Monday, February 26, 2024

Exports hit by new blow to shipping

Neal Wallace
Delays of nearly three weeks as geopolitical tensions, drought affect routes.
Reading Time: 3 minutes

Some New Zealand dairy exports are taking nearly three weeks longer to reach international markets as they are diverted to avoid military tensions in the Red Sea and delays traversing the Panama Canal due to drought.

Santiago Aon, Fonterra’s director of global supply chain, said carriers are diverting around the Cape of Good Hope to avoid conflict in the Red Sea, which increases transit times for the co-operative’s cargo by 14-17 days.

“It is very likely these changes will result in congestion and delays for some time and detail of those impacts will become clearer over the next few weeks,” Aon said.

Dairy and meat sectors said they have not had significant delays traversing the Panama Canal, where drought has created capacity restrictions that are delaying some vessels by up to a week.

Aon described global shipping as fluid and changing daily, but said Fonterra is working with key partners to prioritise and manage its orders.

Meat companies targeting the lucrative United Kingdom Easter trade are concerned that any shipping delays could impact lead-in times, the Meat Industry Association said.

“Red meat processors are watching developments in the Middle East closely, particularly in regard to the potential impact on chilled beef and lamb exports, but at this stage we haven’t received reports of any significant delays to major markets,” association chief executive Sirma Karapeeva said.

Attacks by Houthi rebels on cargo ships passing through the Red Sea and the drought afflicting the Panama Canal have disrupted global shipping.

Houthi rebels, who control much of Yemen, are using drones and firing missiles at cargo ships passing through the Red Sea in a show of support for the Hamas terrorist group in its war with Israel.

An international naval flotilla is protecting shipping, but there are reports that the number of container ships transiting the Red Sea in the first week of January is down 90% compared to the same time a year earlier, an indication carriers are avoiding the region.

The Red Sea provides shipping access to and from the Suez Canal, which the Dow Jones said accounts for about 12% of global trade with about 30% of global container traffic.

On the other side of the globe, prolonged drought conditions in Panama, worsened by a severe El Niño, are causing delays due to a lack of water to operate the canal’s locks.

The Panama Canal accounts for about 7% of global seaborne trade, according to the Wall Street Journal, and last October was the driest October on record for the canal watershed.

Some vessels are offloading cargo and trucking it across the country to be reloaded on the other coast so ships can meet new draught restrictions.

The Panama Canal Authority has cut the number of ships transiting the shipping artery from 36 to 24 a day, and had planned to lower that to 18 a day from February before recent rains brought a reprieve. 

The chair of the NZ Council of Cargo Owners, Mike Knowles, said shipping disruption is unlikely to be on the scale experienced during covid, when a spike in demand meant most ships failed to meet schedules and some stopped calling at certain ports.

He said exporters fear prolonged disruption could cause delays in the delivery of empty containers ahead of apple and kiwifruit harvests, which will require storage and will have and effect on shelf life.

Knowles said carriers that have booked slots to pass through the Panama Canal face minimal delay, but those that haven’t can wait up to a week.

A spokesperson for the Ministry of Foreign Affairs and Trade said it does not yet have data on the impact to New Zealand trade.

The Suez Canal is an important route to Europe and North African and an extended period of disruption could significantly impact exporters and importers, resulting in higher transport costs and delays, especially for perishable items.

The spokesperson said some NZ cargo has been delayed transiting the Panama Canal. 

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