Logistics firms losing money without price hikes
By Beatriz Marie D. Cruz, Reporter
MANUFACTURERS are expected to face higher logistics costs in the coming months due to the oil price shock, logistics industry officials said.
Jesus Carlos P. Villaseñor, chairman of the Procurement and Supply Institute of Asia, told BusinessWorld that costs will inevitably rise because current logistics pricing would leave companies in the industry unprofitable.
“(Logistics firms) will have to remediate somehow. Their current pricing is not going to allow them to break even,” he said on the sidelines of a forum last week.
If the fighting in the Persian Gulf is prolonged, consumer demand may weaken, which will also slow down deliveries, Mr. Villaseñor said.
The Philippine Ports Authority has said that the Iran war will have an impact on freight rates, bunker costs, and cargo volumes.
Mr. Villaseñor welcomed a Department of Trade and Industry proposal to suspend the collection of logistics handling costs and tolls for the transport of basic goods.
However, he noted that these are only effective over the near term.
“You cannot always be subsidizing something over the long term,” he said. “Companies cannot keep on absorbing those cost increases. Eventually, they will have to make adjustments.”
Oil companies implemented a new round of double-digit increases in pump prices last week, pushing diesel costs beyond P100 per liter.
Regional shipping lines have raised passenger and cargo rates by up to 25% following a surge in fuel costs after global crude benchmarks exceeded $100 per barrel.
To cushion rising oil and logistics costs, manufacturers will likely be looking into modern warehouses near key ports or roads, Julius M. Guevara, senior director and head of capital markets and investment services at Colliers Philippines, said in an e-mail.
“While we have not seen warehouse leases increase yet, we anticipate a rise in demand for warehouses near the ports and those with easy access to expressways,” he said.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said logistics firms may also consider shifting to renewable energy and electric vehicles, noting that these are more resilient against external shocks.
“Higher logistics costs, on top of higher oil prices, would add to second-round inflation effects in terms of higher prices of affected goods and services,” he said via Viber.
Headline inflation accelerated to 2.4% in February — the strongest reading in over a year — amid rising food and utility costs.
