‘We need to tread carefully with China’ - says shipping firm | Business and Politics - video Dailymotion

The Manila Times

‘We need to tread carefully with China’ - says shipping firm | Business and Politics  Patrick Ronas, president and CEO of Mstar Ship Agencies Inc. and Association of International Shipping Lines (AISL) says that around 70 percent of goods that are shipped and imported to the Philippines are from China, from raw materials to food. He says that the country must be careful,  as the local economy is closely intertwined with the manufacturing giant.   Subscribe to The Manila Times Channel - https://tmt.ph/YTSubscribe    Visit our website at https://www.manilatimes.net    Follow us:  Facebook - https://tmt.ph/facebook  Instagram - https://tmt.ph/instagram  Twitter - https://tmt.ph/twitter  DailyMotion - https://tmt.ph/dailymotion    Subscribe to our Digital Edition - https://tmt.ph/digital    Check out our Podcasts:  Spotify - https://tmt.ph/spotify  Apple Podcasts - https://tmt.ph/applepodcasts  Amazon Music - https://tmt.ph/amazonmusic  Deezer: https://tmt.ph/deezer  Stitcher: https://tmt.ph/stitcher Tune In: https://tmt.ph/tunein   #TheManilaTimes

Transcript

00:00 this evening is shipping and logistics, which is of course how consumers like me and every

00:04 one of you get the things that we cannot live without. In essence, this industry links Filipinos

00:09 with the rest of the world. As history reminds us, the Philippines was on a global trading

00:13 route. The Manila-Acapulco trade linked east and west. Over time, though, other countries

00:18 have surpassed the Philippines. And in recent years, domestic and external factors have

00:23 challenged virtually every sector of the economy, but in particular, shipping and industry.

00:28 To share with us the latest from the sector, we have invited Patrick Ronas, who has been

00:32 involved in the shipping industry for several decades and has been at the helm of several

00:36 companies in this field. He is currently president and CEO of M-Star Ship Agencies, Inc., Container

00:43 Bridge Philippines, Inc., and the Association of International Shipping Lines. The association

00:49 fosters closer interaction between international shipping companies and the Philippine government.

00:54 As the association president, Mr. Ronas has laid the groundwork for the understanding

00:58 of the industry of international shipping with private enterprises and the government.

01:02 We will ask Mr. Ronas, how can the Philippines reclaim its status as a premier trading hub

01:07 in Asia?

01:08 So, Patrick Ronas, thank you for making time for Business Spot. It's good to see you again,

01:12 the first time since the pandemic.

01:14 My pleasure, Clint. It's good to be here again. It's been some time.

01:17 Yes, I think it's been three years since we had you over for an interview at the Manila

01:22 Times. So many things have happened. Before we get into it, maybe we should ask you how

01:28 is your industry doing, maybe just barely a few years now after the pandemic, and just

01:35 a little bit over a year into a new government. How's your sector?

01:38 Well, to put it this way, Clint, you know, all of us were actually affected by the pandemic

01:45 at that time. Volumes really dropped. We closed everything down. We were one of those essential

01:51 people that can go out, do our stuff, because shipping will not stop. I mean, ships will

01:57 not stop. They will continue to call. The cargo that we carry is considered essential,

02:04 so it needs to move. So we were there where people were all locked up in their houses,

02:10 being safe. Shipping industry, the terminal operators, your truckers, or those in the

02:16 logistics sector, were actually out there, you know, boots on the ground, making sure

02:22 that this cargo will move, or containers will move, and gets delivered to the proper places.

02:27 Oh, you're saying everything is, you said everything was shut down, but you guys couldn't

02:31 shut down because we, you had to ship in the food, the goods, the PPE, the vats.

02:37 Yes. We had to do a lot. And at that time, business was really very much affected. So

02:45 we were, before the pandemic hit in 2019, the volumes were very strong. The volumes

02:51 were very good when you compare it to the previous years prior to the pandemic. So as

02:56 we go along, 2020 happened, but it was really a bad year for shipping. 2021 came. So we

03:07 were all, all we wanted was, we hoped that the volume would go back to pre-pandemic levels,

03:15 which is 2019. But in 2022, surprisingly, by mid-September, we hit the 2019 volumes

03:24 and all the way, we coasted by. But as of the moment, because of what's happening, what's

03:30 happening around the world, we didn't see that the war in Ukraine and Russia would really

03:39 affect us. But the next couple of months, it showed a bit, you know, I mean, as the

03:45 global economy got affected, inflation shot up through the roof, fuel costs rose, food

03:52 prices also went up. So right now we're seeing a very marginal increase in volumes when compared

04:00 to last year, which is unprecedented. Usually we get a 5% increase in volume year on year.

04:07 So this time it's really very slow. So when you say marginal, it's less than the typical

04:12 growth that you see? Yes. Right now, I think first half, there was only a 1%, 1.15% in

04:23 our imports. And our imports is a good signal about how the economy is doing, considering

04:28 that not only do we import finished products, also food, construction materials. We also

04:37 import our raw materials for our exporters. So we see exports, at least the commodities

04:45 that are being carried by ships, to be less than last year's by about 5%. So which means

04:51 the other countries are not really buying that much. So I don't know if they're oversupplied

04:58 or if the warehouses are full, but that's a general situation. The volumes has not gone

05:04 up, but it has grown. OK. Definitely it has grown. But not as much as we expected. So

05:11 do you think from the Philippine perspective, there is a problem with demand, that the growth

05:16 is small, she said marginal, because demand is soft? Or is it more of the supply side

05:23 that we're having? You mentioned Ukraine. I've been hearing in other industries that

05:30 they cannot make their goods because the parts or the raw materials are not getting to them.

05:35 Or if it's getting to them, it's very expensive. Right. Or is it a combination of both supply

05:41 and demand? I think it's a combination of a lot of things.

05:44 OK. Take for example, sure, we don't trade much

05:47 with Ukraine. OK.

05:51 But then Ukraine exports a lot of grain. If you stop the supply of grain from Ukraine,

05:55 then what will they do? They'll buy into other markets where we buy.

05:59 I see. And it's, you know, it's again, it's supply

06:01 and demand. Right.

06:03 In anything there's always supply and demand. It comes into play all the time.

06:07 Right. So same as what's happening with rice. India

06:09 stops exporting. Exporting rice, yeah.

06:13 So the buyers from India, we don't buy from India much.

06:16 Right. Very little.

06:18 But those who buy where we buy from, they will buy more.

06:21 Yes, they'll buy from them. So I was reading the papers this morning and I see some people

06:26 saying that the price of rice will go up by something like certain percentage points because

06:31 of that. Right.

06:32 So that's the way it goes usually. We don't think it will affect us, but then eventually

06:36 it hits us really. Right. Indirectly.

06:40 Indirectly, yeah. Indirectly. Yeah.

06:43 So what about the government? They're a little over a year now into office. Has that created

06:51 some optimism in the shipping and logistics industry? Is it more of the same from the

06:58 Duterte government? What's the situation now? OK. One thing that I can, I can, well personally

07:04 what I can see, the president has been doing some travels all around. It's very, very much

07:11 welcome. You know, you have a president who's a salesman. I was in sales before, so you

07:16 really have to see a person for you to start trade. So, and I think he has done that. He's

07:24 successful. He's got promises of investments all around. But I think we have to tread carefully

07:32 with our relationship with China. OK.

07:34 Again, I'm not an expert in geopolitics, but you see the reason why.

07:39 You see it on your bottom line. Yeah, of course. And put it this way, most of the products

07:44 that we import, I think about 70% of them would come from China. Our raw materials,

07:50 some of the food that we eat. Yeah.

07:52 You know, even the potato chips, U.S. brand, you check on them, it's made in China. So

07:58 that's the way it goes. So we import a lot from China. They're the manufacturing giant.

08:04 They do that all over. So I think we have to tread carefully as far as that is concerned.

08:14 And yeah, we have to just make sure that, a good thing about it is that the ports are

08:20 ready, the ports are open. We didn't have the same concession as what happened during

08:29 the time of the pandemic when all ports were closed. And then when they open up, when China

08:38 opens up, they work really fast. So then you have all these ships racing to get to Manila.

08:44 So when they get to Manila or when they get to other ports, the first one who comes in

08:53 needs to be served. But meanwhile, the others are waiting. We had ships waiting outside

08:56 for something like 12, 15 days at one time. And you can just imagine the cost of having

09:03 these ships wait.

09:05 And typically, how fast is that turnaround before the pandemic?

09:09 Oh, it was fast. Maybe you'd wait for maybe about three, four hours and you get a berth

09:15 and your operations would start. Maybe about a day. And when that happens, there's usually

09:24 some other factor like the weather or you had a long holiday.

09:29 I think I remember you were talking before when we had that interview in the Manila Times.

09:35 It costs thousands. Just fuel alone is expensive. And of course, the manpower, the opportunity

09:42 cost.

09:43 Of course. Just to charter, some of the ships are basically chartered. The shipping lines,

09:51 they don't own the ships. They charter it from somebody else. There's a company, he

09:56 invests in ships, but he doesn't run the service.

09:58 They don't manage it.

09:59 He just gives it to you and you pay him a daily rental. So usually at the time, pre-pandemic,

10:08 a 2,000 TEU ship maybe would have cost you something like maybe 5,500, $6,000 a day to

10:16 charter. During the pandemic, it went up to something like $22,000 a day.

10:25 I'm going to ask you a stupid question. For the viewers who are not familiar with the

10:33 business, why should they care? Do they care because those costs are passed on to the goods

10:40 that they eventually buy, the end consumer? Is that it or something else?

10:48 You know, a space on a vessel is like a commodity. So it plays. It's supply and demand. In any

10:56 commodity, it's a commodity. So what happens is that if there are not enough ships in the

11:01 market or not enough ships to carry the cargo, people fight for space on that ship. So then

11:09 there's a tendency in a...

11:11 Inflation, yeah.

11:14 Inflation, like right now, freight rates are falling because there's a lot of space. There's

11:19 not that much cargo moving. So maluwag na siya. Now one thing about container shipping

11:27 is revolutionary. It's like your Chad GPT. When it came around, it revolutionized trade.

11:39 A container vessel can carry multiple types of commodities and of smaller quantities because

11:47 prior to that, you had to actually charter a whole ship just to carry your cargo. And

11:55 that's where the problem is. Where do you get enough ships to carry that much cargo

11:59 on a regular basis? Where if it's containerized, it's unitized and it moves around.

12:05 So right now, what do they say? They usually say 90% of what you see around you has been

12:12 carried on the ship. How is it carried on a ship to get here? So that's 90% of everything.

12:20 The raw materials, maybe it's made in the Philippines. The chair that you're sitting

12:23 on is made in the Philippines. But I'm sure the materials...

12:26 But even in the Philippines, we're an island. So it may come from the Danau or Visayas.

12:32 We have to move it around. So that's how important it is. So anybody in their house right now,

12:39 if they will take a look around and they'll say, "No, no, this is not Philippine made."

12:43 I mean, it has to be. It has to come from somewhere.

12:47 It has to come from somewhere. So that's how important it is. And right now, as you see,

12:55 people keep talking about the last mile, last mile, last mile delivery, last mile here,

13:01 the last mile is important because it gets to your place. But hold on. Who brought that

13:06 thing to the last mile? That's you guys.

13:10 So from the factory?

13:11 Yeah, from the factory.

13:12 From the factory to the port.

13:13 It entered the Philippines. Our colleagues handled it at the terminal. It's being delivered

13:21 by truck drivers or truck operators. And they clear the customs. So the supply chain is

13:30 alive. There are a lot of players in the supply chain or in the logistics chain that has to

13:39 function perfectly.

13:40 Right. We have to take a quick break, but before we go, I was wondering if I can just

13:44 ask one quick question. So with all of these things, are you optimistic, not optimistic

13:49 about the next six months and maybe even 2024?

13:54 I think I'll say, well, I'm an optimist, Clint. So I'd always say, I always think positive.

14:02 Sabi nga, noong boss ko dati, an optimist is a misinformed pessimist. But nevertheless,

14:08 okay, we're hitting the bear months. After all those years, the bear months. And that's

14:13 usually the peak season. Volumes are usually on a sine wave. So it's low, low, and then

14:18 it goes high. But usually, I mean, you go hit the bear months and you never can stop

14:24 Christmas, no, regardless.

14:26 Especially in the Philippines.

14:27 Especially in the Philippines. It starts next month.

14:31 (silence)

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14:37 (clicking)

14:39 (ding)

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‘We need to tread carefully with China’ - says shipping firm | Business and Politics

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