, consequently, more logistics contracts started to come in and the supply chain accustomed to restrictions, albeit prices went up and delays remained. In 2021 there has been a visible recovery, with the petrochemical and chemical industries going back to their usual production volumes.

Meanwhile, the maritime logistics business has been recovering, but the ocean freight industry is not easy to modify overnight as it requires strategic planning. There is more demand now, nevertheless, supply is restricted in terms of ocean freight availability. As far as costs are concerned, prices have been accepted because there has simply been no other option and the chain has adapted to the situation. However, I believe that by 2022 logistical costs will start to decrease as availability improves.”

Fabiano Machion, General Manager – South America, Newport Tank

"Global export and import demands have increased despite the pandemic, but companies are facing logistical challenges due to lack of space and equipment and port and terminal congestions, which drastically impacts the flow of goods, creating backlogs. Ocean transportation is critical, but companies have started to look for alternatives such as road or air transportation to try and meet demands.

In Latam, besides the pandemic, we have encountered other supply chain interruptions due to political instability. For instance, a protest in Colombia caused the Port of Buenaventura to close, forcing shipments to be diverted. We have a strong presence in Colombia and quickly collaborated with our customers to implement and execute out of the box ideas such as cabotage transportation and usage of our free trade zones services in Cartagena, to ensure business continuity and to minimize the impacts of the disruption."

Helio Coelho, Global Chemical Sales Director – Latin America, BDP International

“Speaking of petrochemicals and biofuels in the Latam region, the demand for bulk liquid storage has increased in recent years boosted by the availability of a variety of petrochemicals and biofuels products coming from the Gulf of Mexico in the USA. In addition, we have seen an increase in the demand of storage for marine fuels due to the new regulations demanded by IMO 2020 for our terminal located in the Atlantic side of the Panama channel. In the future, bulk liquid storage will evolve to the storage of cleaner products that will help to reduce emissions such as LNG, LPG and hydrogen.”

Giancarlo Facchini, Commercial Manager – Colombia and Panama, Oiltanking