Rising raw iron ore prices driven by demand for steel from China, which is embarking on a major infrastructure programme, rose 40% in December alone and is starting to be reflected in the cost of wire.
Rising shipping costs, shipping delays and a container shortage is putting pressure on the price of machinery and creating cashflow challenges for importers and retailers.
Disruption from these logistical issues have forced some agrichemical companies to airfreight product, to ensure it is available when needed.
NZ Fencing Contractors Association director Shane Beets says Chinese demand for iron ore and steel is pushing up the price of steel, with fencing wire prices expected to increase in the next few months.
In addition, the price of fence posts have risen by up to 7%, double the usual annual price rise, and with the minimum wage rising to $20 from April 1, Beets says there will be further pressure on fencing prices, meaning “people will be paying a lot more”.
Tractors and Machinery Association (TAMA) chair Kyle Baxter says shipping disruption delaying the arrival of product by up to 10 weeks is the biggest issue for his members, which puts pressure on supply lines and cashflow.
“It used to be quite straightforward with robust time frames around the world, now nobody knows,” Baxter said.
Container prices are now five to six times what they were last year and the impact of an expected rise in steel prices will provide additional pricing pressure.
Baxter expects the next six months to be volatile, but notes a high NZ-US exchange rate is providing a pricing buffer.
Machinery importer Tulloch Imports Ltd’s managing director John Tulloch says two North American suppliers recently announced price rises due to increases in the cost of steel, but European manufacturers have not yet made similar moves.
He recently attended a Zoom meeting with a large German manufacturer and was told they are working to capacity and expect to deliver goods on time, while accommodating social distancing and taking precautions in the factory to avoid covid-19 infection.
Agcarm chief executive Mark Ross says shipping delays have also been an issue for his members, forcing some to airfreight product, so it was available when needed.
Ross says there is no product shortage, although some users may not be able to get their preferred brand.
ANZ agricultural economist Susan Kilsby says shipping delays and logistical issues show little sign of abating and is already reflected in higher shipping costs.
Very few planes are flying international routes, meaning the reliance on shipping is higher than ever, yet demand for goods has remained intact throughout the pandemic, she says.
“Shipping schedules are constantly changing, with numerous schedules being cancelled or containers being rolled over (or) simply not being collected,” Kilsby said.
“This has left many empty containers stranded well away from where they are most needed, with refrigerated containers particularly difficult to source.”
Competition between shipping lines is diminishing as companies consolidate and with one, Pacific International Lines (PIL), in financial trouble.
She says should it collapse, competition would further reduce.
Inflation remains subdued in most countries, but Kilsby says commodity prices are starting to rise with oil prices forecast to lift 20% this year.
The NZ dollar is anticipated to continue rising in the near term, reaching US74c by the end of the year.
