Skip to main content
Much has been happening in the sea freight industry in recent times. Exporter updates export firms on the many interesting, and occasionally frustrating, developments.
 
Exporters are generally well served by calls from international shipping lines these days.
The New Zealand Shippers Council executive officer Peter Morris says a range of ship sizes call, carrying 1,800–5,000 TEUs (containers). 
“So the market does work. We have good service and lots of choice,” he says.
 
The worlds’ biggest ships carry 18,000 TEUs and don’t even fit in the Panama Canal (yet). But they won’t be visiting New Zealand anytime soon: “Not in my lifetime,” says Maersk Line NZ managing director Gerard Morrison. Morris says the trend is towards fewer services and bigger ships. “You lose choice and frequency – from twice a week to one call maybe. “Maybe over the year demand capacity is the same.”
New Zealand’s cargo to Southeast Asia, the Middle East, Europe and Africa calls at Singapore and Malaysia where containers come off and wait for a big ship carrying 10, 14 or 16,000 TEUs. Maersk has a direct route to the US, where cargo is also trans-shipped to South America.
“So we do arrive in market on big ships,” says Morris.
 
“We [New Zealand] are at a significant disadvantage. The ports at Auckland, Tauranga and Lyttleton could take 6,000 TEUs, which would be a 50 percent cargo increase. A7000 TEU is a sensible envelope for New Zealand and would see us through for 10 to 15 years, but this is not a long time [in infrastructure terms].”
Slow steaming, introduced three to four years ago, is here to stay, adds Morris.
“Not that we accept it, but it’s a natural reaction for carriers. Sailing at 20 to 21 knots instead of 23 to 25 knots saves significant dollars.
“But the transit time can be two to three days longer.”
 
There are implications for value add: meat exporters are right on the cusp between managing fresh supply and reverting to frozen [trade], Morris says.
As a general tip, New Zealand Export Credit Office head of business origination, Peter Rowe, says if exporters’ terms of trade mean they get paid once the goods arrive at the destination, the longer it takes for their goods to arrive at their destination the longer the exporter is left carrying the working capital cost of the export.  
“This may mean it is worth looking at negotiating your terms of trade so that you are paid upon shipment,” Rowe says.
 
Freight predictions
New Zealand’s freight task is projected to increase by about 50 percent over the next 30 years [to 2042], according to the Transport Ministry’s National Freight Demand Study 2014. 
While Morris says the study was a useful exercise, he is concerned that growth forecasts are on the light side. 
“The report says that’s about 1.5 percent at a compound rate but it will be more like five to six percent – generally 2.5 times GDP, as it grew historically through our ports.”
The nature of global trade is increased value-added goods, which often means more packaging. Loading a container with consumer milk powder in 125g sachets rather than commodity milk powder is double the freight task, so it’s difficult for New Zealand, says Morris.
“Our distance to market means you can be holding more inventory and with reduced shelf life.”
Morris says international shipping changes across the board are also reasonably stable because as shipping 
is very competitive, carriers work closer together.
 
Not that this should be too close. New Zealand is proposing to bring the commercial operation of international shipping into the Commerce Act.
“The Government has it about right and not out of step with the rest of our trading partners worldwide. We hope to keep [lines] in check re prices but globally shipping makes big losses then swings to big profits.”
Maersk’s Morrison says putting barriers between lines speaking to one another would make it difficult to match import and export cargo flows to New Zealand.
 
Efficiency and capacity
Export New Zealand echoes the sentiment that shipping services are going quite well for exporters. 
“A few years ago we got complaints from exporters about containers getting bumped at the last moment due to seasonal peak volume pressures,” says executive director Catherine Beard. “This is not happening so much [now] because ships are getting bigger and smoothing [services] out better.
“Bigger ships bring more efficiency of scale for the lines, which means stability in rates too, rather than a boom-bust state.”
Morrison says Maersk’s global company profit of US$1.5 billion last year sounds big but the return on investment was only 7.4 percent. 
“It was due to oil prices and other outside forces and cost cutting – not due to increased freight rates. So it’s good for exporters.
“We have more capacity than 12 months ago but have made changes to where our cargo is coming from and going to, to develop the most cost-effective and customer-effective service. But this is not noticeable to the New Zealand customer.
 
“Economies of scale drive our market. Costing is the same as for selling any other product. Volume is critical and every industry rewards the customer for volume.”
But other factors relevant to costing are volatility, value, seasonality, cargo size and the numbers of customers.
“Trans-Tasman wasn’t very cost effective so we bought space on another service, so service levels might have differed but the network is stable.” 
Morrison cannot see an effective way to revert to fast services, but is working with the meat industry. “Not every customer on the ship would be happy to pay the price [for fast service].”
 
One ‘small’ industry change coming up on July 1 is a new booking cancellation fee of $100 per container cancelled within seven days of departure. So far Australia is the only other country with this charge.
The late cancellation of bookings is a massive global problem for shipping, says Morrison. “All shippers do it, even those on contract.
“[Part of the problem with planning services is] we are not that good at real time data. Cargo movers need more visibility about where cargo is and where it’s going.”
Maersk Line NZ is part of a global pilot testing remote container management software that aims to help exporters track reefers and manipulate the temperature settings
from their own computers, for example.
 
Domestic modes
Coastal shipping has massive scope in New Zealand, Morrison says. “It’s hard to compare prices but it’s generally cheaper to use coastal shipping.”
Pacifica Shipping independently operates two coastal vessels. Chief executive Steve Chapman believes it’s high time to raise the profile of coastal shipping, and in particular, positive collaboration is needed between rail and ship operators about the most sensible approach to interisland cargo transport.
“Coastal shipping offers the most cost-effective and environmentally friendly choice for the country’s exporters with goods to move domestically.”
 
Lesson on freight contracts
Marine specialist broker at ICIB Insurance Brokers, Matthew Davies, raises the 2014 court case of Resource New Zealand v Mediterranean Shipping Co SA (MSC) in relation to the Rena grounding, which drives home the importance of understanding freight contracts. 
Resource NZ had argued it would be “unjust” if it had to pay MSC’s freight bill, given that its timber did not get from Napier to the Middle East. 
But Resource NZ was ordered to pay the bill. 
 
“This case has received a lot of attention, but in fact there was nothing unusual about the conclusion,” Davies says. “A very standard contract term was simply enforced.”
Even if MSC had been liable for cargo losses its liability would have been limited under the Hague-Visby Rules to which New Zealand is a signatory. These require all those associated with a maritime venture to share the costs of saving that venture when something goes wrong. 
‘General average’ isn’t a problem 
for those who are insured because 
cargo insurers provide the necessary guarantee and (eventually) pay the general average contribution. 
Morris points out that insurance costs after the Rena grounding have gone up, though it’s a small percentage of the overall shipping pie.
 
Ports keeping step
Jade Software sells software specialising in managing general (bulk) cargo to ports around New Zealand and overseas.
Chief executive David Lindsay says the software facilitates cargo being broken down into smaller units, such as onto pallets or chassis or in the open, then allocating it to spots in the yard and planning where it goes on a ship. The information results in fewer lifts and helps meet faster ship turnaround times. 
Ports are buying bigger tugs, cranes and straddle carriers; reclaiming land, buying land for inland ports and intermodal freight hubs, and more. But satisfying all parties is a juggling act.
 
Ports of Auckland general manager of sales and marketing, Craig Sain, says “shipping lines are very focussed on reducing fuel costs, so are less inclined to speed up late ships. 
“Some months, over half the services we handle have arrived late because of delays at other (mainly overseas) ports. This causes bunching of vessels, which puts pressure on a number of points in the supply chain.   
“Transport operators, and ports, need to build maximum flexibility into their operations so they can cope with peak demand.”
Also, the relationship between ports and exporters is growing, he says.
“In the past, ports viewed shipping lines as their main customer, but now the importance of the cargo owner (exporter) is also recognised.  
“We are looking at different transport solutions, especially rail, to inland freight hubs so we can optimise the supply chain in both directions.
“We are talking more with cargo owners to understand how certain behaviours can impact on productivity and efficient handling of cargo through our port. For example, the delivery of export cargo with complete documentation before the vessel arrives means we can turn them around faster, offering fuel savings to lines and keeping freight rates down.”
 
Port numbers, sizes and their ownership contribute to the business case for exporters in choosing transport, says the president of the Customs Brokers and Freight Forwarders Federation, Willie van Heusden.
“Discuss with your freight forwarder the best options for getting to market. Do you use coastal shipping to bring goods from the south to Tauranga or Auckland ports, or use rail? Do you have to use a truck?”
 
He says new shipping lines Hanjin and APL are driving rates down, and leading to better scheduling.
Slow steaming continues and exporters are advised to choose their service wisely. “You get what you pay for,” van Heusden says.
 
 
Mary MacKinven is an Auckland-based writer. Email [email protected] 
Dishing

Dishing up export possibilities

Exporter Today Editorial TeamExporter Today Editorial TeamApril 16, 2012
minefield

What’s mine is not yours

Exporter Today Editorial TeamExporter Today Editorial TeamApril 16, 2012
25-countries

25 countries… and counting

Exporter Today Editorial TeamExporter Today Editorial TeamApril 16, 2012