Thursday, May 19, 2022

Shipping delays to stick around for 2022

Global shipping delays are unlikely to improve this year.

Kotahi chief executive David Ross says demand for dairy, meat and horticulture exports for the first half of 2022 will put pressure on reefer availability.

Global shipping delays are unlikely to improve this year.

David Ross, the chief executive of Kotahi, the country’s largest shipping logistics company, says global shipping reliability, a measure of vessels arriving and departing as scheduled, was 32% in December.

This effectively removed 12.4% of vessel capacity from global routes.

“This is due to vessel delays at ports remaining high, sitting at over seven days for the average late vessel,” Ross said.

A shortage of reefer containers will also be an issue for NZ exporters in the first half of this year, accentuated by the large volume of dairy, meat and horticulture to be shipped.

“There are strong dairy, meat and horticulture exports for the first half of 2022, which is going to put pressure on reefer availability,” he said.

Congestion and bottlenecks at ports on the US West Coast worsened to the point where this month NZ exporters can only secure access to one in four scheduled service sailings.

There are reports more than 100 vessels are waiting to berth at Long Beach California, triple the number of a year ago.

He said delays and port rescheduling means NZ exporters have in the past year or so lost the equivalent of about 35% of shipping capacity to those US ports.

Capacity remains tight on routes with Africa, Middle East, West Asia, US East Coast and Australia, with congested shipping schedules between Asia, Australia and Auckland resulting in missed connections and omitted ports.

Issues are also arising – and will continue to do so – from port workers falling ill with covid-19, causing absenteeism which impacts on the supply chain.

Despite this, he said there has been some improvement.

While most NZ ports were sitting below 30% for schedule reliability in December, performance has improved, especially at the Port of Tauranga, which is at 41.2%.

Ross attributed that improvement to assistance from shipping line Maersk, which has added permanent capacity and changed its port schedule.

“The Maersk Sirius Star service rotation was adjusted in September 2021 to enhance stability, with a new ANZ service, The Polaris, introduced to run alongside it and ensure stable calls to Timaru and a further link to Australia from the South Island,” he said.

“Both the Sirius Star and The Polaris continue to hit 100% of their berth windows in Lyttelton, ensuring better connections with the Southern Star service to Asia, which has also been a positive.”

He said the shipping challenge will continue due to operational bottlenecks from port congestion.

Looking further out, he said ship building orders are full, but any benefit from increased capacity will not be felt until the end of the year.

Rabobank’s latest NZ Agribusiness Outlook report warns the pandemic will continue to disrupt global food supply chains.

Report co-author Michael Harvey says the emergence and spread of the Omicron variant has caused supply chain issues to food markets, labour shortages and increased inflationary pressure.

Many governments have reinstated containment measures leading to higher supply chain costs on top of rising inflation and challenges keeping product moving.

Harvey warns of the need to watch China’s zero-tolerance covid policy, which potentially could impact consumer demand.

“There is growing concern about the state of the economic recovery in China, which, combined with the strict lockdown policy, is impacting consumer markets there,” Harvey said.

The growth of retail sales in China slowed towards the end of 2021, and while the most recent retail data shows double-digit growth, when adjusted for inflation, it was a more subdued picture.

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