Thailand's Exports Grow in the First Quarter, but Rising Shipping Costs Remain a Challenge
June, 21 2021
Despite positive news from last week's report stating that exports grew by 4.78% in the first quarter, exporters are now facing significant cost challenges. Shipping costs have been increasing continuously, and when combined with product costs, the overall cost of goods has risen. As a result, importers are struggling to absorb these rising costs, particularly in agricultural and food products, which have been most affected. This has led to postponed shipments by international buyers.
Summary of the Cost Crisis:
- Freight rates have increased by 100-200%, and on some routes, they have surged by up to 300%.
- Container shortages remain an issue. However, the Ministry of Commerce has permitted large 400-meter vessels to dock at Laem Chabang Port with empty containers to help alleviate the shortage.
- Higher production costs for canned food, particularly canned seafood, due to rising steel sheet prices. These steel sheets account for 40-50% of the total production cost in the processed food industry.
- Delays in raw material stockpiling during COVID-19 have led to shortages in electronic chips, steel, rubber, plastic, cotton, and polyester, driving up costs as production resumes.
- Labor shortages due to COVID-19 disruptions.
Although exports continue to grow, the government must urgently address these issues to ensure a stable export sector, which remains a key driver of the country’s economy amid the COVID-19 crisis.