Problems stemming from the supply chain and shipping crisis have emerged for a number of months now, with fears of runaway inflation and exponential rising costs in doing business also making headlines.

Locally, a broad rise in prices for consumer goods, such as electronics, and food – both in restaurants and supermarkets, has made the public all-too-aware that the increasing costs of importing goods and materials is having an effect on their bottom line.

The impacts are not just being felt from a price-perspective, however. Local car importers are having to put customers on waiting lists as long as nine months, as the global chip shortage and shipping delays takes its toll on the automotive industry.

In October, Malta’s Freeport announced a 3.4 per cent increase in tariffs, with the latest Terminal Operator Charge to import a 20-foot container full of goods rising to €146.89, while for a 40 food container this rose to €207.50.

Indeed, in September, the SME Chamber sounded the alarm over the inability of local retailers to be competitive when the price of international shipping, becoming 10 times as expensive in some cases, is posing a serious challenge to keep prices competitive.

So, why is all this happening and how long can it be expected to persist?

WhosWho.mt turned to Franco Azzopardi, CEO of Express Trailers, to break down the issue.

Express Trailers’ roots go back to the 1930s, when the founder cleared cargo from customs and delivered that cargo to his clients using a horse-driven cart.

Since those early years, the company has gone to become a major player offering services that range from Cargo Carriers, Container & Transport Operators, Customs Brokers/Agents, Freight Forwarders and Groupage Bond Operators to Haulage, Hoisting Services & Equipment, Insurance intermediary services, Logistics Storage & Warehousing, Lifting Equipment, Shipping Agents, Truck loading, Air Freight Services, Pick & Pack Services and Trailer Operations.

So, between the rising costs of warehousing, containers, cargo ships and freight, Mr Azzopardi is uniquely well placed to share his insights.

In your expert view, as somebody who is dealing with the worsening supply chain issue on a day-to-day basis, what, exactly, is causing the rising prices and hefty delays?

About 90 per cent of world trade is shipped by sea and most countries are heavily dependent for their supply of finished goods manufactured in China and the Far East. When COVID-19 struck back in early 2020, most of China went into forced quarantine, production stopped, factories closed, supply of raw materials and finished goods got hugely disrupted and supply chains stopped working.

The world went into a lockdown and people bought food.

In the mid-to-end 2020 world trade shot up as demand for goods grew to extraordinary levels and vessel supply was not enough to meet consumer demand. The cost of chartering vessels exploded and that is when freight tariffs started to increase exponentially. The situation was extreme, as not enough containers had space capacity, they were very difficult to obtain, and all this spilled over to port terminal hauliers and rail connections with huge delays and port omissions.

On another note, our European road network was not as much effected, and this was operated as normal unless the origin of goods was from China. We are only recently seeing rising transport costs on the road connections to Malta from EU supply.

The skyrocketing costs of international shipping are undoubtedly having an impact on this globalised economy. Can you share with our readers about how the current backlogs, delays and rising prices are impacted your business?

Supply chains throughout the world had to re-think how to re supply and re-engineer their process.  With the current high demand for e-commerce, world trade in semiconductors, sport equipment and cars manufacturers not keeping up with demand, factories are partially slowing down. This undoubtedly is affecting supply to consumers in Malta. Also, the increase in cost to import has had an effect on the cost of purchase and in turn the cost of goods to the consumer.

We have had to change our methods. Whereas the transit of goods was taken for granted we have had to redouble our operational efforts to keep our customers informed of the movement of their shipments and advise them of the best way forward. The placing of empty container units at suppliers to fill was a challenge as units were not available.

These delays then changed the vessel departure timeframes and therefore, had a change in freight costs, so we had to go back to the drawing board. Containers loaded were left at the terminal at port of loading and missed sailings due to vessel overbooking, vessels omitted ports due to schedule constraints or congestions at ports. It became a nightmare to service a client.

So, we had to be innovative, we started booking from four weeks in advance, paying extra to have empty containers available for loading, sending our own containers to certain ports to have our own equipment available for our clients, sometimes having to pay higher freight tariffs to have better chance of guaranteed space.

Above all, the effort to communicate better and faster had good results as did the fact that we have reliable correspondent networks in place around the world. One thing for sure was ‘Express’ had already invested in digitalisation process, and we were already seeing the benefits being deployed within the company with a better result to the client.  Without our doubt the experience and dedication of our staff.

How long do you foresee the current global shipping crisis to persist?

If vessel capacity is not increased to meet the demand, the current situation will keep playing in favour of the shipping lines. Vessels have been ordered and shipyards are full of orders for mega container ships. These will start to become available at the end of Q4 2022. 

But one has to also look at the infrastructure and the heavy investments needed in ports and the hinterland around the world for trade to come back to a normality.

As far as the cost of supply, this has yet to be seen as the line for a number of years has been in the Red and it is only now that they are making up with these extraordinary profits.

One has also to see other market factors, such as rising costs of fuels and human resources. The International Road Union (IRU) had in Q3 2021 warned of these increases. The recent EU regulations and driver shortages have been putting pressures on our own road operations in the EU and if no solutions are found we could be heading to increases in our road operations.

In tangible terms, how are the global economic challenges impacting your business, from staffing issues, financial hits due to delays in shipping, or the rising costs of warehouses?

I can only praise the performance of our staff who rose to the challenge. This meant hard work, dedication and commitment to the company, and more to the needs of customer.

At first, we also had our own fair share of the slowdown but that has seen an upsurge in demand on our operations in the past year. Customers have changed their purchasing patterns and we have also embraced change in how we operate and also think things.

We have increased volumes in various ports of origin in the Mediterranean region as customers are purchasing products and raw materials closer to Malta than from China or the Far East, with short transit times and better supply costs.

Due to customer demand and spending, inventories have been kept to a minimum and therefore we have seen much quicker turnaround of stock then pre-COVID times, in 2019. We have had to make much more use of our internal resources and also wise economic planning has helped us bounce back to start reaching our targets for the next couple of years head.