In a recently released report, Full Steam Ahead, the NZ Shipping Federation (NZSF) has highlighted the growing unease among coastal operators at the incursion of foreign-flagged vessels plying ports before departing.
A key concern of NZ operators is one set of rules for their operations, while foreign operators exist under another.
The federation takes aim at the Government as the largest impediment to coastal shipping. It claims the lack of government interest arises because of the Government not having any “skin in the game”.
In contrast, it has 100% investment in roading, and rail infrastructure through KiwiRail.
Federation executive director Annabel Young said there are legislated advantages to foreign shippers working the local coast that are not shared to local freighters, regardless of whether they are rail, road or sea operators.
“These foreign operators get an exemption from the emissions trading scheme on purchases of bunker fuel, which ours here do not.
“They are also zero-rated for GST on supplies taken on board and have the right to employ foreign crews at rates the federation claims are lower than NZ levels.”
The issue is a sensitive subject in shipping circles, given the inter-links between local coastal operators and the large corporate global shippers they feed into.
One shipping source said the subject of foreign vessels plying local waters was a “touchy one”, and the international operators were simply making the most of the opportunities NZ regulations allowed for.
The NZSF maintains a healthy coastal shipping industry has the potential to reduce the number of trucks on NZ roads, bringing benefits for reduced roading infrastructure, congestion and lower greenhouse gas (GHG) emissions.
While the Government still has to form a policy on GHG reductions, the transport sector accounts for 40% of total emissions.
The report calculates a doubling of coastal shipping from 3.6 billion tonnes/km to 7.2b tonnes/km would reduce national GHG emissions by 16%.
The pressure on local shippers also comes as the global industry grapples with a crisis in overcapacity that is pushing ships into less than profitable freighting operations.
The Baltic Dry Index, an indicator of shipping rates fell 20% over the past 12 months to 369, the lowest since records began in 1985.
The Chinese slowdown has put a drag on growth in its import of bulk commodities, while depressed demand in the Western world has capped demand for containerised ships, coming as the industry ramped up its capacity.
The chief executive of Maersk NZ, Gerard Morrison, said daily rates for ships have fallen by “four-figure sums” in the past two years.
The Shanghai Containerised Index, regarded as a good indicator of container shipping demand is, like the Baltic Index, at a record low of 615 points.
He said he was bemused by how often “shipping costs” were cited by importers as a reason for goods increasing in price, when in fact the time for moving goods around the world had never been cheaper.
The mass expansion of the global shipping fleet has also resulted in what some commentators have labelled “zombie ships”, offered out at rates sufficient to just cover interest on the vessel, but not the capital debt for its purchase or build.
Operators of such ships will accept freight rates at rock-bottom prices to keep the ship moving.
The ability of ship owners to lay-up ships and reduce global capacity is also reduced today, because of the sensitive nature of equipment and software that power modern ships.
For that reason owners will often opt for the ultra-low rates and keep their vessels operating.
