PHL firms facing higher import costs

ICTSI

By Jenina P. Ibanez, Reporter

PHILIPPINE INDUSTRIES are struggling with higher import costs caused at least in part by global supply chain constraints amid the coronavirus pandemic.

The local steel industry, being relatively small, is not experiencing shortages seen by larger economies like the United States. However, the industry is affected by soaring prices, Philippine Iron and Steel Institute (PISI) President Ronald C. Magsajo said in an e-mail.

“The flat products sector is seriously affected by the worldwide shortage of containers,” he said. The container shortages pushed the prices of tinplate, hot-rolled coil steel, and cold rolled steel higher.

“There’s a logistics issue. There’s a demand issue. For a lot of economies including ours, the primary stimulus to get back from COVID-19 is usually incentives on construction and infrastructure,” he said in a phone interview on Saturday.

“Demand is up on one side, and on the supply side, the price of raw materials went up.”

Mr. Magsajo said costs have been consistently increasing for all imported inputs, including raw materials for rebars, in the steel industry.

“There are many factors that drive up the price. Depending on who you’re talking to, they’ll have a different opinion on why the price is up.”

This cost hike has dampened construction activities with the implementation of some projects having slowed down or even suspended, Mr. Magsajo said.

Delays have hampered both inbound and outbound trade. An export industry group recently flagged logistics issues as vessel space and container shortages cause freight rate surges and shipment delays and losses. Shipment waiting times continue to be long as export market demand recovers, a Philippine Exporters Confederation, Inc. (Philexport) official said.

“Definitely, (the) cost of import and export have increased very much because of logistics issues,” Philexport President Sergio R. Ortiz-Luis, Jr. said in a mobile message on Monday.

Various industries globally are reporting supply chain constraints and shortages as economies bounce back from the pandemic. Labor shortages, demand spikes, and logistics backlogs are some of the problems being experienced by firms around the world.

Large economies like the United States are experiencing shortages for various products including tapioca pearls used in beverages as consumer demand rebounds.

Chatime Philippines Finance and Marketing Director Christopher Cua said that their stores are not experiencing shortages of tapioca pearls or other raw materials but import costs from Taiwan — where the headquarters of the global franchise is based — are up.

“The biggest issue is more of the lead time, because a lot of the items got delayed especially because the Taiwanese also ship in from other places, so that affects our lead time,” he said in a virtual interview last week.

“The problem is not with the supplier. The problem is with shipping. When our container is ready to go, the port in Taiwan can’t release it because there’s traffic. And then when it arrives here, it’s also traffic.”

Mr. Cua said that he is not sure about the reasons behind the cost spikes for imported tapioca pearls and raw materials for paper packaging. The stores’ buffer inventory can so far address delays, but the need for buffer stock heightens costs while demand is slim.

PISI’s Mr. Magsajo said that it is time that the Philippine steel industry, which imports 80-90% of its requirements, become less import reliant.

“The global market dictates prices of steel here. If we achieve some level of self-sufficiency, which is the goal, then we’re not as hard hit when times like these come,” he said.

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