Importers' Connect

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00:00 - Introduction

In importing, timing matters, delays matter, currency moves matter. This is Importers' Connect, your weekly briefing on the logistics, freight and forex trends shaping South African trade. From port congestion and customs updates to shipping costs and market movements, we bring you the insight behind the headlines so your business can plan with greater certainty.

Dylan: Welcome to Investec Importers Connect.

I'm Dylan Governor.

Vernon: And I'm Vernon Sinden. Today we're discussing three developments that every South African importer should have on their radar. Firstly, how recent US tariff decisions are influencing global shipping capacity Secondly, what that means for vessel space and lead times into South Africa, and finally, an important regulatory update closer to home regarding the PVOC program.

So Dylan, let's start with what's happening globally.

00:31 — Why are US tariffs reshaping global shipping routes?

Dylan: Thanks, Vernon. The Trump administration is intending to impose additional tariffs of 12 .5%. These tariffs are imposed on goods coming from 56 countries, South Africa being one of them, and obviously China as well.

Apparently, these additional tariffs are associated with unfair labour conditions in these different countries.

With the volume of goods that moving from China to the US, the shipping lines find much more profitable routes.  What we will see happening in the market is larger vessel capacity moving off the SA trade lane and onto the US trade lane. For example, Vernon, China to Mexico at the moment is approximately $8,000 a 40-foot container.

If you compare that to China to South Africa, you're looking at $3,000 per 40-foot container. So ultimately, the shipping lines are going to go with whichever route is more profitable.

01:35 — What happens when vessel capacity follows the money?

Vernon: So that takes schedule reliability as a talking point where importers often focus on the rates, but I think the bigger trigger here is schedule reliability.

If we're talking about reshuffling of schedules and if we're going to be moving bigger vessels over through to China and the USA route, that would mean reduced service frequency and rolled bookings, last-minute schedule reliability, and that will influence the supply, demand and rates as well.

Dylan: Yes Vernon, it's nothing we haven't faced previously. Logistics is resilient. We've been through it with the closure of the Suez Canal. We've seen it numerous times. When vessels are removed onto different trade lanes, capacity becomes a major issue. At the moment, we've got a three-week delay in terms of just securing a booking.

If a booking is rolled, you're looking at further delays. It could take your goods 8 -9 weeks to get here as opposed to the general importer being used to the four-week period.

02:21 — Why is Singapore becoming a bottleneck for importers?

Vernon: Yes, we are going to be seeing delays in Singapore for transshipment ports between 3-4 weeks.

Dylan: That's an important point to note.

Although your container may not be scheduled to discharge in Singapore, the vessel is still calling that port in terms of their routing and the shipping line at the last minute could decide, "Listen, we're going to dump these containers at Singapore and go onto the next lane," and you have to wait for the transshipment there.

That could lead to a further 3 week delay. So you have to consider as a business in terms of your working capital and how your cash flow is actually tied up in these delays.

02:49 - How should businesses prepare for delays and backlogs?

Vernon: I think the key word is that there is going to be backlogs. What are we going to be doing differently to resolve these type of issues moving forward? We've reiterated booking in advance. We know that the rates are going to be going up. We know that there's going to be backlogs. We know that there's going to be reshuffling and schedule reliability issues. So if we're talking about schedule reliability and we're talking about backlogs, I think those are the two key words that we're hearing here 

So I think the question is, what can we do to help our clients? And I mean, if you're talking out of the Far East, we partner up with seven different shipping lines. We have various options. We have to look at the schedule reliability and the sailings, and of course, cost plays into that, which is quite important.

And of course, we do expect there to be delays, and I think visibility is key. It's communication 101 and that's what we should be looking at constant updates if there is any changes. I mean, it is unpredictable and it is uncertain, unfortunately, so we just have to keep our clients updated with what's happening in the market.

03:43 — Is availability becoming more important than freight rates?

Dylan: Vernon, I think importers often focus on freight rates, but the bigger risk here is availability. It's visibility of your brand. It's having your cargo on the shelves at the end of the day. So reduced service frequency, rolled bookings, last-minute schedule changes can have much bigger impact on a business than a slight increase in the freight cost.

So these are the considerations that we take into account at booking stage. We're looking at different optionality. We're looking at space availability, and we're offering the different rates that may be applicable to secure that.

04:11 — Why are freight costs expected to rise further?

Vernon: I think if  we're seeing in the market now  a 40-foot high cube, it's about $3,000 at the moment, and we're going to be seeing that from next week or the next two weeks at least.

The prediction is that it's probably going to go up to about $4,000. And we know that the shipping lines also imposing peak season surcharges. For an example, like MSC, they've put a $500 surcharge per TEU as a peak season surcharge. They're calling it a GRI, and we're seeing CMA, Maersk, and a couple of other shipping lines follow suit.

If you're talking from a price perspective, the rates are definitely going up and surcharges are coming on top of that. So what does that mean for South African importers? we know that there's going to be backlogs. There's going to be equipment shortages. There's going to be transshipment delays in Singapore.

05:13 - What is the latest on the PVOC programme?

Vernon: Let's move to regulatory update. What do importers need to know, Dylan?

Dylan: The current understanding is that there is still ongoing discussions between SABS and the relevant Chinese inspection authorities around standards, certification requirements, and operational processes.

At the same time, regulators appear to be considering the practical realities of giving importers sufficient time to prepare for implementation. This is a pause. The program is not cancelled, so it will be extended to a further period. We are currently waiting for formal communication in terms of the extension period, and we'll keep importers updated accordingly.

05:40 - How can importers protect working capital amid disruption?

Vernon: Whether it's global tariffs influencing shipping capacity, evolving regulatory requirements such as the PVOC, which we just discussed, or the growing importance of working capital management, with all the delays predicted in the market and the freight rates increasing and the delays at transshipment ports, working capital will become meaningful.

Don't have all your cash tied up on the water. Contact your Investec and Business Commercial Banking representative for workable solutions.

Dylan: Thank you for joining us on the Investec Importers Connect. Until next time, trade confidently.

Disclaimer

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