Regional Pulse: LatAm demand improvements driven by ongoing Asia-Pacific disruptions

Ongoing disruption in the Asia-Pacific region due to COVID-19 is encouraging shippers to shift to near-sourcing, while loosening restrictions are boosting connectivity to and from Latin America, establishing the region as a critical link in more supply chains. Indeed, with a relatively stable market, rates and available capacity, more stakeholders continue to bolster operations in Latin America, Evan Rosen, president of the Americas region and global chief commercial officer at Sri Lanka-based EFL Global, told Air Cargo World . EFL acquired logistics company IDEA Logistics LLC in August 2021 with the intention of expanding its network in Latin America to bolster supply chain near-sourcing as operations in Southeast Asia face delays. EFL recently opened a facility in Panama and plans to grow operations in Costa Rica and Mexico, Rosen said. [caption id="attachment_79679" align="alignright" width="459"] Photo/LATAM[/caption] "I attribute the increase [in connectivity and demand] to the change in strategy from APAC-based sourcing to near-sourcing due to the issues we’ve seen in China and Vietnam,” Rosen said. “ Near-sourcing is becoming more prevalent to cut lead times , improve operations and get cargo to customers, which is why you’re seeing an uptick in volumes. Additionally, as air passenger travel continues to increase northbound and southbound, you’ll see an increase in capabilities and available capacity in the region.” The value share of manufacturing for gross domestic products (GDP) was on an upward trend in Latin America and the Caribbean in 2020, the most recent year for available data, according to World Bank data. The average manufacturing value for 11 countries was $28.45 billion. Brazil held the highest value of $141.15 billion, followed by Argentina, Colombia and Chile at $59.83 billion, $29.90 billion and $25.12 billion, respectively. While any part of the supply chain can experience challenges, disruptions in the Latin American market are often much shorter — four or five days — compared with Asia, where delays could be four to five weeks, Bob Imbriani, vice president of international services at forwarder Team Worldwide, told Air Cargo World . “We’re seeing a lot of new factories come to places such as Costa Rica and other areas of South America and Latin America, making it more viable to source product,” Imbriani said. “As these factories develop in Latin America, they require materials to run the factory [and] make products … So it does create a two-way traffic [as] developing more manufacturing in Latin America not only offers products to come out of [the region], but requires materials and other things to go in for the manufacturing process.” Navigating regional cargo demand Although Latin America faced a significant reduction in capacity at the start of the pandemic due to the collapse of passenger travel, current capacity is not facing the same challenges compared with other regions like Asia , Imbriani said. Now, there are more cargo airlines serving routes from Miami to certain Latin American countries that have continued to fly throughout the pandemic. “The routes that are most in-demand on a global level are those that originate in Southeast Asia and China specifically,” EFL’s Rosen said. “From a regional perspective, Central America continues to be the most relevant in regard to textiles specifically, [with] the Southern Cone countries driving other verticals.” Despite growing connectivity, several customers are having to adjust routes to continue to move cargo from China to Latin America , said Ana Suarez, global pricing manager at Mexico-based automated freight forwarding startup Nowports . Nowports is currently established in seven countries, including Chile, Colombia, Panama and Brazil, and expects to open a new office in Miami in August, as well Hong Kong once COVID-19 restrictions settle. “We have several customers that were moving cargo from China to Russia, and then from Russia to Latin America, but right now the current situation is not allowing them to move the cargo through Russia because of the restrictions,” Suarez said. “What we have seen is that they started [looking] for new routes and new options. So, for example, they were moving the cargo from Russia directly to Mexico, but now they’re moving the cargo from Hong Kong (HKG) to Los Angeles (LAX), and from there, [connecting] to Mexico.” In-demand commodities E-commerce demand between Latin America and the U.S. continues to grow, Team Worldwide’s Imbriani said. E-commerce shipments have not been limited to marketplaces like Amazon, but include “single company e-commerce,” where companies are selling on their own platforms and have their own inventory distribution centers, order fulfillment centers and smaller platforms that specialize in certain markets, he added. High-tech electronic components have also seen an increase as a major chip manufacturer prepares to open a factory in Costa Rica, while Brazil has a significant airline manufacturing industry. Demand for aerospace, automotive and pharmaceutical-related shipments have also been growing in the region, according to Suarez and Imbriani. “There’s some things that people don’t normally look to Latin America for, and those are the areas we see opportunities and growth [for], rather than some of the traditional products like food and wine,” Imbriani said. “We see a much more advanced commodity starting to come out of Latin America.” Meanwhile, continued efforts for supply chain near-sourcing have also led forwarders to transport raw materials to the region. “From a global level, such as Asia to Latin America and the United States to Latin America, we focus on fabrics and raw materials that go into the making of the apparel,” Rosen said. “As demand for apparel increases, it becomes that much more important to ensure raw materials are received in time, as well as the capacity needed to keep production on schedule.” Latin American capacity outlook Countries in Latin America were hit hard during the pandemic, leading to a decline in regional cargo traffic since March 2020. However, In February, carriers based in Latin America reported the largest year-over-year increase in traffic of any region , with international CTKs up 21.9%, according to the latest market analysis by the International Air Transport Association (IATA). Although international CTKs in the region remain lower than February 2019, IATA identified the region as being on an upward trend. “Demand for the remainder of 2022 appears to be strong,” Rosen said. “While there is some debate around 2023 demand, capacity doesn’t appear to be an issue as passenger flights continue to operate. Services and capabilities in the region will remain a long-term view and strategy as additional businesses make Latin America a more critical part of their supply chain.” The Air Cargo Tech Summit, the new airfreight logistics event presented by Air Cargo World , will take place LIVE in Miami from June 6-7. Learn more and register here.

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