29 September 2021 – For several months, the high cost of ocean shipments due to container shortages and subsequent delays has created accumulated frustration for animal nutrition companies. Expensive sea freight costs have been limiting factors for feed additive and raw material importers as well as exporters seeking to supply an international customer base.
At the recent SPACE 2021 trade show in Brittany, many of the companies interviewed by Feedinfo pointed their finger at supply chain disruption as being one of their biggest market concerns, if not the biggest.
In today’s INSIGHT we assess the views the companies had on logistical implications. In tomorrow’s INSIGHT we will focus on the raw materials issue itself.
Companies’ descriptions of the ongoing ocean shipment situation varied from disruptive (being the mildest word used) to nightmarish. From large international entities to local suppliers, no one in the sector is immune.
For instance, ADM is already at the forefront of the problem as the company is a leading grains supplier.
“Like everyone, we are affected by the higher container prices, but we have the advantage of being a big player and totally focussed on securing the continuity of the supply chain,” said Manuel Maire, General Manager France & Northern Europe at ADM Animal Nutrition. “We have tried to offset this by using our supply chain in an optimal way.”
His comments were echoed by another leading animal nutrition/grains provider: Cargill.
“While no company is immune to some disruptions from COVID and other factors, we have a very agile regional and global supply chain that allows us to adjust to mitigate impact,” said Benoît Anquetil, Managing Director of Cargill Animal Nutrition Western Europe. “But supply and infrastructure issues are creating a very tight marketplace, leading to higher costs that everyone, not just Cargill, are facing.”
Nicholas Guthier, Vice President Europe & Global Key Accounts, Evonik Nutrition & Care, added: “The past 12 months have been challenging. What has helped us in methionine for instance is that we have three continental production hubs. That helped mitigate some of the risk but not completely.”
While shipping costs are higher, delivery times are much longer. Compared to the delivery times prior to the crisis, waiting periods animal nutrition companies are dealing with can go up to three months, if not more.
“Our teams are working hard at finding solutions and it is very complicated. We are telling customers to anticipate orders more,” said Frank Chmitelin, Executive Vice President Sales, Marketing and Customer Success at Adisseo.
“We have four permanent members of staff working on exports who are being solicited relentlessly. Our export clients are waiting double the amount of time than before,” illustrated Emmanuel Bedier, Commercial Director at IDENA. “We are thinking of strengthening our export team and we are open to local commercial partnerships in international markets.”
For Caroline Biard, Technical Manager at Phosphea, it was also important to get closer to the local teams and transporters at each level of the chain in order to be more reactive and work hard to ensure delivery to as many customers as possible. “We never overpromised on deliveries,” she commented.
Guillaume Etave, Global Sales Director at NUQO, nodded: “Shipping is an extra stress, and we need to be closer to customers and adapt together. NUQO is also seeking to strengthen its global presence by continuing local implementations, having local, technical staff, providing feedback and advice. We want regional hubs to be more resilient and find local partners with whom we can build synergies.”
“The increase in shipping costs is a major concern for our customers and it forces companies to think and reconsider a system which is energy-consuming, and search for new solutions,” also commented Olivier Clech, Co-CEO of Nor-Feed.
Being close to supply chain partners can help anticipate situations to some extent. However, delays and logistical uncertainties aren’t easy to anticipate, and company business models vary.
“We have developed a solid export business but at the same time have been impacted by transport and raw material costs. It’s complicated because 90% of our business is international, so we focus on being competitive and optimise our solutions,” explained Danièle Marzin, Marketing Director at Olmix, adding that in the US, Olmix is working on a toll manufacturing collaboration with a local producer. The agreement involves the manufacture of an on-farm hygiene management solution.
“That’s been in place since early-2021. And we have similar projects in other countries to get closer to customers,” Marzin added.
Her comments were echoed by ADM Animal Nutrition’s Manuel Maire: “Customers are increasingly asking us for local production solutions, and we try and answer this where possible and where we have technical capacity.”
Meanwhile, Jean-Marc Pinsault, Managing Director at Techna Group, stressed the importance of building stocks.
“The situation has of course led to disturbances, but we don’t consider it a major risk factor. Exports continued and companies can always adapt. We have to take the risk of building up more stocks when possible and consult with partners and customers whether stocking up is possible on their end too,” he argued. “If you can build up stocks you can theoretically reduce productivity rates at factory level. Of course, it depends on the product manufactured.”
Company outlooks for the container situation for the months ahead and in 2022 aren’t very bright either.
“There may be a calmer shipping situation at the end of 2022. I’m confident for the future. Markets will adapt, we have to be adaptative,” said an optimistic Jean Fontaine, President of Jefo.
Others expressed more caution.
“It was especially tough in Q1 and Q2 this year. We have seen a few slight improvements since, but we will continue to face hard times in 2022,” said Phosphea’s Caroline Biard.
“We have consulted with specialists and the consensus is that there won’t be any improvements of note to this situation until at least mid-2022,” added Adisseo’s Frank Chmitelin.
“The banks we have consulted expect the supply chain to remain chaotic until at least late-2022. They remain cautious for after late-2022 as well,” went on to say Nor-Feed’s Olivier Clech.
“We think the situation will be even worse in the months to come and we see no real light at the end of the tunnel,” IDENA’s Emmanuel Bedier also commented, adding, “there’s clearly a lot of stress in the transport business right now and people in that sector are quitting their jobs.”
Some of the companies pointed towards other warning signs.
“The situation isn’t just limited to ocean freight,” said Adisseo’s Frank Chmitelin. “Shipments by road are affected by the crisis too and by political actions which influence trade. For example, it is currently not simple to find truck drivers in the US, or in the UK due to Brexit.”
“Moving forward, the industry also needs to factor in other disruptors such as the hurricane season in the US which can impact shipments, as well as more geopolitical issues such as trade frictions and protectionist policies,” added Evonik’s Nicholas Guthier.