In early September 2020, a local Napier company, a first-time importer, placed an order for an eagerly awaited machine with a supplier in Chicago.
The goods were loaded after being crated in early October and were destined to catch a vessel from the East Coast of the USA mid-October. Vessels were fully booked until as far out as early December from the East Coast, so the goods, in the container into which they had been loaded, were sent on rail to catch a vessel leaving Los Angeles on November 11.
Unfortunately, that vessel was also fully booked and the next sailing to Auckland was cancelled.
The goods finally left Los Angles Port 20 December and arrived in Auckland 5 January where the vessel spent 8 days out in the stream due to the heavy congestion, finally berthing 12 January.
The container was cleared and delivered for unpacking on January 15 at which stage NZ Customs decided to inspect the goods using their mobile scanner. Due to the increase in freight and congestion in Auckland, Customs staff are very busy and the earliest they could arrive to inspect the goods was a full ten days later.
Following inspection Customs took another two to three days before the goods were released and the machine could be passed to the already busy truckers who are at the tail end of these supply chain glitches. The Napier company will be lucky to receive this item before the first week in February!
That company is Benny Fernandez’ (of Georgia on Tennyson fame) Bona Fide Brewing Ltd. Which just underscores you don’t need to be a big HB corporate to have business-disrupting shipping woes these days.
So, for a shipment that takes 16 days from port to port, the congestion and delays at each end turn the total transit into 4-5 months.
This is the compounding of issues leading to the shortage of retail goods and supplies for manufacturers.
These are the supply chain glitches that delay the delivery of empty containers for our exporters to load (both refrigerated and general cargo).
These are the drivers that mean shipping lines are cutting or reducing schedules to (and by default from) New Zealand or applying congestion surcharges to every container that transits Auckland port.
And last, but by no mean least, this is the reason for lines charging freight rates at rates higher than has been seen in New Zealand for a very long time.
The cost to the economy will be enormous when an Auckland congestion surcharge is more than the cost of the freight from China to New Zealand in early 2020. That freight price has at least doubled in 2021.
I recently read an offshore article that for a trader, having a good freight-forwarder does not help in this Covid world of shipping delays. I tend to agree, as a forwarder and customs broker I certainly cannot affect the delays shipping lines and ports are experiencing. What I can do is keep looking at innovative ways in which I can obtain containers or space for my clients. This involves investigating multiple options rather than just the favourites or the cheapest. Cheap freight rates are non-existent in the situation where demand exceeds supply, and it makes me wonder if the shipping lines really want a quick solution!
Whilst the physical delays to supply chain are obvious to all, some aspects of the vulnerability of New Zealand companies in that supply chain are not.
The Ports of Auckland have had major problems with their operational software whilst the volumes of cargo have risen. Because they are reliant on the software they have chosen, they are at the mercy of those who maintain the software to rectify the issues.
The freight forwarding and customs brokerage industry has seen just how vulnerable they are when Cargowise software, which has a monopoly of over 80% of the New Zealand market, failed for nearly 36 hours in mid-December 2020.
This meant that clearing of goods, interfacing with Customs and Biosecurity, and tracking shipments just stopped. This happened at a time when the software company (Wisetech Global) increased the base fees for the software to their clients by up to 300% with a month’s notice.
Times like this make us all look very closer at how we operate our business and how we make contingency plans for the day the software we are totally reliant on crashes or becomes uneconomic to run.
This is a timely reminder to constantly review reliance on all parties adding cost to the supply chain and how quickly we can make a change and at what cost. At the end of the day, we all need to make a living, but it is a fine line between profitability and the downward spiral in the current environment.
Hawkes’ Bay international traders need to look closely at their logistics requirements over the next twelve months. The art of planning becomes that much more important in the strange market we have in 2021.
If an exporter can negotiate a forward contract with forwarders or shipping lines and nail down costs for as far forward as possible that would be a huge advantage. Most likely such a contract may well be at a premium rate and will be reliant on the exporter meeting their obligations in supplying cargo when agreed.
Similarly, an importer can also look to negotiate a forward contract; however, the forecasting of production and ship ready dates with an overseas supplier may be a difficult task. The message is the same however – if importers accurately plan and budget as far forward as possible, the more certainty can be leveraged in shipping schedules and freight rates.
Can Napier Port do anything to ease the situation?
It’s a matter of being proactive. If Auckland is congested (last shipment I had was 11 days from stream to berth) and Tauranga is stretched, why should Whangarei be the alternative? How about offering selected lines a one North Island port call at Napier?
Also, something that is not happening here is ‘groupage’ containers arriving in Napier (that is a container that holds multiple shipments for Hawke’s Bay importers). To do this the Port needs to get alongside a forwarder and offer them attractive unpack rates at the port’s unpack facilities ( Port Pack). This would mean people like my machine importer could bypass Auckland entirely.
But in any event, we are looking at a highly irregular supply chain for all of 2021. Good luck!
A licensed Customs Broker by trade, Murray Painter has years’ experience in international trade with a focus on perishable products. He is a former Chairman of Export Hawkes’ Bay.