“I’ve been involved with freight logistics for more than 30 years, and – along with about 90 per cent of the people I deal with – we have never seen anything like the global situation now.”
Antony Leveridge is one of Business North Harbour’s property owners and the director of local company, Orca Logistics. He shared his insights with FYI to shed some light on challenges being faced by the entire supply chain, from manufacture to final delivery.
Pre-2019, there were predictable peak seasons (e.g., just before lunar new year or the lead into Christmas) when the volumes coming out of Asia would increase, placing pressure on shipping lines and creating space availability issues. That’s now the continuing reality; Singapore is a known choke-point, with transhipment delays of up to eight weeks being experienced.
“From some ports and countries, you might manage to secure a container booking six weeks out, but there’s no guarantee it’ll eventuate,” Antony explains. “We recently had a booking out of Los Angeles cancelled for a sailing just 48 hours prior to empty container release. The reason from the shipping line: ‘over-booking by carrier and capacity constraints at port’.”
Shipping costs have increased exponentially, by 500 to 600 per cent over the last few years. “In 2019, it cost about US$900 to ship a 40ft container from Hong Kong to New Zealand. By July 2021, that was up to US$6,500, and now it’s around US$9,000 or more depending on which shipping line is used.” Moreover, Asia freight rates are currently only fixed for a 15-day window, meaning that most bookings have to be made without knowing the final cost to the client. When bookings do proceed as planned, arrival dates have to be carefully monitored, as the shipping line’s online ETA can differ from Ports of Auckland’s vessel berthing date. “They can sometimes vary by as much as 14 days.”
Counteracting the challenges requires “five times the previous amount of work” and some innovative thinking.
Counteracting the challenges requires “five times the previous amount of work” and some innovative thinking. “It sounds ridiculous but, because empty general-purpose containers can be in such short supply or so highly priced in some countries, it could be better value to use refrigerated containers for ambient goods.” This is because, at certain times of the year, shipping lines look to reposition refrigerated containers back to New Zealand for dairy, meat, and produce exports.
“Vessel bunching”, when several boats arrive simultaneously, is another issue. “The ports process the vessels as fast as they can, but a sudden influx of containers will have a knock-on effect for trucking. If the containers aren’t removed from the port quickly, the client could end up incurring demurrage charges at the port.” FAK (Freight All Kind/LCL) container unpacking depots typically used to have cargo available three days after the container discharged the vessel. “Today, it’s between seven to or nine days, and the effects of Omicron will likely push this out further.”
The good news is that Antony can see some glimmers of positivity as shipping companies reinvest in bigger, better vessels with greater capacity and improved fuel efficiency. “These don’t just pop up overnight. We think we’ll see these start to come online from late-2023.”
With the government reopening borders to international travellers, this should also help as air travel resumes. “More airlines coming into New Zealand should ease some of the pressure on airfreight and, hopefully, air freight rates will consequently decrease,” he says.
To read more articles from the March FYI Magazine click here.
