Maritime trade bill to ease impact of high freight cost
July 29, 2024
THE Association of International Shipping Lines, Inc. (AISL), the leading voice of international container shipping industry in the Philippines, is calling on lawmakers to pass the measure aiming to enhance the competitiveness of Philippine maritime trade amid costlier freight rates due to the Red Sea situation, among others.
“It is very welcome for our industry for [Trade] Secretary [Alfredo] Pascual to say that the government is pushing for a legislative remedy. In the previous Congress, we, together with the Department of Trade and Industry [DTI], the Department of Transportation [DOTr] and port stakeholders, were pushing for the passage of House Bill No. 49333,” AISL President Patrick Ronas told the BusinessMirror in a Viber message over the weekend.
“We hope that this be given attention by the current congress. This will help not only the government address issues being raised by certain stakeholders but also levels the playing field when it comes to costs,” added Ronas.
The AISL President explained that the cost of freight depends on how the freight payer negotiates the freight cost with the shipping lines.
Just last week, the Department of Trade and Industry (DTI) released a statement saying it is seeking a “legislative remedy” to the longstanding issue of “exorbitant” international shipping charges that have weighed down Filipino importers and exporters.
Pascual said “These fees are not only burdensome for our businesses, but they also undermine our competitiveness in the global market.”
Pascual was referring to the International Maritime Trade Competitiveness Act, which mandates the Maritime Industry Authority (Marina) to regulate the imposition of these local charges.“This bill is a crucial step towards creating a level playing field for our businesses and ensuring that they can compete on a global scale,” said Pascual.
Meanwhile, Ronas explained that freight rates have risen due to what is happening in the Red Sea, where attacks on ships have disrupted ship schedules, resulting in congestion in major ports in Asia as these await ships to carry their exports.
Illustrating the re-routing of ships which had prompted the increase in freight rates, the AISL president explained, “Prior to such [Red Sea situation], shipping vessels would go through the Suez Canal from the UK and Europe.”
“This route, say from Rotterdam, a major transshipment port for European cargo, takes 25 days or roughly 10,000 nautical miles [18,250 kilometers] to China,” Ronas said. Because of the continuous attacks made by Houthi rebels on merchant ships, carriers must now go through the Cape of Good Hope in South Africa. This translates to 13,500 nautical miles or 25,000 kilometers. “In terms of days it takes an additional of 10 days as to what it was before.”
Major ports in Asia wait longer for ships to carry their exports, causing congestion.
“Empty container supply is also affected as the ships carry empty containers to go back to the demand location where they are needed,” the AISL president told this paper.
According to Ronas, container shipping space is like a commodity and the pricing is based on demand and supply. “Demand is not only about volume but also of timing when it comes to the shipping trade.”
On the share of shipping fees to the pie of transport cost, the AISL head explained that shipping will “definitely” have a higher share of the pie as the container was t ransported thousands of kilometers away while terminal charges are for the cost of handling the containers at the ports.
“Shipping fees is the cost of moving the cargo from point A to point B. Terminal fees are costs for uplifting the container from the vessel, moving it into the terminal and loading it again onto the trucks to be devliered to the beneficial cargo owner,” Ronas explained.
Early this year, Ronas recommended that Philippine exporters check their carriers or shipping lines on the expected arrival of their goods due to the disruption in the situation in the Red Sea, saying this will cause delays in arrival and therefore requires “reassessment on the availability of goods and raw materials coming from the countries affected.”
In June 2024, Japan-based think tank Nomura said, “With no immediate end in sight to the Red Sea disruptions, Nomura’s transportation analyst expects tight supply-demand conditions to persist throughout 2024.”
“Rising shipping costs add to import price inflation and feed through to PPI inflation with a lag. While firms could absorb some of the cost increase, this would squeeze their profit margins. This also suggests goods disinflation is coming to an end and is likely to become a source of upside inflation risk in coming months,” the think tank explained.
Source: https://businessmirror.com.ph/2024/07/29/maritime-trade-bill-to-ease-impact-of-high-freight-cost/