New Zealand exporters are considering banding together to charter their own ships to ensure access to overseas markets.
A group of exporters, importers and other businesses are talking about co-ordinating charters for bulk shipments, as the country continues to struggle with port congestion, sky-high freight costs and post-Covid unreliability.
This would help reduce New Zealand’s reliance on overseas shipping lines, and on shipping containers, which are in short supply in parts of the country.
“I would say that all the right people are talking to each other,” Export NZ’s chief executive Catherine Beard said.
Simon Beale, group shipping manager of fruit and vegetable supplier T&G, said his company had done about four chartered shipments recently to avoid port problems, and he knew of a few other exporters looking at it.
T&G shared one shipment with meat and apple exporters in Nelson to get product to the US port of Philadelphia.
“It was pretty much, I reckon, near 20 years since they had a line of service doing mixed commodities.”
All the shipments were non-containerised – “they’re virtually just a big, floating coolstore”.
“It’s not easy to do, but if you’ve got experience, you can do it.”
Beale – who chairs the New Zealand Council of Cargo Owners – was with about 80 people at a Ministry of Primary Industries workshop two weeks ago where a co-ordinated approach to charters was discussed. Another workshop was due in September.
National secretary of the Maritime Union, Craig Harrison, said New Zealand had made a mistake by relying on global shipping companies who had relegated the country to the bottom of their lists to chase bigger, more profitable markets.
He said it was time the country built its own shipping capacity and give exporters and importers options.
“Previously, there was an obsession with convenience, speed, just-in-time supply chains. Now that has been completely changed, and we are looking at the need for secure and reliable services.”
Shipping schedule reliability at the country’s ports has plunged from above 80 per cent before the pandemic to a historic low of 6 per cent, raising the risk of ship visits being dropped.
However, chartering ships is expensive and Harrison said it came with risks. The use of low quality “flag of convenience” shipping could be unsafe and unethical.
A fragmented approach would fail, and that was why New Zealand needed to quickly upgrade its own coastal shipping capacity in a co-ordinated and coherent way, he said.
The union has campaigned for a dedicated coastal shipping to service regional ports but maintains local shippers will not emerge unless foreign shipping companies lose their waiver from local labour laws for temporary visits.
While Transport Minister Michael Wood is keeping an open mind on solutions to the crisis, he has said he has no plans to subsidise sea freight in the way airfreight is subsidised.
Beard said the Ministry of Transport was leading work on the future of the transport system as a whole.
Transportation had become quite siloed “but Covid has shown us it’s all interconnected”.
If a plan did come to fruition, she said it could help alleviate the pressure on the demand for containers, which would help small to medium exporters.
However, Don Braid, of logistics firm Mainfreight, thought it was better to work with existing shipping lines.
“We’ve got customers coming to us desperate for us to find them alternatives and one ship is not going to do that for them. You need options in this market and you need options across all trade lanes, not just one.
“It’s not just the ship either, it’s equipment. It’s not just Ports of Auckland that’s got congestion problems, it’s every port in the world.
“At last count there were 300 ships waiting to be worked across all ports around the world… Just because you have the ship doesn’t mean to say you’re going to fix the problem.”
The Council of Cargo Owners, which includes big exporters like Zespri and Fonterra, also wants changes, although it believes the best solution is to make the existing infrastructure more efficient.
“Part of the solution to the current congestion challenge requires a more efficient use of all existing facilities – manufacturing, warehousing, container parks, ports,” Beale said in a recent open letter to Minister Wood.
“Ports are already operating on a 24/7 basis but not all elements of the supply chain are. Increasingly it will be essential that they move onto a similar footing. The council would be concerned if any changes to employment law discouraged this move.”
Congestion remained at a critical level “and there is a great risk that if a new external or internal shock were to occur the system could break down completely.”
Spreading out empty containers around the country was vital and Beale backed coastal shipping as the most efficient method.
“Unfortunately, this is a task that is beyond domestic coastal operators. This means that our policy settings should be encouraging international operators to step in and help,” he said.
“It is absolutely critical that international services continue to be allowed to carry containers around New Zealand, with no change to our cabotage policy.”
Cabotage is the right for a foreign transport operator to take goods or passengers from one place to another within a country.
Chris Edwards, president of the Custom Brokers and Freight Forwarders Association, said Covid pressures had forced the freight and exporting sectors to collaborate.
“There are so many segments of the market that are slowly coming together”.
His own view was a “hub and spoke” service between a lower level Australian port and smaller New Zealand vessels was the sensible answer long-term.
For others, a long-term view of New Zealand shipping means addressing issues simmering on the back burner such as roading, immigration, labour laws and rail charges.
The Council of Cargo Owners said that for roading and rail to play its part, the Government should park any increase in the cost of rail freight user charges until the congestion was cleared.
The council also wanted to see many of the access routes to ports and airports become state highways, and it was worried about immigration changes not recognising the level of skill of necessary workers, such as supply chain managers.
Last year the Government set up the Supply Chain Interagency Group, a cross-agency body compromised of various ministries, Maritime New Zealand and New Zealand Trade and Enterprise.
The Ministry of Transport’s supply chain manager, Harriet Shelton, expected more charters of the break-bulk variety in the future, saying there were “strong commercial imperatives” to do so.
“Some companies have already gone down this pathway while others are actively exploring the option.”
While the prime responsibility for developing solutions rests with business, she said the Government did have a support role to play, for example the workshop hosted by MPI and Seafood NZ last month.
The workshop gave industry players the chance to discuss break-bulk charter experience and best practice, while the Government provided advice on regulatory issues.
Source : stuff