• August 20, 2021

Logistics and pricing pressure nightmare ex China

Posted By: Harvest Chemicals

A number of factors are working against supply chains and putting pressure on prices. The main contributors are:
  1. Covid-19
The Delta variant has reared its ugly head in China, resulting in travel restrictions which puts pressure on manufacturing and delivering.  Even more severe is the Covid-19 Delta variant has reduced port efficiencies and worst of all is, Ningbo port, the third biggest port in the world has been temporarily closed.
  • This will increase pressure on all the ports in China.
  1. Restricted hazardous cargo for September
South Africa is serviced by 6 main shipping lines ex China to South Africa. These are:
  • MSK/CMA/COSO sharing a vessel, and
  • ONE/SIM/HPC sharing another vessel.
Only one shipping line is accepting hazardous cargo from China to South Africa in September.  One wonders how long this ban will last.  We must also remember most pesticides are considered hazardous so this bottle neck will restrict supply.
  1. Shortage of containers and increased freight rates
Coupled with the above problems there is a shortage of available containers resulting in delays.  Orders to shipping has moved from 8 weeks to 12 weeks. With all these restrictions and shortages, 20-foot container rates have risen from USD 1,000 to USD 7,500 in just over a year.  September hazardous cargo restrictions are expected to increase container freight rates to USD 8,500.  In practical terms freight alone has increased from R0,94 per litre or kilogram to R7,99! For low priced agrochemicals in the R40,00 – R60,00/ℓ range, most gross profit is wiped out with inevitable price increases.
  1. Currency weakening
The rand:dollar has been relatively stable for a number of months but today it broke through the psychological R15:USD barrier and having done so, could well weaken further in the short term also putting pressure on prices.
  1. This situation is further exacerbated by the looting and destruction of UPL’s main warehouse in Durban destroying many thousands of tons of agricultural chemical stock.
This again compounds the agrochemical shortages.   In summary we are in the prefect storm, the nett result an anticipated shortage of crop protection chemicals and those that are available, at ever increasing prices.

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