Freight rates are starting to creep up a little ahead of year end but ample capacity is allowing shippers to pick up some good rates along the way.
BY: MARY MACKINVEN
Lock in freight rates and exchange rates now, says Vince Hattie, principal of Freight Services Ltd. “Rates are starting to increase a little.” there will be less available space on fewer, bigger ships. His advice: “service is the name of the game. To appease your customer be as efficient as ever, be on the ball and don’t delay or leave room for the competition. “We’re still staring at peaks around July to September and in the Pacific Islands October-November and the Christmas season. “But markets are still markets with high and low times around the end of financial years, budgets and Christmas, among others.”
SLOW GRIND
Hattie says the first half of this year was pretty horrible for the logistics sector. “But I feel this Christmas things are already improving but it’s a slow grind. A lot of manufacturers and importers worldwide have stock on hand; it’s slow for exporters to get rid of inventory because of slow orders, but it’s picking up.”
However, freight space is still available because of the economic downturn, so it’s a good time to negotiate a very good freight rate, says Murray Painter, chief executive of go group NZ Ltd, that includes go Reefer refrigerated logistics company and go Cargo dry cargo specialists.
Prices, which have not necessarily gone down, might fall because New Zealand is heading into a quieter shipping season (following the meat and apple peaks), as a matter of supply and demand. Furthermore, the UK and Europe shut down over Christmas, as does New Zealand, so goods don’t move on that route.
But the US keeps going, and so does Asia, where we have free trade agreements. They continue to need manufactured goods in our holiday period.
Airfreight, suffering from the economic crisis, will have unused capacity for strawberries, fish and stone fruit coming on stream. Painter warns: “Your entire supply chain needs to be run well or your marketing is ruined.”
HOMEWORK TIME
Noel Thompson, managing director of Cargo Coordinators shipping Agencies Ltd, echoes Painter.
“A beginner exporter often fails to do his homework, at his peril, especially when there are language differences.”
His key planning advice is:
Do costings carefully to get a profit – allowing for some things beyond your control such as the exchange rate, fuel costs and fuel factor (Thompson’s firm supplies templates to help plan).
Comply with all legislative and official requirements — for example, bio-security, quality and safety standards — which might require an export licence.
Have insurance cover for loss of profit or “container overboard”; you don’t want to find your importer is not actually licensed to import.
Manage terms of trade (duties of seller and buyer) – know your Incoterms, the standard trade definitions most commonly used in international sales contracts; for example, EXW (ex works), FOB (free on board) and CIF (cost, insurance and freight). Find them at the International Chamber of Commerce site iccwbo.org.
Some banks do not have confidence in certain banks in other countries – a letter of credit in this credit crisis might not count for much.
“It’s important exporters start planning shipments heading into the new year,” says Hamburg Sud, New Zealand general manager Simon Edwards. His company and other shipping lines begin to negotiate their major sea freight contracts – mainly agricultural – in October-November. He says: “2009 has been a strong year for the export peak season but some trade lanes are experiencing a decline in import volumes as a result of the global economic climate. Consolidation of most services in and out of New Zealand over the last 18 months has been the result.
“While there may be sufficient space available presently during the off-season, we do expect a bounce back in November when export markets pick up, driven by the new meat and dairy seasons and both pre-Christmas deliveries and clear-outs.
“Start thinking about the shipping equation – ‘price-service-commitment’ — and covering space through contracting or agreements with your preferred carrier.
“Come November-December space will start to tighten in all trade lanes, but particularly in the southeast and North Asian trades because they are hub services catering for global markets.”
