Shipping challenges and port inefficiencies drive up export costs

The Ever Given container ship stuck in the Suez Canal in late March caused profound disruption to shipping worldwide. Inevitably, it also triggered concern over weaknesses in the global shipping network. Marlene

Louw of Absa AgriBusiness and Kandas Cloete of the Bureau for Food and Agricultural Policy explain.

Although the Ever Given container ship stuck in the Suez Canal was freed on 30 March, the broader problems in global and local shipping and logistics have not gone away. The imminent exporting season for key South African commodities such as maize, citrus and pome fruit focuses the spotlight firmly on these issues.

It is also worth noting that South Africa is expecting a record citrus harvest that will result in exports of around 158,7 million cartons, a record pome fruit harvest producing more than 55 million export cartons, and a bumper maize crop ( see Table 1 for South Africa’s export figures for fruit).

According to the Crop Estimates Committee, this maize crop will amount to about 15,9 million tons, and with other countries in the region also expecting larger-than-usual harvests, the role of deep-sea markets will be more important than ever.

Graph 1 shows the Baltic Dry Index, which tracks the cost of moving raw materials such as grain, iron ore and coal by ship. It shows that during the first quarter of 2021, the cost of shipping dry goods increased almost 50%. The red and green sections represent the days on which the Suez Canal was blocked (red) and the days after which it was reopened (green). From this, it is clear that shipping costs gained momentum about three weeks before the blockage.

There are two apparent explanations for the increase in March. First, it coincided with strong exports of grains and oilseeds from the US to China. Second, a later-than-normal Brazilian soya bean harvest contributed to the demand for shipping in March. The Brazilian soya bean crop is traditionally harvested in February and March, but very little was done in February due to late planting and slow crop development. With more of the harvest becoming available later than anticipated, demand for shipping of grains in March strengthened substantially.

Fruit is exported in reefer containers on ships or in break-bulk reefer vessels from Cape Town, Durban, Ngqura and Gqeberha. While the bulk of citrus is exported from Durban, the

Cape Town terminal is important for stone fruit, pome fruit and grapes.

Over the past couple of months, during which stone fruit and table grapes were harvested, packed and exported, challenges in the Cape Town Container Terminal (CTCT) caused havoc. These problems include weatherrelated delays, container shortages and lack of terminal efficiency.

According to Transnet’s terminal performance reports for March 2021, a total of 43 726 containers moved through CTCT and the Cape Town Multi-purpose Terminal, with exports and imports contributing 52% and 48% respectively. This is a significant increase from the 31 360 containers in January and 33 226 in February.

Despite this improvement, the availability of reefer containers for fresh produce exports remains under pressure. Whilst 86% of the reefer containers entering the CTCT during March were empty, 12 770 reefer containers were exported, compared with 9 110 that were imported. There is currently no clear solution to this problem, since

the shortage is a global one, with hold-ups experienced at other ports and waterways. As a result, this challenge may well be carried into the height of the citrus and pome fruit export seasons.

In terms of port efficiency, Transnet reports that the gross crane moves per hour (GCH) target for 2020 for CTCT was 28, meaning that 28 container moves (loading or offloading) are executed by a crane in one hour. Graph 2 shows that crane-use efficiency was below the target for March. Considering that there are eight fixed cranes, with a normal schedule of seven in operation and one in maintenance, between 3 136 and 4 704 containers could theoretically be moved per day, in two or three eighthour shifts. Yet the maximum number moved recorded on a single day was 2 354.

IMPACT ON HARVESTING

The challenges at the waterside of the port ultimately also affect the landside port performance. Given the high stack occupancy (over 80% at some point during the month), truck access to the terminal is negatively affected, resulting in packhouse disruptions and problems with cold storage space. These, in turn, affect the rate at which crops can be harvested. From firm shipping prices and the issues highlighted above, it is clear that strong global demand points to economic recovery, which would boost aggregate demand over the medium to longer terms. At the same time, it has the potential to create a volatile logistical environment, posing a shortterm distribution risk that could be passed on to realised prices for local producers. To benefit from this growth, a collective and creative approach to these logistical issues will thus be necessary.

• Email Marlene Louw at marlene. louw@absa.africa, or Kandas Cloete at kandas@bfap.co.za.