Chile: PMA Seminar addresses logistical challenges for fruit exports

November 22 , 2019

Key players from the Chilean fruit industry gathered in the capital Santiago on Wednesday morning for a Produce Marketing Association (PMA) Breakfast Seminar addressing one of the sector's most critical areas - logistics.

A panel comprising chiefs of leading port, shipping and exporting organizations discussed various topics. These included port challenges in Chile and elsewhere around the world, express shipping services, labor-related issues, and the new regulations coming into force next year.

The panel was moderated by Francisco Labarca of Global Reefers and included Daniel Fernandez of Chilean port chamber Camport, Ricardo Klempau of Mediterranean Shipping Company, Cristian Tagle of San Francisco lo Garces, Cristian Ureta of Exser, and Roberto Zilleruelo of DP World Chile.

Speaking to FreshFruitPortal.com, Labarca highlighted that the event addressed an essential topic for the Chilean fruit industry and also served as a forum for interaction between the shipping and fruit sectors.

"I think that it is very important for the fruit industry to address logistical issues," he said. "Generally they are issues that are slightly forgotten about as more time is spent on commercial aspects. But logistics are key, especially for Chile because we are so far away from the markets.

"I'm very happy that exporters can connect directly with the people who manage the ports and the shipping companies, because it's such a relevant topic for exports nowadays."

Andrés Armstrong, the PMA's representative in Chile, said the event was an opportunity to bring together the whole supply chain in the country to help to build a better fruit industry.

"We are doing at least four of these events per year on topics of true importance. Our own members are the ones who propose what issues should be discussed from around the industry," he said.

Six key challenges

In the morning's opening presentation, Fernandez provided his perspective on six of the biggest port-related challenges for Chilean exporters.

These included availability - which has been squeezed as global TEU container volumes have tripled over the last couple of decades - and the numerous and rising port costs, many of which in Chile are among the highest in the world. 

The other challenges are the bureaucratic administration, the sub-optimal - yet ever-improving - speed of container transfer to and from quays at ports, port connectivity with other transport infrastructure, and distribution.

Connectivity and worker strikes

On port connectivity, Zilleruelo said he believed that it should be one of the industry's key investment priorities. Currently, only around 2% of cargo arrived at Chilean ports via railway - an efficient but underdeveloped transportation method in the country.

And on port worker strikes - which have been common at the Port of San Antonio, the main exit point for Chilean fruit exports - he noted that the topic was a time-consuming one.

In many ways, the challenge has become more complicated over recent years as workers had come under increasing pressure, both domestically and internationally, to cause disruptions, he said. 

Challenges at U.S. and Asian ports

When asked about the situation for Chilean exporters at U.S. points of entry, Ureta said that many ports in the country had not seen high levels of investment over recent years, although there are improvements being made. 

Many of the delays that exporters have faced were related to weather conditions, fumigation capacity, or port capacity, he said. 

He also explained that there was an increasing demand to send fruit to places other than Philidelphia or Los Angeles - which have traditionally been the key points of entry for Chilean fruit on either coast.

Greater volumes were now going elsewhere - such as Houston, Savannah, or Miami - and it was therefore important that investments be made in infrastructure and capacity around the country.

Tagle also noted that the entry into Chinese ports was a concern, especially true for high-volume fruit exports like cherries. Nowadays around 10,000-11,000 containers are shipped within just a few weeks, and that number is expected to double to 20,000 containers within a few years.

Express and direct shipping services

Another topic that was discussed was the benefit of express shipping services - which Tagle said have recently begun to be used for nectarine exports.

In fact, he explained that the reduction in shipping time for some nectarines had meant the fruit had a much better shelf life on arrival, which has in turn generated much greater demand from Chinese consumers for that fruit.

Express services can therefore effectively create new industries in themselves, he explained, adding that he expected the trend toward express shipping services to continue in the future.

In addition, the lack of direct shipping services to the distant India market was raised during the event, and pointed out as a major barrier for Chile making inroads into that market. But Klempau explained that a critical mass of volume was needed in order to make such a service feasible.

New fuel regulations for 2020

One final but important issue that was also mentioned was the new fuel regulations for shipping companies that will come into force next year. The International Maritime Organization (IMO) will in January implement a new regulation for a 0.5% global sulfur cap, against the current limit of 3.5%.

Klempau noted that North American and European ports already have limits of 0.1%, meaning that ships need to switch to a different fuel on approach. While that limit will be maintained, but this new regulation will apply everywhere else in the world. 

He said the biggest impact of this rule will be the increased costs, which will inevitably be passed down to the users. Mediterranean Shipping Company expects the changes will raise its annual operating costs by US$2bn, he said.

In addition, the absence of fuel refineries in Peru and Chile make the logistics of supplying the fuel especially challenging and costly for those countries, he explained. 

 

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