Business & Economy

Expert: Rise in shipping costs boosting CentAm intra-regional trade

Panama City, Aug 17 (EFE).- The sharp rise in shipping costs now affecting global supply chains is giving a boost to intra-regional trade in Central America and opening a window of opportunity for Panama, the president of that country’s Logistics Business Council (COEL) said.

In an interview with Efe, Alberto Lopez Tom said container shipping prices “are varying depending on the type of freight and the shipping line, but we’re talking about shipping containers that used to cost $2,000 or $3,000 (per unit) that now are $12,000 or $15,000.”

There has been a “substantial increase in trans-oceanic shipping costs that have produced very interesting effects” in places like Central America, according to the president of COEL, which comprises a score of Panamanian trade and logistics companies.

Lopez Tom said consolidated regional figures are still lacking but that company results indicate the rise in shipping costs is encouraging greater trade – especially in raw materials – among Central American countries.

“For example, a (Panamanian) company that had been buying a raw material in China now buys it in El Salvador. Because even if it’s more expensive, when you add the cost plus the shipping, it comes out ahead. El Salvador has a trade opportunity in Panama that it didn’t have before due to a production cost issue,” he said.

“Many Panamanian companies are (now) depending on raw material that comes from Central America,” and that is reflected in an “increase in the volume of cargo” crossing the Costa Rica-Panama border, Lopez Tom said.

A plant in Costa Rica owned by Japanese tire maker Bridgestone, for example, is expanding operations to increase production, he said.

“They’re logically seeing that bringing tires from China is more expensive” and are making a commitment to regional production to cover Central American demand, Lopez Tom said.

Panama has a “role in distribution and for COEL this is an opportunity,” that entity’s president said. “New regional trade schemes are emerging. The goal should be to see how we can best take advantage, and that requires regulatory adjustments.”

According to figures from the Secretariat for Central American Economic Integration, the value of goods exported intra-regionally (within Central America) grew 11.9 percent in the first quarter of 2021, compared to the same period of last year.

The rise in shipping costs is partly due to increased demand as markets recover from the impact of pandemic-triggered economic disruptions.

But the increase in shipping costs also is attributable to a lack of available cargo space on ships and a shortage of empty containers in China, according to Lopez Tom, who noted that lower operating efficiency amid the pandemic has made it difficult to ship those empty containers back to the Asian nation.

The situation also has been exacerbated by port closures in Asia. In that regard, the Ningbo-Zhoushan, considered the world’s busiest, has been partially closed since Wednesday.

“With Panama mainly being a transshipment destination, we’ll have to see what adjustments are made at the level of both China and points of exit, and at the level of shipping lines” to gauge the impact that closure may have on the country, the COEL president said.

He recalled that another large Chinese port – Yantian – was closed in June due to the pandemic, adding that “a direct impact was not felt so much in Panama but rather at the Port of Los Angeles, with a significant drop in cargo from China.”

The Panama Canal handles roughly 6 percent of global trade and counts the United States and China as its two biggest users. EFE


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