Friday, March 29, 2024

Venture improves exporters’ hand

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A new freight venture aims to give exporters more leverage around the negotiating table with an increasingly smaller number of shipping companies servicing the South Pacific. Bearing 360 is a joint venture freight company established between big wood products company Oji Fibre and freight solutions business Netlogix.
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“Over recent years we have noticed greater pressure on freight rates falling to unsustainable levels, resulting in ending up with players moving out and takeovers happening,” Bearing360 general manager Dritan Ramohitaj said.

The international shipping industry has been characterised by a series of takeovers in recent years, including Maersk’s takeover of Hamburg Sud and Chinese shipping company Cosco taking over OOCL.

“So, really, what we are ending up with is only four to five key players in the market.”

Only three years ago there were about 12 separately owned and operated shipping companies servicing New Zealand but that is now seven.

He described international shipping industry as struggle street for the past few years. 

Losses have been as high as US$1000 a 40-foot container and percentage growth in container ships outstripped growth in container traffic by three to one between 2015 and 2017.

Ramohitaj said in the industry having scale does matter when it comes to negotiating rates, routes and regularity with shipping companies.

The joint venture promises to bring together two companies capable of managing 70,000 20-foot container equivalents (TEU) of exports a year.

“We are the second largest exporter in our own right and offering this capacity to other customers is a way to improve our relevance when it comes to negotiating.”

Oji Fibre Solutions is favoured by shipping companies because it offers good base load export volumes, regularly for building a ship’s consignment. Its products cover the breadth of processed timber products including building timber, pulp, paper, plywood and MDF.

Kotahi is another joint venture freight solutions business, formed between Silver Fern Farms and Fonterra in 2011, with a strategic alliance to Port of Tauranga.

“Our point of difference is we are port agnostic and are not favouring any one shipping company,” Ramohitaj said.

At this stage the company is not sourcing temperature controlled or chilled container assets but that will be possible if demand proves sufficient.

Two years ago NZ received the first 10,000 TEU container ship the Aotea Maersk at Port of Tauranga. While the promise of larger ships was to make shipping cheaper, Ramohitaj said supply and demand has largely driven down shipping prices. 

The Baltic Dry Index, an indicator of international shipping rates, has risen in recent weeks to 1230 but remains well down on its 2014 peak of 2330.

NZ has its peculiar seasonal patterns for shipping capacity demands, typically ramping up from October to April as key export products are harvested and processed. 

Ramohitaj said shippers have generally adapted well to that but the venture aims to improve the predictability of demand for their services and potentially increase the pool of cargo.

“But what we are also starting to see is that NZ’s infrastructure as a whole is at an interesting point, at peak capacity in terms of port infrastructure and container moving ability around NZ.” 

More ports are looking at order books for cranes, lining up dredging projects and looking at their transport options.

Bearing360 is talking to interested exporters from all parts of the economy, including the primary sector and Ramohitaj is encouraged by the level of interest being expressed from exporters.

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