As international trade and protectionism come into focus, the trading relations between the US and Latin America are increasingly taking on an additional level of importance. Some of the key indicators include the availability of multiple carrier options. These are designed to take up as much of the market share as possible. The other is the preemptive increase in capacity so as to deal with the anticipated demand from the sector. The overlapping issues of international trade will also have an impact. The nature and operations of the shipping industry are already reflecting the realities of a market that is primed for expansion.
For example, in 2017, the North-South routes between the US and Latin America increased by 2.6%. These changes were primarily driven by the increase in continental trade. At other times, it was the industry players (shippers, liner operators, and service providers) that were positioning themselves for the expected increase in trade.
Shipping companies in particular responded by increasing capacity so that they could take up more of the trade if and when it arrived. Maersk acquired Hamburg Sud, which means that this major shipping line now has a firm foothold in Latin America. Likewise, the SeaLand Brand has been closely associated with the Latin American market. Even if some of the biggest shipping companies are not directly involved in the USA-Latin America trades, they have an interest there by virtue of their subsidiaries and acquisitions. Expansion and diversification seem to be the buzzword in the current era of international shipping.
Companies That Are Expanding
Whereas some companies are downsizing or even closing down, others are just going from strength to strength. A case in point is Crowley, which has taken notice of all the changes that are happening in the industry and is already taking advantage of the possible opportunities that will become available in 2018 and the coming years. For example, Crowley and King Ocean want to be at the heart of any new business opportunities. Currently, they are offering a capacity of up to 1.2 million TEU (an increase of 6.2% compared to the previous year). It is anticipated that this will increase their market share as well as operational capacity.
To that end, there is a new Vessel Sharing Agreement (VSA) between Crowley and King Ocean, which will in turn make it easier to operate within the Caribbean and Costa Rica. Moreover, Seaboard Marine added and upgraded new services in order to strengthen their hold on the USA-Latin America trade routes. Currently, Crowley operates weekly sailing across a number of ports in various localities such as Manzanillo, the Everglades, Jacksonville, and Limon. The diversity of options means that shippers are no longer stuck with a limited range of solutions to their shipping needs, particularly on routes that are not as popular as others.
Regions Affected by All the Changes
Many of the major ports that work the routes between the US and Latin America will have some impact. Examples include Panama, Costa Rica, St. Lucia, and Barbados. The use of VSAs is a favorite tactic because it increases capacity without increasing the risks to the company. All this comes on the back of economic indicators in a flurry of increments in imports and exports between the two regional groupings.
The measures are supported by the upsurge in trade. For example, the trade between the USA and Costa Rica increased by 20.3% over the course of 2017. Currently, that trade takes up a capacity of 115,496 TEU. The same story was seen in Panama. Trade with the USA increased by 10.9%, and now, there are calls for a capacity of about 10,863 TEU. Some skeptics still worry that such huge capacities may lead to supply gluts if the demand falls for any given reason.
One of the interesting anomalies in this complex relationship is the fact that US exports to Costa Rica are down by 12.4%. This could be a reflection of the difficulties that the locality has been facing as a consequence of a recent storm. The port of the Everglades is a demonstration of the expected level of activity in the coming years, particularly with reference to destinations like Panama.
Some of the key products include petroleum and oil from the USA and rubber from Costa Rica. Others items that move across the route include paperboard and pharmaceuticals. There is also a new trend for items such as nuts and fruits from the Latin American countries that have created a niche for themselves. The Everglades, for example, were able to process up to 4420 TEU in fruits and nuts in 2017.
Imports From Latin America
Although America is currently reviewing its trade balances with all countries, including those from Latin America, the imports from there continue to flow. The Everglades were able to process up to 1880 TEU worth of edible preparations in 2017. Jacksonville is experiencing a 2.4% increase in traffic and currently handles about 386,174 TEU. The increase for the Everglades was 3%, and this means that the port is currently handling over 380,000 TEU.
The key driver of the changes is the import figures with Jacksonville recording an 8.2% increment. The intra-region trade is growing too. For example, the trade between the Caribbean and Latin America came to (FOB) $816,075 million. The question is how long that boom in trade can continue and whether it will be enough to cover all the extra capacity that is being created.
Exports From the US
Traditionally, the US has exported crude oil and energy products to Latin America. However, there is also a growing market for consumer goods. For instance, in 2017, the US exported goods worth $137,053 million and imported goods worth $106,853 million. This created a trade surplus of over 30,000 million. That means that Latin America as a trading partner does fall within the Trump Administration’s criteria for reviewing trade relations with countries with whom the USA has a trade deficit. The implication is that trade is bound to grow unfettered in the coming years.
Expectations for the Next Few years
Although, generally speaking, there is an expectation of retaliatory trade barriers against the US, the unique position of Latin America means that this trade will only grow over the coming years. One of the implications is that there will be an expansion of the capacity to deal with shipments. However, the industry players need to be careful that they do not fall into the over-capacity conundrum that has been problematic for the shipping industry over the past few years. This is a time to work smart and make use of technology in order to respond appropriately to the needs of customers regardless of what part of the industry they are currently occupying or hope to achieve in the future.