Skyrocketing shipping costs threaten exports

Cambodia Rice Federation (CRF) vice-president Chan Sokheang told The Post on February 8 that while the cost of transporting goods to international markets has risen steadily since the Covid-19 outbreak, it has gained significant momentum since November.

He said shipping lines blame the price hike on Chinese firms stockpiling containers for export to major destinations – especially the US – leaving a global shortage of the receptacles.

“This is the main reason why containers in all countries are in short supply and high in price,” Sokheang said, adding that Thailand and Vietnam are also feeling the pinch, but seemingly to a lesser extent.

“The cost of shipping goods from Cambodian ports to those in other countries has increased two- or three-fold when compared to before November 2020,” he said.

According to Sokheang, the average cost of chartering a 20-foot container from the Kingdom to Europe rocketed from $1,250 in November to nearly $3,000 now.

He said the surge in international shipping costs had become a major hurdle circumscribing the prospects of exports of Cambodian milled rice finally passing the one-million-tonne target this year.

“A number of buyers of Cambodian milled rice have opted to postpone their orders. Milled-rice exports are facing major headwinds, especially in the first quarter,” Sokheang said, adding that the private sector has called on Minister of Public Works and Transport Sun Chanthol to work with ship owners on a solution.

Cambodia exported 34,273 tonnes of milled rice last month, down 32.07 per cent from 50,450 tonnes in January last year, according to a Ministry of Agriculture, Forestry and Fisheries report.

Keo Mom, CEO of LY LY Food Industry Co Ltd, said Covid-19 has resulted in a surge in shipping costs and an increase in production costs. A protracted pandemic crisis could render producers unprofitable, or even trigger catastrophic losses.

In addition to rising costs, she said overseas shipping has also been dogged by a shortage of shipping vessels and containers, leading to longer transit times.

“Some exports have a pre-contract price, hence rising shipping costs will deal a blow to suppliers,” Mom said.

Cambodia Logistics Association (CLA) president Sin Chanthy said the surge in shipping costs began in August and is now a far cry from pre-Covid-19 levels.

He claimed that some shipping prices around the world had risen between 200 and 400 per cent, while exploding 10-fold for other voyages.

He attributed the volatility of the freight rates to Covid-19, which triggered many countries and carriers to reduce Lift-On Lift-Off (LOLO) cargo handling operations and trim their labour force.

China in August significantly ramped up production and exports to the US and Europe, leading to container congestion in the East Asian country and a global shortage that persists today, he said.

“Containers at the moment are not only very expensive, but even booking is difficult,” Chanthy said, noting that milled-rice accounts for many of the reservations.

Cambodia’s total exports reached $16 billion last year, marking an increase of more than 14 per cent compared to 2019, Prime Minister Hun Sen told a live press briefing on December 29, citing preliminary data.

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