Brasília – The chaos in international trade caused by the sharp rise in freight costs, combined with the severe container shortage, is not expected to return to normal until the beginning of the second half of 2022, by which time freight rates and the logistics chain should have stabilized. This is the opinion of Fábio Pizzamiglio, director of Efficienza Importação e Exportação and an expert in foreign trade and logistics.
Predicting that it will take at least ten months for international trade to return to normal, Fabio Pizzamiglio believes that Christmas 2021 will be marked by a shortage of some of the traditional products associated with the end-of-year celebrations and prices much higher than those seen in previous years.
Fábio Pizzamiglio’s assessment aligns with the opinion of Cláudio Loureiro de Souza, executive director of the National Center for Transatlantic Navigation (Centronave), who does not believe the crisis will worsen and emphasizes that “a few weeks ago, there was serious concern that the major congestion at Chinese ports would hit Brazil like a tsunami. But today, the assessment is that what had to happen has already happened. The situation will return to normal gradually, but the crisis is expected to last until the second half of 2022.”
According to the director of Efficienza, “We expect to have a Christmas with fewer products and higher prices. It’s important to remember that import taxes also apply to shipping costs, which is why some products will double in price—a situation also due to the fact that the dollar exchange rate remains high. “The exchange rate and the taxes levied on shipping costs will be reflected in the prices of Christmas products.”
In analyzing the current state of Brazilian foreign trade, the expert points out that “Brazil began to suffer from imports as the dollar appreciated at the start of the pandemic, and from there the problem worsened. By 2021, we thought the situation would return to normal, but the opposite happened. The recovery of foreign trade in developed countries occurred sooner than in Brazil, and this ended up generating a much stronger flow of containers. And this group of countries has the capacity to absorb higher prices (for containers and freight), which is more complicated for us.”
Fábio Pizzamiglio also noted that “in May and June, with the temporary closure of the Suez Canal, China’s ‘zero-COVID’ policy, and, more recently, in mid-August, with the closure of a terminal at the Chinese port of Ningbo-Zhoushan, the problem worsened even further. It is important to remember that this port—the third-largest in the world in terms of shipments and second-largest in China in terms of cargo volume—handles more cargo than the entire volume of Brazilian foreign trade. This combination of factors had a significant impact on international trade and, consequently, on Brazilian foreign trade.”
Fabio Pizzamiglio, director of Efficienza—a company based in Caxias do Sul that was founded 25 years ago—says, “We’re seeing the market gradually recover, but the process is slow. Last week, I was visiting one of our major clients here in Curitiba. They have sales and business volume, but unfortunately, since the entire supply chain is behind schedule, there aren’t enough raw materials to supply their factory. Another client of ours in Caxias do Sul—a bus body manufacturer—is facing the same problem. They had to put their employees on leave because they can’t maintain sufficient production levels, also due to a shortage of raw materials.”
But the problems persist, as Fábio Pizzamiglio points out: “Things are starting to return to normal in China. However, the available containers are going to the larger markets, because whoever pays more gets more. Container prices are rising, but the large markets are affected less.”
Despite everything, the effects of this external crisis are not yet reflected in Brazil’s foreign trade figures, and exports and imports continue to set all-time records.
According to the Efficienza executive, “Brazil’s top export is iron ore, which doesn’t require containers, and with the bulk carriers used to ship soybeans, corn, and other agricultural commodities, everything is running smoothly. But we can see that there’s a delay. Shipments had been piling up, and we’re now receiving cargoes that should have been in Brazil months ago.”
In his analysis, Fábio Pizzamiglio points out that “we have many customers looking for new suppliers in the domestic market, even though the quality isn’t as high, but often these companies have to build up inventory and deal with shipping costs that are double—and sometimes much higher—than what they used to pay, since there are cases where shipping costs have risen from $1,000 to as much as $15,000. The current situation remains difficult, and I don’t believe relief will come before the second half of 2022.”
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