MV Cool Spirit will berth in California and Philadelphia in the United States. Photo credit: Courtesy of Reefer Express Line Filipinas, Inc.
Reefer Express Line Filipinas, Inc. plans to start a service to the United States from General Santos City in Mindanao at the end of August to help manufacturers to ship their goods amid a global shipping problem. The company was set up to serve the BIMP-EAGA market and call key ports in the subregion.
Reefer Express CEO Felix Ishizuka said their ship, MV Cool Spirit, will berth in Long Beach, California in the West Coast and then Philadelphia in the East Coast and will make monthly trips. “We've been asked by several cargo interests to provide this service. As you may know, the worldwide shipping market right now is in chaos.”
Disruptions in supply chains in the wake of the COVID-19 pandemic as well as a surge in demand resulted in shipping delays, port congestion, and the skyrocketing of freight rates worldwide.
Ishizuka said a lot of container lines now also skip calls to the Philippines or Mindanao as they prioritize ports that give them better revenues.
Local manufacturers struggle to find ways to ship their goods overseas. If they get a slot in container lines, they are faced with costly fees. “If you have big operations producing foodstuffs for markets like the US and you have no shipping, you will end up piling up inventory in your warehouse,” he said.
Given the shipping problem is expected to last for 3 to 5 years, he said manufacturers need to strategize to ensure their logistic needs are met since the air freight market is also uncertain given the pandemic.
Maiden voyage
The maiden voyage to the US will launch either on 28 or 29 August.
Ishizuka said MV Cool Spirit will carry manufactured goods like canned foodstuffs, desiccated coconut, hardware products, and garments. He declined to say which manufacturers have approached Reefer Express, but General Santos City is home to seven tuna canners. The city is known as the tuna capital of the Philippines.
The MV Cool Spirit can carry more than 800 TEU (twenty-foot equivalent unit) containers. It is a reefer vessel, a refrigerated cargo ship that can also carry perishable goods like frozen bananas and processed milkfish.
Transit time will only take 26 days as the maiden voyage will not have stops. Conventional container lines take 40 to 50 days to reach the US since they stop at transshipment hubs, either in Hong Kong, China or Singapore, before proceeding to the US.
Ishizuka said Reefer Express will be charging 50% to 60% less than prevailing market rates for the service. “We provide the cheapest freight rate and the fastest solution to bring your cargo, your product, to the market.”
He encouraged Mindanao-based exporters to support the service so they can ship goods to the US in time for the Thanksgiving and Christmas holiday buying. He said Reefer Express is also looking at transporting goods back to the Philippines from the US market. “Definitely we will carry whatever we can on the way back to the Philippines.”
Challenges faced in BIMP-EAGA routes
Ishizuka said the company has put off plans to revive the Davao–General Santos–Bitung route that includes a stop in Iran because of a new regulation requiring all vessels calling at the Middle Eastern country’s ports to deal with local insurers for indemnity insurance.
Since Iran still faces US sanctions, ship owners will run the risk of being blacklisted if they deal with Iranian insurers. “So if the regulation now in Iran calls for having a locally run insurance company and you are trading worldwide you will not be able to call other ports,” he said. “That's why I decided to just call it off for the time being because it's not stable yet.”
Iran has been facing sanctions since 2018 when then US President Donald Trump withdrew from a deal curbing the country’s nuclear program.
Reefer Express included Iran in the BIMP-EAGA route so it could transport bananas as “backbone” cargo to the Middle East in the hopes of making the service profitable and sustainable.
Ishizuka said adding other Middle East stops will not do because countries like Saudi Arabia or the United Arab Emirates get their bananas from India or Ecuador.
If the situation in Iran improves, he said Reefer Express will push through with the plan. “The industry definitely needs a direct service to Iran because it is the biggest market in the Middle East for Philippine bananas, and we want to really make that happen sooner or later.”
Asked if Reefer Express is looking at other ways to revive the BIMP-EAGA route, he said, “Honestly, there's not much alternative for the BIMP-EAGA route.” Trade should really support the service, he said, but there is not much cargo to carry right now
Before coming up with the idea to add the Middle East route to the BIMP-EAGA service, the company was planning to make stops at Viet Nam so it could have rice as backbone cargo to the Philippines. But because of the Philippine restrictions on rice imports, the company could not go ahead with the plan as it could not secure an import permit. “You remove the backbone you’re paralyzed basically.”
While the Philippines is a major rice importer, the government regulates the issuance of import permits for the grain.
Kumpits, the wooden ships, that traditionally ferry goods between BIMP-EAGA countries are an added complication, he said. “As long as you have those options, a commercial approach like what we have will never be successful because they [traders] will always have an alternative to move and trade their goods.”
Apart from shipping, Reefer also offers trading, chartering, bunkering, crewing, warehousing, freight forwarding, and custom's brokerage services.