Panama, Red Sea crises a blessing and a curse for SA
Shipping constraints at the Panama Canal and in the Red Sea could create an opportunity for SA fruit exports to Europe, but it could also turn out to be a double-edged sword in the longer term.
SA’s fruit export competitors in Chile and Peru are faced with constraints in getting their products through the Panama Canal due to drought in the region, while Houthi attacks in the Red Sea are affecting that shipping route.
The European markets are vital for SA’s stone fruit industry and for the pear industry, says Jacques du Preez, GM: trade & markets at Hortgro, the governing body of the SA deciduous fruit industry.
During the previous season, 41% of SA’s stone fruit were exported to Europe and 26% to the UK alone. The estimated value of pome and stone fruit exports to the UK and EU markets are about R4bn.
“Given the problems at the Panama Canal, we suspect that fewer Chilean products will reach the European market and possibly also reach there at a later stage, which would come in handy for SA fruit exporters, given the demand and supply situation,” said Du Preez. “The European
market has up to now been positive initially, but we have our own challenges to get SA fruit there in a good condition and on time, given problems at SA ports and shipping delays.”
Delays in the port of Cape Town now are estimated at two to three weeks. Between 10% and 20% of producers’ value can be destroyed if fruit is not loaded and shipped efficiently.
As for the situation in the Suez Canal, he said that should also be beneficial for SA fruit exporters in terms of markets in the Middle East and Far East if EU products cannot reach these markets.
It will also be more difficult for Indian table grapes, for example, to reach EU markets.
“We are watching the situations in Panama and the Red Sea closely. These two shipping route developments cause risks and inject uncertainty into the market,” said Justin Chadwick,
CEO of the Citrus Growers’ Association (CGA). Chadwick said that the crises in the two routes also increased shipping rates, affecting growers “considerably”. “So, it remains to be seen whether SA citrus can in any way benefit from the situation,” he said.
Access to the European market is of great concern to the CGA, as any possible benefits from shipping developments could be negated by what the CGA regards as the EU’s “unscientific and discriminatory” phytosanitary regulations on citrus black spot and false coddling moth, which hampers exports.
Roelf Pienaar, MD of TruCape Fruit Marketing, one of the largest SA fruit exporters, said infrastructure problems at SA ports are “probably too big” for SA fruit exporters to benefit from the congestion in the Panama Canal. “Currently the local ports are causing our biggest bottlenecks,” says Chris Knoetze, MD of Link Supply Chain Management.
“We need to get our fruit in the market as soon as possible, while the prospects are still good,” said Calla du Toit, procurement manager for Tru-Cape Fruit Marketing.
“Unfortunately, our consignments are arriving late, resulting in missed opportunities. It damages our reputation and image as a country and harms our relationships with importers, who might prefer to reach out to our competitors in countries where logistics and shipping are less of a challenge,” he said.
Citrus producer and exporter Jan-Louis Pretorius, CEO of Groep 91 Uitvoer and a director of the CGA, cautions that oceanbound cargo and reefer containers carrying fruit and other perishables around the globe constitute an incredibly complex and interconnected system. “In our experience, any delays, diversions or other blockages such as those resulting from the ongoing congestion in the Panama Canal and attacks in the Red Sea, cause a chain reaction of disturbances which unsettle the natural flow of vessels and equipment, normally taking much longer to resolve than what it took to create,” said Pretorius.
“Though this could result in short windows of undersupply in certain markets and commodity types which could be seen as an opportunity by specific players the longer-term impact of rising shipping costs and related logistical inefficiency could potentially do a lot more damage than good to export-orientated producers.”
“With our entire citrus season lying ahead of us, we see the current situation, specifically in the Red Sea, as a significant risk to our business and industry.”