Exporter - - FRONT PAGE - By Mary MacK­in­ven.

Ex­porters are gen­er­ally well served by calls from in­ter­na­tional ship­ping lines these days.

The New Zealand Ship­pers Coun­cil ex­ec­u­tive of­fi­cer Peter Mor­ris says a range of ship sizes call, car­ry­ing 1,800– 5,000 TEUs (con­tain­ers).

“So the mar­ket does work. We have good ser­vice and lots of choice,” he says.

The worlds' big­gest ships carry 18,000 TEUs and don't even fit in the Panama Canal (yet). But they won't be vis­it­ing New Zealand any­time soon: “Not in my life­time,” says Maersk Line NZ man­ag­ing di­rec­tor Ger­ard Mor­ri­son.

Mor­ris says the trend is to­wards fewer ser­vices and big­ger ships. “You lose choice and fre­quency – from twice a week to one call maybe.

“Maybe over the year de­mand ca­pac­ity is the same.”

New Zealand's cargo to South­east Asia, the Mid­dle East, Europe and Africa calls at Sin­ga­pore and Malaysia where con­tain­ers come off and wait for a big ship car­ry­ing 10, 14 or 16,000 TEUs. Maersk has a di­rect route to the US, where cargo is also trans-shipped to South Amer­ica.

“So we do ar­rive in mar­ket on big ships,” says Mor­ris.

“We [New Zealand] are at a sig­nif­i­cant dis­ad­van­tage. The ports at Auck­land, Tau­ranga and Lyt­tle­ton could take 6,000 TEUs, which would be a 50 per­cent cargo in­crease. A7000 TEU is a sen­si­ble en­ve­lope for New Zealand and would see us through for 10 to 15 years, but this is not a long time [in in­fra­struc­ture terms].”

Slow steam­ing, in­tro­duced three to four years ago, is here to stay, adds Mor­ris.

“Not that we ac­cept it, but it's a nat­u­ral re­ac­tion for car­ri­ers. Sail­ing at 20 to 21 knots in­stead of 23 to 25 knots saves sig­nif­i­cant dol­lars.

“But the tran­sit time can be two to

three days longer.”

There are im­pli­ca­tions for value add: meat ex­porters are right on the cusp be­tween man­ag­ing fresh sup­ply and re­vert­ing to frozen [trade], Mor­ris says.

As a gen­eral tip, New Zealand Ex­port Credit Of­fice head of busi­ness orig­i­na­tion, Peter Rowe, says if ex­porters' terms of trade mean they get paid once the goods ar­rive at the des­ti­na­tion, the longer it takes for their goods to ar­rive at their des­ti­na­tion the longer the ex­porter is left car­ry­ing the work­ing cap­i­tal cost of the ex­port.

“This may mean it is worth look­ing at ne­go­ti­at­ing your terms of trade so that you are paid upon ship­ment,” Rowe says.

Freight pre­dic­tions

New Zealand's freight task is pro­jected to in­crease by about 50 per­cent over the next 30 years [to 2042], ac­cord­ing to the Trans­port Min­istry's Na­tional Freight De­mand Study 2014.

While Mor­ris says the study was a use­ful ex­er­cise, he is con­cerned that growth fore­casts are on the light side.

“The re­port says that's about 1.5 per­cent at a com­pound rate but it will be more like five to six per­cent – gen­er­ally 2.5 times GDP, as it grew his­tor­i­cally through our ports.”

The na­ture of global trade is in­creased value-added goods, which of­ten means more pack­ag­ing. Load­ing a container with con­sumer milk pow­der in 125g sa­chets rather than com­mod­ity milk pow­der is dou­ble the freight task, so it's dif­fi­cult for New Zealand, says Mor­ris.

“Our dis­tance to mar­ket means you can be hold­ing more in­ven­tory and with re­duced shelf life.”

Mor­ris says in­ter­na­tional ship­ping changes across the board are also rea­son­ably sta­ble be­cause as ship­ping

is very com­pet­i­tive, car­ri­ers work closer to­gether.

Not that this should be too close. New Zealand is propos­ing to bring the commercial oper­a­tion of in­ter­na­tional ship­ping into the Com­merce Act.

“The Govern­ment has it about right and not out of step with the rest of our trad­ing part­ners world­wide. We hope to keep [lines] in check re prices but glob­ally ship­ping makes big losses then swings to big prof­its.”

Maersk's Mor­ri­son says putting bar­ri­ers be­tween lines speak­ing to one an­other would make it dif­fi­cult to match im­port and ex­port cargo flows to New Zealand.

Ef­fi­ciency and ca­pac­ity

Ex­port New Zealand echoes the sen­ti­ment that ship­ping ser­vices are go­ing quite well for ex­porters.

“A few years ago we got com­plaints from ex­porters about con­tain­ers get­ting bumped at the last mo­ment due to sea­sonal peak vol­ume pres­sures,” says ex­ec­u­tive di­rec­tor Cather­ine Beard. “This is not hap­pen­ing so much [now] be­cause ships are get­ting big­ger and smooth­ing [ser­vices] out bet­ter.

“Big­ger ships bring more ef­fi­ciency of scale for the lines, which means sta­bil­ity in rates too, rather than a boom-bust state.”

Mor­ri­son says Maersk's global com­pany profit of US$1.5 bil­lion last year sounds big but the re­turn on in­vest­ment was only 7.4 per­cent.

“It was due to oil prices and other out­side forces and cost cut­ting – not due to in­creased freight rates. So it's good for ex­porters.

“We have more ca­pac­ity than 12 months ago but have made changes to where our cargo is com­ing from and go­ing to, to de­velop the most cost­ef­fec­tive and cus­tomer-ef­fec­tive ser­vice. But this is not no­tice­able to the New Zealand cus­tomer.

“Economies of scale drive our mar­ket. Cost­ing is the same as for sell­ing any other prod­uct. Vol­ume is crit­i­cal and ev­ery in­dus­try re­wards the cus­tomer for vol­ume.”

But other fac­tors rel­e­vant to cost­ing are vo­latil­ity, value, sea­son­al­ity, cargo size and the num­bers of cus­tomers.

“Trans-Tas­man wasn't very cost ef­fec­tive so we bought space on an­other ser­vice, so ser­vice lev­els might have dif­fered but the net­work is sta­ble.”

Mor­ri­son can­not see an ef­fec­tive way to re­vert to fast ser­vices, but is work­ing with the meat in­dus­try. “Not ev­ery cus­tomer on the ship would be happy to pay the price [for fast ser­vice].”

One ‘small' in­dus­try change com­ing up on July 1 is a new book­ing can­cel­la­tion fee of $100 per container can­celled within seven days of de­par­ture. So far Aus­tralia is the only other coun­try with this charge.

The late can­cel­la­tion of book­ings is a mas­sive global prob­lem for ship­ping, says Mor­ri­son. “All ship­pers do it, even those on con­tract.

“[Part of the prob­lem with plan­ning ser­vices is] we are not that good at real time data. Cargo movers need more vis­i­bil­ity about where cargo is and where it's go­ing.”

Maersk Line NZ is part of a global pi­lot test­ing re­mote container man­age­ment soft­ware that aims to help ex­porters track reefers and ma­nip­u­late the tem­per­a­ture set­tings from their own com­put­ers, for ex­am­ple.

Do­mes­tic modes

Coastal ship­ping has mas­sive scope in New Zealand, Mor­ri­son says. “It's hard to com­pare prices but it's gen­er­ally cheaper to use coastal ship­ping.”

Paci­fica Ship­ping in­de­pen­dently op­er­ates two coastal ves­sels. Chief ex­ec­u­tive Steve Chap­man be­lieves it's high time to raise the pro­file of coastal ship­ping, and in par­tic­u­lar, pos­i­tive col­lab­o­ra­tion is needed be­tween rail and ship oper­a­tors about the most sen­si­ble ap­proach to in­ter­is­land cargo trans­port.

“Coastal ship­ping of­fers the most cost-ef­fec­tive and en­vi­ron­men­tally friendly choice for the coun­try's ex­porters with goods to move do­mes­ti­cally.”

“Meat ex­porters are right on the cusp be­tween man­ag­ing fresh sup­ply and re­vert­ing to trade.” frozen

Les­son on freight con­tracts

Ma­rine specialist bro­ker at ICIB In­sur­ance Bro­kers, Matthew Davies, raises the 2014 court case of Re­source New Zealand v Mediter­ranean Ship­ping Co SA (MSC) in re­la­tion to the Rena ground­ing, which drives home the im­por­tance of un­der­stand­ing freight con­tracts.

Re­source NZ had ar­gued it would be “un­just” if it had to pay MSC's freight bill, given that its tim­ber did not get from Napier to the Mid­dle East.

But Re­source NZ was or­dered to pay the bill.

“This case has re­ceived a lot of at­ten­tion, but in fact there was noth­ing un­usual about the con­clu­sion,” Davies says. “A very stan­dard con­tract term was sim­ply en­forced.”

Even if MSC had been li­able for cargo losses its li­a­bil­ity would have been limited un­der the Hague-Visby Rules to which New Zealand is a sig­na­tory. These re­quire all those as­so­ci­ated with a mar­itime ven­ture to share the costs of sav­ing that ven­ture when some­thing goes wrong.

‘Gen­eral aver­age' isn't a prob­lem for those who are in­sured be­cause cargo in­sur­ers pro­vide the nec­es­sary guar­an­tee and (even­tu­ally) pay the gen­eral aver­age con­tri­bu­tion.

Mor­ris points out that in­sur­ance costs af­ter the Rena ground­ing have gone up, though it's a small per­cent­age of the over­all ship­ping pie.

Ports keep­ing step

Jade Soft­ware sells soft­ware spe­cial­is­ing in man­ag­ing gen­eral (bulk) cargo to ports around New Zealand and over­seas.

Chief ex­ec­u­tive David Lind­say says the soft­ware fa­cil­i­tates cargo be­ing bro­ken down into smaller units, such as onto pal­lets or chas­sis or in the open, then al­lo­cat­ing it to spots in the yard and plan­ning where it goes on a ship. The in­for­ma­tion re­sults in fewer lifts and helps meet faster ship turn­around times.

Ports are buy­ing big­ger tugs, cranes and strad­dle car­ri­ers; re­claim­ing land, buy­ing land for in­land ports and

in­ter­modal freight hubs, and more. But sat­is­fy­ing all par­ties is a jug­gling act.

Ports of Auck­land gen­eral man­ager of sales and mar­ket­ing, Craig Sain, says “ship­ping lines are very fo­cussed on re­duc­ing fuel costs, so are less in­clined to speed up late ships.

“Some months, over half the ser­vices we han­dle have ar­rived late be­cause of de­lays at other (mainly over­seas) ports. This causes bunch­ing of ves­sels, which puts pres­sure on a num­ber of points in the sup­ply chain.

“Trans­port oper­a­tors, and ports, need to build max­i­mum flex­i­bil­ity into their op­er­a­tions so they can cope with peak de­mand.”

Also, the re­la­tion­ship be­tween ports and ex­porters is grow­ing, he says.

“In the past, ports viewed ship­ping lines as their main cus­tomer, but now the im­por­tance of the cargo owner (ex­porter) is also recog­nised.

“We are look­ing at dif­fer­ent trans­port so­lu­tions, es­pe­cially rail, to in­land freight hubs so we can op­ti­mise the sup­ply chain in both di­rec­tions.

“We are talk­ing more with cargo own­ers to un­der­stand how cer­tain be­hav­iours can im­pact on pro­duc­tiv­ity and ef­fi­cient han­dling of cargo through our port. For ex­am­ple, the de­liv­ery of ex­port cargo with com­plete doc­u­men­ta­tion be­fore the ves­sel ar­rives means we can turn them around faster, of­fer­ing fuel sav­ings to lines and keep­ing freight rates down.”

Port num­bers, sizes and their own­er­ship con­trib­ute to the busi­ness case for ex­porters in choos­ing trans­port, says the pres­i­dent of the Cus­toms Bro­kers and Freight For­warders Fed­er­a­tion, Wil­lie van Heus­den.

“Dis­cuss with your freight for­warder the best op­tions for get­ting to mar­ket. Do you use coastal ship­ping to bring goods from the south to Tau­ranga or Auck­land ports, or use rail? Do you have to use a truck?”

He says new ship­ping lines Han­jin and APL are driv­ing rates down, and leading to bet­ter sched­ul­ing.

Slow steam­ing continues and ex­porters are ad­vised to choose their ser­vice wisely. “You get what you pay for,” van Heus­den says.

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