Ex­porters can’t con­tain frus­tra­tion

Central and North Burnett Times - - RURAL WEEKLY - Nidera Aus­tralia PETER McMEEKIN

THE use of con­tain­ers for the ex­port of grain from Aus­tralia has been steadily in­creas­ing over the past decade and this method now makes up a sig­nif­i­cant pro­por­tion of to­tal ex­ports each year. Grains ex­ported in con­tain­ers in­clude wheat, malt­ing bar­ley, feed bar­ley, oats, pulses (pre­dom­i­nantly chick­peas and lentils), sorghum and canola with Asian ports the most com­mon des­ti­na­tion.

This sea­son ex­port trade has been sig­nif­i­cantly im­pacted by lack of con­tainer space, and/or equip­ment is­sues with ship­ping lines.

Most of these is­sues have stemmed from the poor fi­nan­cial per­for­mance of the global con­tainer ship­ping in­dus­try in re­cent years.

This in turn has led to over­ca­pac­ity as vol­umes have strug­gled to re­cover fol­low­ing the global fi­nan­cial cri­sis (GFC) and in­ter­na­tional freight rates have re­mained low over the same pe­riod. The in­dus­try re­sponse has been twofold.

Firstly, there has been global ra­tio­nal­i­sa­tion of the in­dus­try, via a series of takeovers and merg­ers.

Se­condly, ship­ping com­pa­nies have re­duced in­vest­ment in fleet up­grades, lead­ing to an in­crease in the av­er­age ves­sel age and a dra­matic in­crease in the oc­cur­rence of break­downs and ship­ping de­lays.

An­other ma­jor blow to the in­dus­try was the col­lapse of South Korean com­pany Han­jin Ship­ping last year, owing cred­i­tors over US$8 bil­lion.

At the time this left 97 ships, car­goes and crews stranded in nu­mer­ous ports around the globe. Han­jin was one of the world’s largest con­tainer car­ri­ers, ship­ping more than 100 mil­lion met­ric tonnes of cargo an­nu­ally.

Here in Aus­tralia there have been a num­ber of other fac­tors that have com­pounded global is­sues. Re­duced im­port ac­tiv­ity post the tra­di­tional pre-Christ­mas re­tail po­si­tion­ing meant the sup­ply of suit­able, food-grade con­tain­ers has been less than in re­cent years and much less than the pre-GFC vol­umes.

In ad­di­tion, a con­tainer im­bal­ance has de­vel­oped do­mes­ti­cally. Im­por­ta­tion of goods into Aus­tralia in 40 foot (40’) con­tain­ers has in­creased at the ex­pense of 20 foot (20’) con­tain­ers lead­ing to an over­sup­ply of the 40’ va­ri­ety.

Not many do­mes­tic pack­ers can han­dle 40’ con­tain­ers, road weight re­stric­tions means that they can only be half-filled and a lot of des­ti­na­tions through­out Asia don’t have the in­fra­struc­ture to man­age the larger boxes.

So how has all of this im­pacted Aus­tralian trade? Well it all started with pulses to the In­dian sub­con­ti­nent in Oc­to­ber last year. The de­layed start to har­vest and the strong front end de­mand meant the prod­uct needed to be shipped early to avoid the in­verse in the mar­ket.

Other ce­real and agri­cul­tural prod­ucts were then im­pacted. Ship­ping lines re­acted by pri­ori­tis­ing the higher pay­ing pulse car­goes to the detri­ment of tra­di­tional milling wheat ship­ments into South East Asia. Like bulk ex­ports, any de­lays in con­tainer ship­ments have sig­nif­i­cant knock-on ef­fect across the en­tire sup­ply chain. Many ship­ments, from mul­ti­ple mar­keters, have been can­celled by the ship­ping lines, at very short no­tice, in the past six months.

This re­sulted in a loss of ef­fi­ciency for pack­ers, dead freight is­sues for trans­porters (both road and rail), de­lays with pack­ing fa­cil­i­ties be­ing able to re­ceive farmer de­liv­er­ies and farm­ers not getting paid as quickly as they had orig­i­nally ex­pected.

Such de­lays are ex­tremely detri­men­tal for ex­porters and des­ti­na­tion buy­ers alike.

Con­tainer­ised wheat buy­ers tra­di­tion­ally buy just in time so any de­lays im­pact their pro­duc­tion ef­fi­ciency.

Buy­ers im­pose fi­nan­cial penal­ties on Aus­tralian ex­porters for late ship­ment, nor­mally due to the afore­men­tioned can­cel­la­tions. The catch here is the ship­ping lines won’t be held li­able.

To add in­sult to in­jury the ship­ping lines have sub­stan­tially in­creased their sec­ond quarter freight rates and im­posed “peak sea­son” sur­charges so prod­uct that was orig­i­nally in­tended to be shipped in Fe­bru­ary, but now not go­ing out un­til April in many cases, is in­cur­ring an ad­di­tional freight cost.

Once com­bined, all of these penal­ties far out­weigh the orig­i­nal mar­gin the ex­porter hoped to achieve when they orig­i­nally ne­go­ti­ated the busi­ness. Strong ex­port de­mand con­tin­ues for con­tainer­ised agri­cul­tural pro­duce from Aus­tralia.

How­ever the rep­u­ta­tion of the Aus­tralian ex­porter is be­ing jeop­ar­dised by the lack of ac­count­abil­ity of the global con­tainer freight providers.

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