Like other businesses, companies trading in tea continue to face challenges from logistics even after the Covid-19 pandemic's decline:
Price and capacity constraints: The availability of shipping containers has increased this year, and on trans-Atlantic routes, spot rates have trended down significantly from 2022 spikes. Nevertheless, rates remain elevated due to higher costs instituted by carriers, new regulatory costs, higher fuel prices and congested ports. Shipping demand has been high in 2023 due to efforts by retailers to rebuild depleted inventories. Tea must compete with high-value cargo for bookings on routes to destinations in Europe and North America.
Supply chain disruptions: Supply chains continue to face significant disruptions due to such factors as Russia's invasion of Ukraine, which has led to volatility in fuel prices. The reliability of on-time arrivals at ports has decreased and is still under 60% compared to 85% in 2019. The apparent "decoupling" of commerce between the U.S. and China has led to a decline in trade. China’s customs data shows that exports to the U.S. declined by 25% in November. Tea exports to the U.S. were down 16.9% in November.
Increasingly complex maritime regulations: Governments are imposing stricter regulations on the logistics industry, emphasizing sustainability and the environment. Regulations increase compliance costs for logistics companies and add to their operational expenses.
Last-mile delivery: With consumers' continuing high demand for home and same-day delivery, last-mile delivery is becoming a critical challenge for many companies.
Labor shortages: The logistics industry has a shortage of skilled personnel, which has increased its labor costs and reduced productivity. Staff at the busiest ports are exhausted, turnover is high, and organized labor is demanding higher pay and better working conditions. In China, Covid-19 infections have been so high during the first two months of 2023 that it will be months before normal port operations resume.
Digitalization and automation: The logistics industry is moving toward digitalization and automation, which can help to improve efficiency and reduce costs. But it also requires investment in technology. Logistics companies must adapt to new ways of working and do more to prevent rising cyber-attacks.
Several of these issues were highlighted in a January 19 webinar by Bojan Mijatovic, global market analyst at Tridge, a Seoul-based global sourcing hub for agricultural products. He commented that the pandemic had a critical and irreversible impact on international trade and is still shaping global agricultural markets. He said agricultural production worldwide is threatened due to limited labor, the rising cost of raw materials, especially fertilizer, and climate change
“Worse weather, now more than ever, is affecting the agricultural supply chain with more frequent extreme weather events, leading to outbreaks of plant diseases and tougher import protocols,” he said.