By: Yukki Nugrahawan Hanafi, ALFI Chairman and AFFA Chairman
Amid the pandemic Covid-19 outbreak, our logistics and transportation business have been hit by some serious problems of container shortage and unavailable slot/space as most of the containerships were full booked. And, not to mention our old problem of poor data ecosystem among stakeholders of transporters, cargo owners, forwarders, and related institution.
Indonesia Logistics and Forwarders’ Association (ALFI) knows and understands that these problems are absolutely bottlenecks of export import activities. Evidences have said, container shortage and unavailable slot/space significantly halted our export import activities and our industry productivity as well. Many export commodities were blocked at some factories, forcing them (factories) to stop production.
On the other hand, the smooth flow of export and import activities and their financing during pandemic are the key steps to improving our national export performance. Actually, we (ALFI) and other relevant agencies and ministries have taken this as main focus.
The good news is that the global container shortage will stay no longer than next year (2022). Moreover, Indonesia is one of the countries that is considered to be the most prepared to face this problem as no lockdown policy was taken in overcoming the pandemic.
The current world’s containers shortage is basically triggered by the global Covid-19 pandemic that has lasted almost the last two years. The impact of this situation has also affected the behaviour of the logistics industry. There is a very strong change in the industrial sector in which the international shipment is strongly influenced by trade to and from America, while intra-Asia is considered less profitable with shallow margin. So, in view of business, routes to/from America is more attractive, rather than to Europe and intra-Asia.
The global trade decline, including American export performance that is much lower than its imports, has resulted the ex-import containers are held back, which in turn affects the global shortage of containers. Thus, the global shipping industry rationalizes costs up to pending shipments or omissions.
This condition also has an impact on trade activities to and from Indonesia because Indonesia import tends to use 20-feet containers, while exports using 40-feet ones. This condition makes Indonesia export import activity is getting worse, resulting in a very extreme increase in freight rate on a number of international shipping routes.
As reported, during 2008 – 2019, the world economic turmoil came from the financial, energy, and trade sectors. But, these crises did not really put pressure on the supply and demand sides.
The Covid-19, which originates from the health sector, has paralyzed the economy because it suppressed the performance of the supply and demand sides. This condition was getting worse, because the world economy had no experience in dealing with COVID-19 at that time and it is still having an impact until now.
As an association of often involved in discussions in finding solutions to the problem of container shortage, ALFI has actually submitted various proposals and inputs to the government and related ministries and stakeholders.
Seven Key Facts
Based on the ALFI’s study, there are at least seven key facts that have significant relation with the issues (container shortage and its impact on Indonesia’s export/import performance); first, container shipping is required for export-import of finished products. Export activities of Indonesian natural resource commodities such as coal and CPO do not use containers but use dry bulk or liquid bulk shipping.
Second, the availability of containers in a country depends on the frequency of imports. Containers tend to move a lot to America along with high imports, while in Indonesia is less.
Third, during the COVID-19 pandemic, there was a decline in Indonesian imports which resulted in fewer containers entering Indonesia. As a result, Indonesia export import faced container shortage, the 40 feet/40 feet high cube, in particular. Further, the pressure of rising transportation costs cannot compensate for the added value of the exported commodities.
Fourth, shipping lines give clients a free time window at the port to maintain business relationships.
Fifth, shipping lines reduce the free time window in the United States and charge additional costs for unloading containers, in a bid to push containers back to Asia as quickly as possible for the next shipment. However, US importers were unable to find sufficient truck capacity to empty the containers.
Sixth, Asian exporters suppress prices by pre-ordering containers, reserving space on ships, and negotiating tariffs using index-linked container contracts and risk management tools.
Seventh, the Chinese government intervened the price and asked COSCO (a Chinese-owned container company with a world market share of 35%) to hold its price, which is expected to curb the increase in container prices.
ALFI Proposed Solutions
It is undeniable to say that the problem of containers shortage has tiggered logistics prices higher. This becomes more serious as amid the pandemic, there was a decline in Indonesia’s imports which led to a container shortage, especially the 40 feet ones needed for export.
The Indonesia’s smaller import volume during the pandemic have led to a low number of containers entering Indonesia, in addition to the imbalance in the flow of export and import containers between Asia America which raises container prices.
In view of those problems mentioned above, we (ALFI) have actually submitted a proposal to the government to overcome the problem of container shortage, in order to encourage the smooth flow of Indonesian export and import goods;
First, optimize the utilization of container turnover by seeking to release/utilize containers with un-clearance status (no clearance) at each port terminal. Then, the shipping lines can also transparently submit an earlier report to the exporter and related agencies if their loading capacity is indeed problematic or has been fully booked by the exporter. The shipping line is expected to prioritizes to carry full container rather than empty (reposition).
Second, give relaxation / convenience for the transfer of export goods / finished goods from the factory to the logistics warehouse, if the factory has customs facilities (KB or KITE) then it has been supported by BC to facilitate the process of this temporary relocation permit from KB / KITE to the warehouse location PLB, TPS or TLDDP (public warehouse with guarantee). In addition, technical control of container loading facilities and the availability of containers can be monitored and be monitored by relevant agencies and service users.
Third, optimize the involvement of national private logistics players to support government infrastructure projects. In this case, the acceleration and ease of licensing for business activities will help business players without neglecting the larger interests of the state (monopoly practices, export/import bans/restrictions and so on).
Fourth, provide subsidies to exporters, especially for high competitiveness commodities (RCA > 1) so that they are able to change the export payment method from FOB to CIF and have bargaining with overseas buyers.
Fifth, provide subsidies to shipping operators so that they are willing to do repositioning (repo) of empty containers that are still stuck in several places. *****