Exporters are not seeing sustained savings in transportation costs despite some downtrend seen in sea and air freight charges while trucking costs have headed north.
BY: MARY MACKINVEN
Kiwi exporters are enjoying freight rates that are as good as they have been for a long while, says Agility Logistics chief executive Anthony Browne.
Lower freight rates are due to reduced fuel surcharges in all transport modes and increased competition in recent months, coupled with the more favourable exchange rate.
“However, there may be challenges ahead if services are reduced to New Zealand,” Browne says.
On the domestic front, Browne adds there is still no change to a business’ considerations for using road, rail, air or sea to get goods to ports or international airlines.
“For example, there is still a long way to go before the rail service is brought into the new century. It’s good for bulk (large quantity) items such as coal, dairy or timber, but not containerized manufactured items unless the exporter has a long lead-time and long distances to freight the goods – then rail can come into its own.”
Coastal shipping currently offers limited competition to road and rail freight even for long distances, he says.
On the roads, the economic downturn and road user charge data shows the amount of freight moving has fallen, says Tony Friedlander, chief executive of the Road Transport Forum of New Zealand.
Receipts for road user charges (truck trips) decreased by 7% from March 2008 to 2009. But people are not moving to other modes, just slowing down [their operations], he says.
The Forum is responding to a welcome review of road user and transport charges, which are at least 30% higher than in Australia.
“Clients pay for this. While fuel prices have danced around and come down a bit, other costs such as replacing vehicles, tyres and batteries have gone up at least 6% on average on about 15 months ago.”
FIND A TRUCK
The downturn has lead to a new web-based freight service, Findatruckload, setting up to link empty trucks with businesses wanting competitive quotes to move their goods. When the exporter or transporter agrees on a price, a success fee of 6% is paid by the seller, the person offering a service/ item for sale, as on TradeMe. The person advertising to ask for help (in this case to provide their empty truck to move goods), pays the fee.
Managing director Andrew Bishop, who has a transport background but does not own any trucks, says the idea works overseas and aims to eliminate empty truck running therefore reduce costs and vehicle emissions.
AIRFREIGHT MORE AFFORDABLE
Airfreight is starting to pick up for DHL Express after a “savage drop” in the last few months, says Gary Edstein, senior vice president of DHL Express Oceania, based in Sydney. “Exporters have been consolidating [their shipments] more and looking at alternative transport, for example, moving from express to air or air to ocean.” The fuel surcharge dropped dramatically in the past 12 months, from 21% in May 2008 to 8% this May. “So the cost has come down for everyone,” Edstein says.
Don Braid, managing director of Mainfreight Group agrees the time is ripe for exporters to negotiate prices with freight forwarders. “It’s a tough market; shipping space is very competitive and where there’s an abundance of space[we are working] to get the right price.”
SHIPPING LINES UNDER PRESSURE
Container rates have fallen to unsustainable levels leading to ships being laid up, services combined and stopped. “Worldwide operators are having extremely poor results; some observers talk about failures, says Maersk New Zealand country manager, Julian Bevis. “It’s a bleak picture, though it varies from market to market. Asia to Europe especially is taking steps to reduce costs and increase freight rates [to customers].
In New Zealand’s past few months, peak season exports such as dairy, fruit (apples) and meat have held up pretty well. Maersk provided four to five extra loaders (vessels) to cope.
“This is a very important market for Maersk Line because of robust volumes here and very important, big customers [in meat and dairy]. ”Fluctuating oil prices have been a problem in the past but the company is now in a position to properly reflect that [with a pricing mechanism], Bevis says.
But fuel prices are not necessarily a driver of costs in international trade, according to Geoff Popham, export business development manager at Burnard International.
“It affects the price of shipping and we see some reductions [in freight charges] around the world in some areas but not in others because of competitive elements. For example, shipping companies have reduced their capacity by taking ships out of services to maintain demand and keep prices up.”
Other transport risk factors include ever-changing supplier charges, exchange rates, congestion at certain ports, freight forwarders folding up and canal charges escalating [at Suez and Panama].
“The freight market is very unstable so exporters should examine their own supplier costs and ensure the best deal, as they have to do all the time,” Popham says.
KEY TAKEAWAYS
- Freight rates have dipped due to favourable exchange rates, reduced fuel surcharges in all transport modes and Increased competition in recent months.
- Trucking costs have gone up by an average of 6% from 15 months ago.
- Fuel prices are not necessarily a driver of costs in international trade.
- Airfreight charges which have seen huge drops are starting to level off.
