Saturday, March 30, 2024

‘Slow shipping’ no threat to exporters

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Exporters are confident a developing trend in shipping practices will not have an effect on time-sensitive products like chilled lamb as shippers grapple with overcapacity and rock-bottom fuel prices.
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The Suez Canal, regarded as the vital link for booming containerised shipping for the last half-century has not been immune to low oil prices, as shippers opt instead for the very route the canal was intended to eliminate.

Latest marine intelligence reports highlight an increasing trend for shippers to dodge the high cost of the canal’s use by taking the Cape of Good Hope route around Africa, forfeiting earlier arrival in Asia for fuel costs that on balance still represent a net saving over the canal access fee.

More than 100 ships have taken the route between October and December last year, an unusually high amount.

The company SeaIntel has reported the low values shippers receive for freight on the “back haul” route for ships leaving Europe or the United States to return to Asia has meant the number of ships passing through the canal has fallen by 6%. Average costs for the passage through the canal are US$360,000.

Estimates are that on average a container ship will take an additional 10-11 days and travel an extra 6500km to make the Cape of Good Hope trip.

The prospect of a return to “slow shipping” is one not relished by chilled product exporters in New Zealand who had to grapple with shorter delivery windows post shipment after the global financial crisis in 2008.

That situation arose because a surplus of capacity and higher fuel costs had shippers throttle back on speeds.

Typically they dropped from 22-24 knots to 15-18 knots, saving fuel and soaking up additional shipping capacity but eating into the time available to distribute product into market on arrival.

Affecting the trans-shipment journey legs from Asia to Europe, transit legs were extended by up to five days, totalling 37 days, depending on port destination.

For chilled product the days of shelf life were chopped down from 15 under normal conditions to less than 10.

However, this time Meat Industry Association chief executive Tim Ritchie is confident NZ exporters will dodge any damage, with much of the slowdown coming on the return leg from Europe back to Asia-Oceania.

He said it was a perverse outcome of exceptionally low bunker fuel prices that the situation almost mirrors what occurred when prices were high.

One shipping source said the hope was NZ exporters would remain relatively untouched by the situation, given the ships were dodging the canal on their return journey from Europe.

“That is basically a container repositioning manoeuvre – there is usually not a lot of high-value cargo going back the other way.

"Ships may be taking waste and materials for recycling, but the ‘head’ haul-earning sector is east to west.”

The source did anticipate the slowdown could work in NZ’s favour, given the additional time it would add to European primary exports potentially competing with NZ supplies, such as milk powder.

“They would undoubtedly beat us on freight costs on that back haul, but they would be looking at a longer shipping time compared to delivery from here.”

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