2nd Quarter Letter from the President

2nd Quarter Letter from the President
A Letter from the President of National Shipping

The second quarter shows continuous economic improvement. Puerto Rico is keeping pace with stateside GNP. Manufacturing, led by the pharmaceutical industry, thrives on the recent trends of ‘homeshoring’ and ‘nearshoring’. Tourism is buoyant and is nearing pre-pandemic levels. It is an election year, or, as some political pundits call it, an ‘asphalt year’.

The consumption side is slow to recover as it adjusts to a higher cost of living. Inflation impinges on the purchasing power of the consumer. While the government boasts inflation at 3%, they fail to mention that the base has risen by 16% between 2021-2023. Now we are adding 3% per year to the new plateau. Along the lines of inflation, I learned a new word recently, ‘shrinkflation’, meaning that the size of the product is reduced but not the price. I was surprised by the large-name brands that have been cited for this activity.

Also negatively impacting consumption is the delay of the Farm Bill in Congress until 2025. Congress is not reaching consensus on anything these days, taking the approach of ‘kicking the can down the road’. There will be no changes to Puerto Rico’s NAP program until next year.

The brighter side of trade is industrial. The promises of FEMA from Hurricane Maria and Fiona are arriving in San Juan in the form of transformer’s, generators, poles, and power distribution equipment. Firm shipping bookings are evident from the second quarter onward. On the renewable energy side, DOE and Puerto Rico’s grant and soft loan programs for sustainable energy are evidenced in the imports of solar panels, batteries, and microgrids.

The macro-outlook for trade is concerning. In a global society with so many interdependencies, we cannot hide from global events. Trade patterns are shifting due to both canal issues. Asia/Europe and Asia/US East Coast cargoes are routed via the Cape of Good Hope route, adding approximately 2 weeks to voyage time. In the west, the drought in the Panama Canal Zone has reduced canal crossings by 30%. The winners in this scenario are the US West Coast ports, as evidenced by a surge of freight in February. The shift is likely to put pressure on the west coast terminals, especially Southern California terminals, railroads, and trucking, which eventually impact Puerto Rico freight by pushing up inland costs.

Another event influencing the shift to the west coast is the ILA stevedoring contract negotiations in September that impact East Coast and Gulf ports. Major Asian importers have already shifted a portion of their freight to the west coast. As a sidebar, Puerto Rico would not be impacted by a strike or lockout, as all states, territories, and trusts of the US are guaranteed an uninterrupted supply chain. Only US-flag vessels serving Jones Act trades enjoy this benefit.
I would be remiss in not mentioning the tragic incident last week in Baltimore. This will have a large impact on the maritime industry. Other than human and financial loss, we can expect new rules from regulatory agencies that will change vessel navigation and how we protect our bridges. The Port of Baltimore is closed, and their cargoes need to find a new gateway to enter or leave US waters.
Managing in a post pandemic environment is a new concept that tests our management skills. We have had to adopt new methods to motivate, lead, and measure productivity. Throughout this effort, our goal has been to increase customer satisfaction through closer customer contact, schedule reliability, and ease of doing business.

To the point of increasing customer contact, I am pleased to announce the appointment of Mr. Carlos Suarez as our sales and business development representative. Carlos has a strong background in international and domestic transportation. Carlos will be domiciled in Puerto Rico and joins Roberto Lugo in our San Juan office.

On the ‘behind the scenes’ marine operations, Mr. Russell Harriman has joined as the National Glory Superintendent. As a licensed marine engineer, Russell brings the technical experience to ensure the National Glory maintains its high-performance level. We are excited to welcome both gentlemen to our team.

April will mark our 275th voyage to Puerto Rico. Our success in the market is attributed to our customers, vendors, employees, and an experienced owner.

From all of us at National Shipping, thank you for your support and confidence!

Sincerely,

Torey Presti
President of National Shipping of America