When the boat doesn’t come in
Supply chain issues are only getting worse as major issues pop up at a port in Southern China, writes Dileepa Fonseka.
Shipping containers are worth more empty than when they contain New Zealand exports.
If you ship goods in and out of New Zealand from anywhere other than Auckland or Tauranga, you are likely to get this email: ‘‘Your ship is no longer coming.’’
‘‘Please be advised that Ship XYZ will omit Lyttelton, Wellington, and Nelson in order to recover schedule due to ongoing delays from port congestion,’’ the email often reads.
The message is a sign worldwide shipping delays are getting worse, not better. That may not play to our advantage, despite our Hobbit-like ability to keep the ‘‘hermit kingdom’’ in good shape while a pandemic rages across the globe.
As Stuff reported last week, shipping in our region is going through a major shock right now courtesy of a Covid-19 outbreak at a major international container terminal attached to the thirdbusiest port in the world.
The situation at the Yantian International Container Terminal, in Southern China, has only deteriorated since then.
Exact numbers are hard to come by, but Lars Jensen of Vespucci Maritime, a well-known Danish shipping consultancy, has told shipping media outlets like Splash24/7 that more containers have likely been delayed during Yantian’s near-shutdown than when the Ever Given blocked the Suez Canal.
Speaking to Stuff, Jensen said: ‘‘When something like Suez or Yantian happens, that slows everything down even more – and pulls more capacity out of a system where there is already insufficient capacity.’’
‘‘This impacts everyone everywhere – also in New Zealand. If there are not enough ships available, shipping lines have to cancel some planned sailings.’’
Yet when you call people about this issue, a lot of exporters, importers and even government bureaucrats aren’t even aware it’s happening.
Customs Brokers and Freight Forwarders president Chris Edwards says the Ever Given captured a lot of headlines, but the disruption coming out of Yantian will likely be a lot worse for us.
‘‘The Suez Canal was a very interesting event in that it was very visual, right? You saw a ship stuck in the canal, everyone thought it was fascinating.
‘‘Actually the southern ports in China are much more important to New Zealand in my opinion . . . it’s really those places like Shenzhen, Yantian, those sort of places, that a large amount of manufacturing takes place and particularly that’s New Zealand-centric,’’ Edwards says.
‘‘My own clients, I’ve got literally tens and tens of containers now delayed into New Zealand because of the disruption into that area.’’
Shipping companies place great value on schedule reliability and will normally do whatever they can to get their ships back on schedule. Skipping ports south of Auckland, which don’t import much, are probably one easy way they can do that.
If you couple the disruption in Southern China with soaring demand for empty containers to service the route between the United States and China, then you have the potential for a real disaster when it comes to our much-touted export-led recovery.
The commercial incentives are all there for shipping companies to dock at Auckland, offload all the imports they were paid to take on, put a bunch of empty containers on to their ship, and then sail back to Asia without any of our export produce from further south.
Jensen says shipping companies will just ship these containers to the place where they can get the most for them.
‘‘This means that New Zealand’s importers/exporters are in direct competition over a limited resource with other companies globally who otherwise have nothing to do with New Zealand.’’
Empty containers from New Zealand are now worth more to these companies than ones filled with our produce.
Edwards says it’s these flow-on effects which are the real issue.
‘‘The centre of the problem is Yantian, but it flows out in everincreasing circles to other schedules, other countries, and that affects New Zealand getting containers, which is what’s happening at the moment,’’ Edward says.
Supply chain experts refer to shocks like these as triggers for the ‘bullwhip effect’, where small ripples at one end of the supply chain cause major issues at the other end.
It’s a story Road Transport Forum chief executive Nick Leggett is hearing more and more, because exporters can’t put their goods on ships at a local port, so they try to cart it up to Auckland in trucks.
‘‘Most of us are very focused on one aspect of the problem, but actually understanding it in its totality is what we’re lacking.
‘‘We’ll have to start doing that when the wheels start to come off.’’
This is where Government comes in. The good news is officials have had a lot of time to prepare for a massively disrupted shipping system.
These disruptions were predicted right from the beginning of the pandemic, which is why the Government pumped hundreds of millions of dollars into keeping air freight links running.
A workshop was also held by the Ministry of Transport in March between 43 representatives of the country’s exporters, shipping lines, ports and freight forwarders.
Participants say it touched on a lot of interesting issues, but they haven’t heard much about what came out of it since then.
The bad news is many officials seem to be expressing the hope players within the largely private-run shipping ecosystem will sort these issues out by themselves.
They very well might do, but this doesn’t mean their solution will benefit New Zealand.
Australia realised this early on and formed an Empty Container Working Group last year, an approach Edwards says has had some success.
There are no easy answers, but the problems are amplified in New Zealand’s case because we rely on many of these international shipping lines for our own domestic coastal shipping too.
So, does the Government need to charter or form contracts with ships directly? Should there be greater regulation of ‘‘minimum service levels’’ for shipping, as people are discussing in Australia and the United States?
Or do we just need to get on the phone to major shipping lines and make sure the end-solution is something that benefits NZ Inc?
Some fear if we push too hard there’s a chance shipping companies could simply choose not to come.
Fair enough, but that doesn’t mean we shouldn’t be paying more attention.