Posted inBusiness/Economy, HB Recovery
HB traders face 'perfect' shipping storm
by Murray Painter November 16, 2020 November 17, 2020
Napier Port, Shipping, Containers, Logs
Certainly during 2020 we have been hearing the term "unprecedented" on countless occasions.
This however is really the best term to describe the logistics and international freight events that have occurred in this year of Covid-19.
From the time that the pandemic really bit, until August 2020, shipping lines experienced the lowest demand for both capacity and containers for a very long period.
This meant that vessels were 'marking time' in world hub ports awaiting cargo demand … and containers were stockpiling in most locations for the same reason.
Since August however, shipping lines have received unprecedented demand for capacity and containers to such a degree that they have been unable to cope.
This wild fluctuation in supply and demand has really caught most lines on the hop as they were preparing for a longer term decreased demand and simply did not have the plan in place for the upswing.
Ports in the USA, Asia and Europe have become significantly congested with the rise in demand and, closer to home, Australian and New Zealand ports have now joined that list.
Whilst this is not unusual for Australia, in particular Sydney, which is also currently subject to waterfront action, it is unusual for Auckland.
In New Zealand we expect to deliver or pick up our freight or containers in a weekly cycle and delays of hours are unusual let alone days.
At the time of writing, Auckland has a 6 to 9-day berthing wait for vessels arriving to both discharge and load. This, compared to vessel turnaround within 24 hours or less, is extraordinary.
What has this meant to traders?
Firstly, lack of services, with some lines ceasing routes to and from New Zealand and others reducing sailings.
Secondly introduction of Auckland port congestions surcharges in the vicinity of US$300 per TEU (twenty-foot container) and US$600 per forty.
How did we get to this?
Obviously Covid-19 meant that there were delays for overseas suppliers in delivering cargo for export in the initial and lock down stages. Whilst essential services were given priority (and shipping and logistics are an essential service), factories not producing items considered essentials were shut either temporarily or part time.
As we are aware the larger economies in Europe, USA and the UK did not respond with the 'go hard, go early' policy adopted here, meaning economies were slowed rather than being in almost total lockdown. This meant that after initial slowdown, businesses have returned to producing and delivering goods to almost business-as-usual levels. Add to that the catch-up of orders that they initially could not produce creates a spike in demand for shipping capacity.
Because airlines are not flying to the schedules pre-Covid, freight capacity has been restricted and much of the reduced capacity has been reserved for essentials like PPE, drugs, and food.
New Zealand, during the export season (December–May) was able to move food products by sea without too much effect and in fact some horticultural products had a bumper export season without sizeable delays.
Air New Zealand and the Government together with the forwarding community was able to use some of the grounded air fleet to move airfreight orders of product that could stand the higher freight rates.
The immediate future is however not so rosy.
With the lack of services and capacity coming to New Zealand from September there will no doubt be a shortage of both containers and capacity going forward.
This season's airfreight crops moving from December will be hard pressed to find space on aircraft as they are reliant on capacity in the belly of passenger aircraft.
Importers will find that there are substantial delays in bringing their products here, and in fact, retailers are already facing shortages and fearful of not meeting Christmas orders.
Auckland port, with the delays it is currently experiencing, has also been rocked with a recent death on the port, testing of workers for Covid, and at the time of writing, a software breakdown in cargo automation systems.
Ideally, lines that are able will use Tauranga in the interim to help Auckland return to quicker berthing schedules … and not continue to cut or remove New Zealand services. Beware that Tauranga is already experiencing a large influx of business.
Hawke's Bay exporters would be wise to spend substantial time in planning their logistics forecasts and locking space down now for as far into the future as they can manage.
There is certainly no point in overestimating the supply of equipment required in an export plan, as lines will give priority to those with accurate forecasts.
Exporters also need to bear in mind the 'use or pay' mentality that is becoming more prevalent in sea bookings and the upswing in rates and spot market pricing.
In Hawke's Bay we are very reliant on reefer containers to move our food and produce. If lines cannot call Napier as per regular schedules, we will be reliant on equipment being trucked in from either Tauranga or Wellington. This will add complexity to an already difficult situation.
For Hawke's Bay importers it is also a situation of planning and getting suppliers to book early to secure Southbound space and equipment. Likewise, the need to get these containers from Tauranga may arise if vessels make a single North Island call.
No doubt Napier Port will be lobbying lines to offer up Napier as a good port of call away from other North Island congested calls. And, in the scenario of lines wanting to drop cargo at a sole North Island port, why not Napier? There is of course only a certain amount of capacity Napier Port can offer and it would be wise to not over-extend.
Hopefully 2021 will not be the impending crisis we are all predicting and the very smart logistics providers in our supply chain will work much-needed miracles.
Copyright (permission required for republishing)
Murray J Painter
GoGroup NZ Ltd
BayBuzz says:
BayBuzz asked Napier Port chief executive Todd Dawson to comment on the container issue. He replied:
"Yes, this is something we are watching and monitoring closely and are actively engaging with both shipping lines and cargo owners on to ensure that the lines are positioning equipment into NZ and the Hawke's Bay early and in sufficient quantities to ensure cargo gets away.
We are not overly concerned about the lack of arrivals of ships, rather the positioning of equipment (containers) into NZ leading into our busy season, keeping in mind that the peak season for Auckland and Tauranga is now, but ours is general between March – July.
Both Auckland and Tauranga are experiencing issues currently with congestion. This is not impacting Napier Port currently; in fact we have capacity available that can be utilised to support the upper North Island at this time of year."
M Painter says:
That's great Todd but we should surely be concerned with the future lack of arrival of vessels because if the equipment is here but cannot be uplifted we will shortly become congested too?