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Friday 03 December 2021

‘Container chaos’ to continue – ANZ

1st July 2021 By Staff Reporter | | @foodtickernz

Covid-19 induced congestion in the global shipping industry is likely to continue well into 2022, with skyrocketing costs hitting New Zealand primary producers hard, according to ANZ.

Shipping costs are skyrocketing for the country’s exporters, says ANZ.

The bank’s Container chaos: the impact on NZ primary producers report released today described the current environment as “extremely challenging” for importers and exporters because of freight delays and elevated freight costs.

“Over the past couple of decades supply chains have become increasingly reliant on having goods delivered just-in-time, effectively reducing the cost of holding inventory,” ANZ said.

“But for this to work, global freight networks need to be operating in a reliable and efficient manner, which is not the case today.”

The delays ships were facing at ports struggling with reduced capacity, huge backlogs to clear and strong incoming demand, which was equivalent to reducing the global shipping fleet.

In response, shipping companies faced with strong demand and limited supply have reacted by hiking their freight costs and charging clients additional fees if they wanted cargo offloaded at ports with long wait times. They have also in some cases reverted to the most profitable routes and most efficient ports.

“The impact of the freight disruptions is being felt acutely by our export sector,” ANZ said with skyrocketing shipping costs meaning a lower proportion of value being returned to New Zealand’s primary producers.

“This is particularly the case for chilled products with limited shelf lives, and low-volume exporters who rely on being able to access space on commercial ships for a few containers at a time.”

The ANZ team, led by chief economist Sharon Zollner, added that until there was a shift in the current dynamics, there was no end in sight to the disruption with estimates of when global shipping routes and costs would return to ‘normal’ continually pushed out.

“Shipping companies are currently making abnormally high returns and are flat out to boot, so have no incentive to
reduce their prices to gain market share,” the banks said.

“For shipping demand to normalise, some of the global consumer demand for goods needs to wane, either because the great substitution from holidays to things partially reverses as travel opens up again, and/or because global
(particularly US) consumers feel the need to be more prudent with their spending.

“The latter could hit demand for our top-end exports, so exporters should cross fingers rather for the former. Importers will also be hoping things improve as getting goods in just keep getting harder for them as well.”

Click here for ANZ’s Container chaos: the impact on NZ primary producers report.



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