Thursday, May 19, 2022

Supply chain logistics disruptions continue

An anticipated return to normal global supply chains looks unlikely in the near-term due to port congestion in Europe from uncleared containers caught up in trade sanctions against Russia.

New Zealand Council of Cargo Owners chair Simon Beale said access to containers is tightening as they become stranded in Russia or are unable to be delivered because of sanctions.

“There are issues with getting containers now,” Beale said.

This logistical challenge adds to existing shipping disruption from a shortage of staff to work the ports in the United States and city-wide lock downs in China as the Government tries to eradicate covid.

Beale said shipping delivery times have improved in the past year, especially for perishable products, but that could change as container supplies tightens or other large Chinese cities are shut down to contain covid.

An issue for NZ schedules are continued delays from the ongoing implementation of automation systems at the Ports of Auckland, which has forced ships to wait at sea for access to ports around the country.

Alliance Group sales manager Shane Kingston said supply chain logistics have improved in the last year, but he fears a return to more reliable schedules and access to containers could be delayed by up to three years due to existing disruption and the growing congestion in Europe.

“That will be significant when there is already a distressed network,” Kingston said.

“I don’t see a pathway to an end to supply chain disruption for the next two and a half to three years.

“It is one step forward and a half a step back.”

Kingston makes his assessment after senior Alliance management met customers in the United States earlier this month, the first market visit in two years.

He saw first-hand the labour shortage issues facing the Los Angeles port of Long Beach, which is struggling to clear imported consumer products from China and Asia, where despite the demand, not all cranes were operating.

A spokesperson for Kotahi, the country’s largest supply chain logistics company, said there have been minor improvements in reliability and waiting times for ships.

Global industry data up to February reported a decline in average delays for late vessels from eight to seven days, still almost double historic averages.

The number of vessels queued outside US West Coast ports, particularly Long Beach, has also reduced.

Schedule reliability has improved from 30% to 35% globally, again well back on historical averages of 80-85%.

Kotahi reports that despite these improvements, at any given time about 12% of the world’s vessel capacity is effectively laid up waiting to berth.

The price of bunker fuel for ships increased 33% between January and early March due to the Russian-Ukrainian war, potentially adding an extra $US100 per 20-foot container in the coming quarter.

The ongoing lockdown of Shanghai is considered by Kotahi as an emerging global supply chain risk.

Carriers are advising port operations in Shanghai are slow and plug utilisation for reefer containers are at unsustainable levels due to the slow gate movements.

“As a result, a number of carriers have implemented a suspension on reefer and dangerous good bookings into Shanghai Port and encourage product to be sent to alternate destinations, until further notice,” the spokesperson said.

It anticipates further capacity restrictions for NZ exporters through the peak export season and says access to refrigerated containers remains tight but supply should be consistent.

Shipping and staffing issues have not detracted from a 25% increase in New Zealand tractor and machinery sales for the year to date.

Industry group Tractor and Machinery Association (TAMA) report tractor sales are up 25% in the year-to-date compared to the same period a year earlier, which was in turn 19% higher than the previous year.

TAMA president Kyle Baxter said demand is across all horsepower models and strongest in dairy regions, Northland, Waikato, Taranaki and Southland, and those focused on horticulture.

There has been a 20% increase in the sub 40HP sector, a 27% increase in tractors 40HP to 100Hp and more than a 30% increase in the 100-150HP-plus sector.

“The strong commodity prices are driving and providing buyer confidence,” Baxter said.

He said demand has continued into 2022 but with the addition of increased imports of agricultural equipment.

“Many of our members are also turning their eyes to beyond 2022, as they look to confirm production slots of equipment that is expected to arrive in NZ around early to mid-2023, thus ensuring that supply continues to meet demand, whichever way it trends.”

He warns that the price of raw materials, labour, fuel, and shipping are rising globally, with the additional risk of shipping disruption potentially delaying deliveries.

“Global manufacturing constraints are still very much a reality, as plants continue to work through covid restrictions in their respective countries, and that coupled with constraints in component supply, all contribute to disruption to the smooth flow of equipment into NZ,” he said.

Equally border restrictions have left TAMA members short staffed, but he said there are indications this could ease later in the year.

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