Logistics

Out of chaos comes opportunity

For Latin America to fully recognize the potential of its chemicals industry, achieving a competitive logistics sector will be critical. At past APLA meetings, Latin America has been talked about as one of the most inefficient regions in the world due to the infrastructure deficit and congestion at its terminals. Today, there is still much room for improvement and that presents a great opportunity for the industry. By understanding logistics well, costs will be under control and, given margin pressure in many chemical related industries, logistics is a critical component of running a viable business.

According to Fabiano Machion, general manager South America at Newport Tank: “In Latin America we suffer from an important logistics deficit. This creates high costs and sometimes operations become unfeasible.”

These disadvantages become even more acute during challenging times. However, as 2020 has progressed, there is ample evidence of the industry’s resilience. Jarl Kåreson Hakvåg, in charge of Odfjell Tankers chartering business in South America, observed: “We saw certain segments spike to historic highs and some segments to be extremely quiet. After April this year, we have seen shipping routes returned to a new normal, but what is new is the rapid change to different volumes and commodities month by month. Through this period earnings have stayed positive and demand for our services seems to be supported at a fundamental level.”

Some companies, such as Andino Holdings, are even finding promising opportunities out of the period of disruption. According to company CEO Peter Staartjes: “Due to the pandemic, our Tuxpan terminal is particularly attractive today because of the influx of alcohol for the production of much needed hand sanitizer. Given our marine facility is within trucking distance of the Mexico City area, we provide excellent logistical alternatives to those of rail and truck from the US […] My first thought is that initially Mexico will not be importing as much as it did before COVID, but this is a very large country so if things pick up, volumes will rapidly grow. However, in the interim of all the uncertainty, we predict current players will have exited some key markets, leaving more opportunities for Andino to grow its Andikem model (transparent chemical fulfillment services). As they say in Spanish, ‘aguas turbias, buena pesca’.”

Organizations have also displayed a tremendous amount of adaptability, with many pulling forward digital innovations that initially were not planned to be implemented in such a quick manner. “The digitalization aspect of our business has gained more focus and users have embraced solutions much faster than normal during this Covid-19 outbreak,” said Jarl Kåreson Hakvåg.

As a result of economic and pandemic headwinds, change is sweeping the industry in 2020. Martin Sack, regional head Americas at Leschaco, a leading global freight forwarder with its own fleet of tank containers, asserted: “The chemical sector is also under an ongoing wind of change. Companies are acting globally, mergers and acquisitions became the new normal and emerging markets are increasingly relevant, while logistics has become more important for our customers to remain competitive.”

The US-China trade war in 2019 followed by the COVID-19 pandemic in 2020 have caused disruptions in business activity. The industry has now faced two consecutive years of an unpredictable operational environment. In the face of these challenges, logistical efficiency remains as important as ever in the America’s and companies are having to display flexibility. Those that prove capable will be well positioned as commercial activity picks up. “We see huge opportunity to grow at a significant rate (in the Americas). The company is increasingly shifting our attention to a regional focus as customers are looking for regional and integrated solutions rather than country solutions” said Leschaco’s Martin Sack.

Image courtesy of Evonik.

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Leschaco Interview