Wednesday, December 8

The Way of the Cross to import from China: “The ships are so full that your containers do not enter”

“We have had three containers with knives waiting for 30 days in the port of Shenzen (China).” With these words Diego Santos, a partner of the Kontenut company, lamented a few days ago, which –among many other things– imports kitchen accessories from China. “You can have a reservation with a shipping company, but the ships arrive so loaded that they do not take your merchandise, they pass you by … And they do not give you many explanations,” he said.

Concern about the lack of electronic products for Black Friday and Christmas

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World trade has been installed for months in the so-called ‘perfect storm’ and its consequences are being noticed in numerous Spanish companies, which see how the importation of merchandise from countries like China has become a true way of the cross. Especially for small firms, which have less negotiation capacity with large shipping companies. Delays and uncertainty are the daily bread for them and to that must be added the skyrocketing price of containers, which in some sectors is already beginning to affect the sale price of products.

Santos was recently informed that his three containers had already left for their destination, but this does not relieve him of concern. They have been in a constant battle for more than a year to meet production and delivery deadlines. “Now we are preparing two shipments for the end of November and mid-December. We hope that we will not have to suffer so much,” explains this Kontenut partner, who markets his products in different Latin American countries and in Spain, where he imports through the Port. from Barcelona.

The chaos of world trade has multiple causes. Among them, the sudden increase in demand, the closure of some key ports due to the coronavirus or the imbalance in the distribution of containers after the pandemic – the World Bank estimates that 8% of the total are unemployed. That is in addition to the shortage of certain raw materials and the well-known semiconductor shortages, which has paralyzed the automotive sector and threatens a Christmas and Black Friday without electronic products.

Meanwhile, the main Spanish ports, and among them that of Barcelona, ​​assure that they are operating normally. That they have neither collapsed nor the opposite. But his message contrasts with the story of those Spanish companies that have been suffering from delays in their imports for months.

One of them is Eurofred, based in Barcelona and which mainly distributes air conditioners from the Japanese Fujitsu. “The shipping companies we worked with used to work like clockwork. Now you never know when the merchandise will arrive,” says Manel Pérez, the firm’s head of Imports. One of the biggest delays they have suffered recently is a ship that had to It left in August and arrived in October. “It stops at a port, unloads your merchandise so that another can load it, and you don’t know why,” explains Pérez.

Perez also recalls that the current delays are only the latest chapter in some logistical complications that date back more than a year. Since the start of the pandemic, world trade has been affected by COVID, by the related delays of the Chinese year, by the ravages of typhoons or by the Evergreen traffic jam.

Small businesses suffer

In the case of Eurofred, they move a sufficient number of containers per year, about 3,500, which have managed to agree on a fixed price with a shipping company to ensure cargo until the end of the year. According to Pérez, they have also done this to ensure their sales campaign, which is in spring. Instead of gathering all the imports just before that period, they are now receiving them week by week. “The work is tripled,” he acknowledges.

The fact that all companies that depend on Asian factories have embarked on importing more than necessary to ensure medium-term campaigns is in fact one of the factors that have stressed the supply chain. It has to do with the bullwhip effect, according to Imma Ribas, a professor at the Polytechnic University of Catalonia (UPC) specialized in logistics. If the demand for a product suddenly rises, the one who sells it increases the order a little more just in case, then the manufacturer does the same … And this causes the chain to be saturated, but later the opposite can happen.

“In this context, some companies have anticipated and have taken over the transport capacity of ships, while those that have not seen it coming are having a worse time,” explains this professor. Ikea, Walmart, Home Depot and other large multinationals For months they have chartered entire ships to avoid delays, but it is not just a matter of anticipation, it also has to do with the size of the firm.

This is what explains why ships load some containers and not others, despite having reserves, when ports are saturated. “Big clients are given priority over small ones. And if little happened before, now much more due to lack of capacity”, explains Jaume Hugues, professor in the Department of Operations, Innovation and ‘Data Sciences’ at Esade , which estimates that the shipping crisis will continue in 2022.

One of the few favorable indicators that have been released in recent weeks is that the price of freight may have already peaked and would begin to decline, according to The Institute of Export and International Trade. This has been one of the biggest headaches for companies. Most of those consulted for this report note how the price of the container has increased in the last year from approximately $ 1,500 to above $ 12,000 or up to $ 15,000.

This has also had a significant impact on the companies’ accounts. Also the fact that some have opted for air transport, much more expensive, to meet deadlines.

20% more expensive toys

In this case, the example of Injusa, a toy manufacturer from Alicante, is useful, explaining that they have had to increase the price at which they sell their toys by up to 20%, especially electric vehicles for children. “With the rise in transport, component and energy costs, it would be impossible to maintain the previous rate; we are already assuming part of the profitability ”, expresses Yéssica Jiménez, director of marketing of the firm.

Injusa they explain that they also soon detected the shortage of supplies and since the beginning of the year they opted to order more components, such as batteries and chargers, as well as raw materials that are beginning to be lacking, such as steel, cardboard or plastic. The latter, which are imported from South Korea, has doubled in price in recent months.

The global logistics crisis is exemplified in this Alicante factory with the GS BMW toy motorcycle, the main novelty of their 2021 campaign. They wanted to launch it in July and in the end they had to delay it to September. But it wasn’t just the deadlines. This same week, in conversation with, Jiménez explained that his main concern now was to break stock with this product. Of the 6,000 units that they assembled, they only had 400 left, more than a month before Christmas, and they were not able to obtain the necessary steel to continue producing.

Just before the publication of this report, and in a sample of the whirlwind in which the world of logistics is immersed, Jiménez updated his situation. “We have found an alternative air transport and in two weeks we will have it here.” The cost of the plane is however much more expensive and this time the difference will be assumed by the company, because they do not believe that prices can rise any more at this point.

Exports, also hit

The focus of the container crisis has been placed above all on those companies that bring merchandise to Spain, since their better or worse performance depends on the full store shelves in our country. But in the same way that it hurts imports, logistical chaos hits those Spanish companies that are dedicated to exporting to the other end of the globe.

“Before manufacturing, loading and exporting was a process that was rolling. Now it’s all trouble and putting out fires. Every day is a challenge ”, describes Montserrat Ramon, CEO of Industrias Talpa, who from its factory in Parets del Vallès (Barcelona), and through subsidiaries in Mexico, the United States and China, supplies flocked solutions to the main automotive brands in the market. . They usually rent about 25 containers a year.

Ramon relates exactly the same problems to load containers, at the mercy of the opaque criteria of the shipping companies. “Everything is much slower and container prices have increased from 200% to 300%,” he laments. “Since the summer we have been assuming the cost of the increase, because negotiating with customers is not easy, but now we are trying to pass it on because although the indicators say that it will go down again, we cannot trust ourselves,” argues this directive.

Relying primarily on the automotive industry, they have suffered more from a lack of semiconductors than from chaos in ports. To some extent, the fact that their sector now operates at half throttle has meant fewer logistical puzzles, because the chain has slowed down. But the problem is in sales: they expect to close the year with a 20% drop.

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