If you talk to any forwarder in the world right now, nobody has seen it this bad. Ever. We caught up with Priya Sharma, 360 Logistics Gold Partner to ask what’s happening behind the scenes and when we can expect things to improve.
Our Shipping World is Broken
Import peak season has well and truly hit
Capacity out of pretty much everywhere in the world is being booked out at least a month in advance. Shipments out of Europe are being booked up to two months in advance. To make matters worse, shipping lines out of Europe have pulled out of the Australasian region in favour of servicing the Asia to Europe route, a much more lucrative market.
Shipping options to Australia and New Zealand have become extremely limited and, from 1 July, shipping rate charges have almost doubled for shipments coming out of Europe.
Shipping delays are growing so as a result, people are ordering earlier. Subsequently, because everyone’s doing the same thing, it’s simply creating a longer peak season and exacerbating the problem. Prior to COVID-19 the usual import peak season was August to November. It’s now June through to December, which is much earlier and longer lasting than ever before.
What’s needed?
More ships are needed to call into New Zealand, particularly into Wellington. Wellington is being hit hard, with only two or three trans-Tasman options out of Wellington, less than Auckland, Tauranga, Napier and Christchurch.
Exporting and importing via alternative New Zealand ports is one option that Logistics 360 is using, however this creates higher costs for business.
There’s more pain however. If you do manage to get a booking, it may or may not sail on time. It could be stuck for two or three months waiting for the next transit vessel, or stuck in Auckland before being transited to the next port.
Schedule integrity is another major issue, with little visibility to exporters or importers.
When will the pain end?
360 Logistics believes we’re in the peak of this issue right now which will only come right with the introduction of new vessels coming into the fleet of shipping lines.
While shipping lines are currently ordering new vessels, they won’t be ready for another year and a half, so it’s likely two years before we start to see a marked improvement in the current situation.
Supply and pricing
A word of warning from Priya Sharma, from 360 Logistics,
I don’t think people quite realise yet that when you go into a supermarket or any store, like Kmart etc., what that means in the long run. It’s only going to get worse before it gets better.
The team at 360 Logistics is telling their clients to constantly review their pricing, despite being reluctant to pass on price increases to their clients. By not accurately calculating the unit costs of their products and pricing their goods accordingly, exporters and importers will take the impact and feel the pain. Shipping prices have not yet peaked and are expected to keep rising.
Price increases are being seen month on month currently. Before COVID-19, a container out of China would cost maybe US$750. Now, that same container will cost US$4,000. If you compare the same situation with what we’re seeing out of China to Europe, ships have hit US$10,000 for the same container – that’s a more lucrative line for the shipping market which is why they’re routing all their ships that way.
The pricing will hopefully flatten but the next few months will tell as we’re into peak season now. We’re seeing increases month by month as that’s what’s happening at the moment and how evolving this situation is.
Marine insurance
The team at 360 Logistics is also stressing the importance of marine insurance. It may seem like an unnecessary expense but the fact is, if your shipment is stuck, this can have substantial financial consequences.
Take a look at the Ever Given, the vessel that held up one of the world’s key shipping lines for almost a week, when it was stuck in the Suez Canal. If your goods were on this vessel, you would have had to pay your share of the total of all costs involved, on top of your own costs.
Many businesses don’t read the terms and conditions on the bill of lading they’re agreeing to.
Another example is if a vessel catches fire. In this situation you would have to pay a general average of all the costs involved in fixing that vessel, or to recoup all other shipments on that vessel, on top of your own shipping costs.
Marine insurance is so incredibly important, never more than in the current climate.
360 Logistics
- Level 6, 25 Victoria Street, Petone, Lower Hutt 5012
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