Posted on April 13, 2021 · Posted in Industrial / Flex, Investments, Retail

Vessel delays and port congestion in South Florida are threatening to spoil the flourishing perishables trade between the US and Latin America.

Although trade between the two regions has been spared the severe disruptions seen on the US West Coast, sources tell PortMiami has seen vessel unloading times spike because of ships arriving one to two days late.

HLB Specialties, an importer of exotic and tropical fruits from Central and South America, brings about 70 percent of its fresh fruits into PortMiami, with the remaining coming into Port Everglades. The company said carrier delays are affecting its ability to make scheduled connections with trucks heading northbound out of South Florida.

CEO Andrés Ocampo said vessel delays started last November and December following hurricanes Eta and Iota that hit Central America. Vessel delays have flared again over the past month, but now carriers are blaming mechanical issues and port issues in Honduras and Guatemala.

Vessels that typically arrive in South Florida on Sunday and Monday were instead arriving on Monday night or Tuesday morning. HLB Specialties’ palletized fruit shipments move northbound on trucks that depart on Monday or Tuesday morning.

“If you miss that window, you have to wait until the end of the week to get product to your customers,” Ocampo said. “So a one-day delay on the vessel arrival can trigger a four-day delay in delivering fresh fruits to our customers, and it’s not good for our business. There were years that would go by without any hiccups, but in the last six months we’ve experienced disruptions by the carriers, and it’s not easy to fix on our side. It is especially a problem when vessel delays are further compounded by blank sailings and reefer cargo gets rolled as carriers attempt to get back on schedule.”

“While service from the carriers is diminishing, ocean freight rates and surcharges over the past 6 to 12 months are spiking,” Ocampo said. “I’ve never seen prices going up this high and this fast. Previously it was steady, predictable, what you could expect in terms of ocean freight rates from Honduras, Guatemala, Ecuador, and Peru. But in the last six months to a year, we’ve seen a tremendous increase in rates and surcharges, including bunker adjustment factors.”

Ocampo said rates are up 20 to 25 percent overall for the fresh fruit imports HLB Specialties is moving from Central America to South Florida.

“That has a big impact on our pricing and the returns for the growers. It’s affecting how much we can sell our products for,” Ocampo said. “We can only absorb so much of the rising freight costs and surcharges, and then we have to start raising our prices to the customers. Otherwise, the growers aren’t going to have enough income to be able to plant again, which means there is going to be less crops produced to satisfy the growing market demand.”

Drayage Delays An Issue, Too

Ana Ramos, co-owner of The Perishable Specialist, a Miami, Florida-based customs brokerage that handles fruit and vegetables, acknowledged that many arriving vessels are delayed.

“Once they’re berthed, because of COVID constraints, labor is scarce,” Ramos said. “What used to take eight or nine hours to offload a vessel, is now taking two or three days.”

It’s not just discharging a vessel that is taking longer because of labor constraints. Drayage and truck transportation, which was already suffering a driver shortage prior to the pandemic, is also taking longer.

Drivers are hurrying to deliver inbound perishable shipments from the port to the customers’ facilities, “but not necessarily in a hurry to get the empties returned to the port, which is obviously creating a lack of available reefer containers for exports,” said Ramos.

On average, once a container leaves the port, it has to be returned within two days. However, because of the large volume of inbound cargo coming into South Florida, Ramos said drivers are picking up containers from the port and dropping them at the customers’ facilities, then returning to the port to pick up more incoming containers, which means the previously delivered containers are sitting empty at the customers’ facilities waiting to be returned to the port. Those empties are not necessarily a priority for the draymen or trucking companies.

“It’s a vicious cycle,” said Ramos. “You have all those empties sitting at a warehouse and they’re not heading southbound to Central and South America, for example in order to get filled up again.”

The result is mounting per diem charges.

“Anyone who is moving a decent volume of reefer cargo is getting massacred with per diem charges because the shipping lines have not made concessions for the driver shortages nor the huge amount of cargo coming in,” Ramos said.

Using Reefer Containers For Dry Cargo

One solution for keeping reefer containers flowing is to use them for dry cargo as a way to reposition them to where reefer beneficial cargo owners (BCOs) need them.

“We accept most any type of dry cargo in the reefer containers, and we incentivize dry shippers to use those boxes,” said Michael Britton, CEO of Sealand Americas — A Maersk Company.

Shippers of dry cargo receive an adjusted price in exchange for the reduced cubic capacity inside a reefer container because of the refrigeration unit.

“Sealand is also expanding intermodal solutions and looking for opportunities to triangulate containers,” said Britton. “For example, keeping perishable product in the reefer container all the way to Chicago helps deliver a secure cold chain all the way to the center of the US, which is really valuable to growers and consumers, and it’s also important from a food safety perspective.”

“We’re also developing intermodal capabilities that allow us to more consistently triangulate boxes,” Britton said. “For every import to the US, we want to turn it on the street and bring it to an exporter. That way, customers are getting their equipment faster, and we’re eliminating waste associated with moving empty boxes around.”

Todd Pigeon, Sealand’s chief commercial officer, noted that utilizing niche ports, such as Ecuador’s Puerto Bolivar or the Port of Pisco in southern Peru, is another way to support fresh food importers and exports on the north-south trade lane.

For example, US-based supermarkets and fresh fruit and vegetables importers are increasingly sourcing directly from South American growers and producers in order to shorten the food supply chain.

“We’re moving our vessels and equipment closer to where the product is coming out of the ground, which helps extend shelf life while reducing the impact of transportation and handling,” said Pigeon.

Growth Despite Pandemic

Fresh food imports and exports between the US and Latin America continued to grow in 2020 despite the COVID-19 pandemic.

Vegetable products, foodstuffs, and live animal/animal products were the top three commodity groups traded between the US and Latin America during the past three years (2018 to 2020), according to data from PIERS, a sister product within IHS Markit. Each showed steady growth over the three-year period, with the exception of foodstuffs, which saw slight variations.

Two commodity groups saw particularly strong year-on-year gains in 2020 compared with 2019: US refrigerated exports of live animal/animal products (up 30 percent) and vegetable products (up 27.6 percent).



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