"I believe more US companies will start sourcing from Mexico and maybe also other Latam countries instead of China in the near future."

Martin Sack

REGIONAL HEAD – AMERICAS, LESCHACO

August 27, 2021

How has 2021 been for Leschaco, and to what extent have things returned to normal after the initial impact of the pandemic?

Leschaco’s Latin American business bounced back much better than expected. We have reached our goals in all countries, and 2021 started with much higher business volumes than we normally have. The outlook for the rest of 2021 is also positive. From a logistics point of view, we are facing many challenges with regard to global trade and transport disruptions, especially due to the high demand we have seen from the US. We have challenges regarding blank sailings, the availability of space and containers, port congestion and there are also trucker shortages in many countries. Due to the disruptive environment our staff needs to put more hands on any file to carry out a shipment, so we have to invest in additional manpower.   

How are you dealing with rising logistics and freight costs, and how long do you see this lasting for?

Increased logistics and freight costs is an issue for the entire market and there is currently no ideal short-term solution. We are in a situation where shippers are paying more and more to get their cargo out. I believe that we will only see a decrease in prices again when we somehow get back to normalization of global trade. At the beginning of 2021 we thought that it would only take a couple of months but have now seen that it is going to take until at least 2022, or even longer. Especially those shippers who are dealing in the spot-driven market are suffering from sky-rocking freight levels we never have seen before. Collaboration is important, and the market should work together to make the best out of the situation.

Which of the Latam markets that Leschaco works in have performed well in the last 12 months?

Leschaco is present in three countries in Latam – Mexico, Brazil, and Chile. These countries are currently overperforming, and business throughout the region, especially in the chemical sector, is following a positive trend. The issue is maintaining margins due to the logistical challenges. We are seeing increased demand due to economies rebounding from 2020 and expect this to continue into 2022. Meanwhile the US economy is booming and the Latin American economies shall benefit. Due to the positive development in the region, we are currently working on initiatives to further increase our footprint in Latin America.

Looking at individual Latam markets, the continuous saber-rattling between the US and China, global trade disruption and increased transport costs might lead to a restructuring of logistics, which could favor the Mexican market as a production and export hub. I believe more US companies will start sourcing from Mexico and maybe also other Latam countries instead of China in the near future.

To what extent do you think political instability impacts the flow of goods in the Latam region?

Latin America has always faced infrastructural and political challenges. This year is no exception. In Colombia, the Port of Buenaventura was closed for a couple of weeks due to protests, and shipments had to be diverted. There were also challenges of getting containers out of Chilean ports due to political unrest. Mexico faced infrastructural challenges and the railway was partially blocked. These local issues, in combination with widespread global disruption, significantly impact the flow of goods and the entire supply chain.

How could Latam governments and private companies reduce the logistics bottleneck that exists in the region?

Investments into logistics infrastructure and long-term planning should be devised to reduce bottlenecks. There have been always investments, currently for example in the Peruvian port infrastructure, but it is not yet enough, and Latam is losing out on trades that would benefit the region economically.

Can you elaborate on the importance of sustainability to Leschaco?

As a global logistics company, we recognize we have an environmental footprint, and it is our aim to keep this burden as small as possible by continuously improving our processes and efficiency along the global supply chain. We are focused on contributing to the improvement of the quality of life of people all over the world, now and in the future.

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