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News Article

Shipping Costs Could Affect Black Friday

By Lorenzo Núñez | Wed, 09/29/2021 - 14:10

Mexico’s Black Friday and the retail Christmas season could face shortage of products due to the lack of production in electronic devices. This is due to a decrease in containers, as well as reduced activity at key international trade ports as well as an increase in international freight costs.

According to Drip Capital Mexico, a company specialized in financing exporters and importers, the global container shortage that has been occurring since the mid-2020s, has continued its negative affect in logistics and deliveries for multiple sectors. While the shortages are expected to taper off  by mid-2022, the current landscape remains challenging and, in some cases, freight costs in Asia have increased around 900 and 1000 percent and remains unprecedented and completely disruptive to some industries. The last few years have shown the importance of ports and logistics, which were key to reducing the impact of disruptions in supply chains, as around 90 percent of the world trade is by sea, told MBN Yemile Mariana Tuma President of the Mexican Arab Chamber of Industry and Commerce (CAMIC).

 

Facing Challenges

The shortage in electronic devices which began in mid-2020, has had a massive impact in the automotive industry. This shortage could cost the automotive industry up to US$110 billion in revenues this year. In addition, the US is facing a historic stagnation of containers, since only 40 out of every 100 units arriving at its ports are exported, meaning that 60 are accumulating on a route that moves an average of 900,000 containers per month, according to Descartes Datamyne. Also, one of the most important ports in the world, in Yantian, China, presented a drop in operating capacity by 30 percent, equivalent to an estimated 175,000 containers.

Recently, the International Chamber of Shipping which represents more than 80 percent of the merchant fleet, presented a submission to the UN calling for an internationally accepted market-based measure to accelerate the uptake and deployment of zero-carbon fuels, reported by MBN. This could potentially translate into an even higher freight cost if shipping does not return to pre-pandemic levels.

With all these challenges ahead, Drip Capital suggests that Mexican importing companies take precautions when placing orders during high season demand such as black Friday and the holiday season, due to delivery times that may vary according to the season, in addition to the possibility that there may be freight saturation during high seasons, which could potentially lead to even higher cost in shipping rates.

"Like all markets, trade is cyclical. Eventually there will be a recovery, including the proliferation of new industries. Times of crisis are times of opportunity, so we will eventually notice the development of new industries, products, services and technologies, as well as the gradual recovery of the economy as well as for Mexican imports and exports," said Gregorio Vázquez, commercial director of Drip Capital Mexico.

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Lorenzo Núñez Lorenzo Núñez Junior Journalist & Industry Analyst