This is a 10% increase on production in the fourth quarter of 2020, and a 21% increase on year-ago levels, when production took a nose-dive in anticipation of soft global demand due to the pandemic. At this rate, there is potential that 2021 could be a record-breaking year for container production, with projections exceeding 4.7m TEU.
This heightened container production does not appear to be enough to compensate for the ‘tools down’ period at the beginning of 2020. This put carriers on the back foot when demand surged, driven by lockdowns redirecting spending from restaurants and travel to online shopping. Additionally, low staffing rates at the height of the pandemic softened production of all commodities, exacerbating shipping issues as supply was constantly a step behind demand and bottlenecks ensued.
To meet heightened demand, shipping companies attempted to be more efficient by missing certain voyages to travel busier routes and use larger ships to compensate for travelling off route. This has created congestion at US ports, particularly as laden ships do not reload with empty containers. So, we are faced with a cyclical issue of certain ports being overwhelmed by a strong supply of containers, further contributing to the displacement of empty containers in the supply chain. Evidently, shipping companies can add and change capacity faster than ports, creating an imbalance in productivity.
Refrigerated containers, specifically and ships which are built to transport them, are in high demand. Reportedly, any key export season challenges the supply of refrigerated containers, and extra complicating factors this year has exacerbated this. Shipping consultancy company Drewry reported refrigerated container prices have gone up 26% over the first quarter of 2021, which is the biggest spike since records began in 2017. At this stage, Drewry expects it will be 2022 before some price erosion kicks into shipping.
High costs and low availability of refrigerated containers have been a consistent headache for NZ exporters this season, particularly as fruit, meat and seafood exporters all compete over the same pool of containers during the key export season of November to May. Reports of logistical complications began filing into AgriHQ through November and December, when chilled lamb exports were ramping up. Since then, export demand for lamb has been consistently strong, with the average export value (AEV) from November to March equalling NZ$9.84/kg, 27c/kg higher than the five-year average AEV over the same period.
Higher than average export values are a saving grace for the NZ supply chain given the surging rate of sea freight, especially since initial expectations of the shipping situation righting itself by mid-year become laughable. For the time being, securing containers will remain a waiting game. Processors will have to manage storage and throughput effectively to minimise the risk to chilled shelf life and export values.
Sarah Friel
