Shipping companies: “It is very possible that freight rates will go up a little bit more”

One of the unexpected tails of the COVID-19 pandemic has hit the shipping industry directly, in a process of container shortages, shipment delays and intermittent port closures that have affected the entire international trade system.

One of the results of the imbalance between the capacity of cargo shipments and the surge in consumer demand has resulted in a jump in freight rates and disruptions to the usual maritime trade routes.

Representatives of the Dominican Republic Shippers’ Association indicated that it is still possible that freight rates will go up “a little bit more”. The laws of supply and demand are mercilessly fulfilled in the market of ships and containers, and the vessels transit more safely to the ports of those who are willing to pay more for the dispatch of goods.

“We are paying between 13,000 and 14,000 dollars for a container and it is very possible that, due to the fact that the Americans are paying 20,000 dollars for each one, the freight rates will go up a little more,” said Teddy Heinsen, president of the Dominican Republic’s Shipping Association during his participation in the Free Dialogue.

30% of imports come from China
He added that the demand for containers from the United States has been of such magnitude that there is not enough space to cover the demand for maritime transport of the entire Caribbean, not just the Dominican Republic.

“What has happened with all this is that at the beginning there was no demand and ships that were not necessary left and three months later there is a demand that has not been able to stop,” Heinsen highlighted.

The maritime trade route that has suffered the most with all this new dynamic is the one coming from China, from where 30% of the foreign trade received by the Dominican Republic comes from.

Cristyan Peralta, member of the Dominican Republic Shippers Association, considered it a bit difficult to forecast what kind of goods could be missing in the coming months, after the guild itself recently warned that Christmas supplies could be affected by the global container situation.

“Local importers are looking for ways to avoid the potential shortages that could be registered due to this situation, looking for other places. The big importers are already thinking about how to readjust their supply chain because the chain has changed with this global situation. We are sure that the large local importers are going to look for ways to keep the local public supplied with what is needed,” said Peralta during his participation in the Free Dialogue.

When will the end of the trade crisis come?
The representative of the shipping guild believes the prognosis for a solution to the global imbalance of containers and ships dispatching goods is uncertain. “To have a certainty of when this will change is impossible because this situation has been given for a particular cause,” expressed Peralta.

He added that there is a manufacturing process involving some four million containers, which could normalize the situation within about four to five months after those equipment enter the maritime system.

“By the end of 2021 they could enter the system. Probably by mid-2022 we could see an important stabilization between supply and demand, but it is practically impossible to say that this is going to happen like this,” Peralta said.

The representatives of the Dominican Republic Shipping Association denied that the situation of freight costs has a direct impact on the increase in prices that has been registered during the last months and that, in the Dominican case, brought the annualized inflation rate to around 10% during the first months of the year.

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