Major disruptions caused by the Rena grounding and Port of Auckland strikes have resulted in challenging times for the shipping lines and for exporters. But somehow they’ve managed to cope.
Peak export production seasons are the major influence on scheduling for the world’s largest global shipping line, Maersk, says its New Zealand managing director Julian Bevis.
In New Zealand the seasonal peak is roughly January to June and a little before Christmas. Prior to every peak Maersk evaluates the freight volumes for each commodity and refines the port schedules to provide transit times, tonnage and port coverage that exporters want.
“Then we try to stick with the schedule through the peak season for stability and reliability, although individual commodity production can change. For example, the apple season might be compressed,” Bevis says.
Another consideration for the shipping lines is the balance of imports and exports. Most import containers get delivered to the Auckland, Tauranga and Hamilton triangle; and exports are packed nationwide into the ship spacethey vacate.
A big problem for the shipping companies is exporters booking space but not turning up. “Our margins are thin and we must have full boats,” explains Bevis. “Sometimes we have to overbook if we are not certain, just as airlines do – although we try not to.”
Nevertheless it is always worthwhile for exporters to check to see if there is space available on a ship, he says. “We know it’s not easy for an exporter when their prices are shifting, etcetera, but if you talk to us we can understand. If you pay more we might find a way to deal with [your cargo].
“Or sometimes [there will be space] because someone else has ‘fallen over’ or we leave some empties behind to make space. It’s not necessarily booting someone else off – that would be our last option and it’s very much the exception.”
Maersk maximises its use of assets with measures including speeding its ships up or slowing them down (to save fuel and reduce carbon emissions), using bigger or smaller ships, or changing the schedule or price.
“It’s not unusual at all to do so. But we balance this with our product offering.”
Bevis says a definite selling point for them is that Maersk tops the industry in achieving on-time delivery of advertised container services worldwide – at 87.5 percent, according to Drewry Shipping Consultants.
Maersk Line New Zealand prefers electronic bookings too. “This frees up the office staff to deal with the exceptions, the newcomers and inevitable problems – such as if a truck breaks down on the way to port,” says Bevis.
Shipping to the islands
Pacific Forum Line NZ (PFL) is owned by 12 island nation governments including the New Zealand government, and operates ships small enough for the demand and the ports.
The Maersk ship from Shanghai to Auckland transfers containers onto PFL ships to go to Samoa, where PFL is Maersk’s agent. Another agreement sees PFL sharing a boat with Pacific International Line.
An influential factor for PFL is delays due to tropical cyclones. Schedules are not regular, says CEO Henning Hansen. “We might hold the ship for an hour to wait for a container load. We might sail on 15, 16 or 17-day frequencies.” Slow steaming is built into the product offering, with boats sailing at 10 to 14 knots instead of 24 knots during pre-GFC days (and big global carriers are now down to about 16 knots).
PFL customers book by phone, not the website, because the less developed countries it serves have unreliable power and limited access to computers, Hansen says.
PFL ships mostly dock at Auckland, so for nationwide distribution it books customers’ cargo with Pacifica Shipping (1985) Ltd – New Zealand’s only coastal shipping line, which also operates trucks and stores, and integrates with rail.
“We are doing our best to position ourselves as the extended arm of international lines’ services,” says Pacifica Shipping CEO Steve Chapman.
“As ships get bigger we will see the [lines’] migration out of the second tier ports: maybe in five to 20 years they will only visit two New Zealand ports. For operators like us, this is where we will play our part.”
Ship transit times are often only slightly longer than road or rail and up to 25 to 50 percent cheaper, he says.
Ports are not stores
Ports must unload imports and load export cargo as fast as possible so ships can stick to their call schedules.
Ports of Auckland sales and marketing general manager Craig Sain explains that most ships come in and out of ports on a fixed day and usually weekly. They unload in the morning then load exports and leave that night for their next port, with the last port of call usually Tauranga before heading to Asia and beyond.
Ports use financial deterrents to limit ‘dwell time’ – charging a storage component for imports not removed after three days from landing (although not charged at the Auckland container terminals while they were strike bound).
Export goods have seven days free time before the vessel arrives.
Sain says in peak season container space gets tighter because it is prebooked. Shipping lines sometimes bring in extra loaders but there is a cost to arriving with more empty containers, raising export prices. Container supply in this period can also be a problem.
The Port of Tauranga encourages exporters and importers of all sizes to tell the port exactly what they need from a port company, says CEO Mark Cairns.
Larger companies have relationships with shipping lines as well as ports. “They work in partnerships on a long-term basis with 10 to 15-year agreements that allow us to invest and provide for the future. We prefer an open and trusting environment about how much they are willing to pay.”
Disruption at overseas ports affects schedules, because once a backlog occurs it’s hard to tidy it up, explains Port of Lyttleton’s marketing manager Simon Monk.
The port is endeavoring to increase efficiencies at its 24/7 operation, that is seeing record volumes due to local economic growth. But Port of Lyttleton is also waiting on a complex and large earthquake insurance claim. Some trucking companies are willing to deliver after hours but exporters and importers are not so keen to open their doors outside normal hours of operation.
Coping with the unexpected
Last year’s MV Rena grounding in the Bay of Plenty and the months of industrial action at the Ports of Auckland container terminals this year have undoubtedly shaken New Zealand businesses.
Lessons from the Rena event include the need to insure cargo, establish a robust supply chain, not wait till the last minute or present everything on one ship, says Hansen.
Meanwhile Bevis expects the debate might open on oil pollution precautions.
And Cairns hopes for measures to prevent another Rena disaster rather than require New Zealand to respond.
Traders affected by the Rena disaster should talk to a freight forwarder or shipping line, says Sain. Port companies are bound by all sorts of confidentiality agreements with a shipping line around liability, and so on.
Taking a cue from his company’s marketing campaign, QBE Insurance (International) Ltd marine manager Graeme Orchard says, “Sh*t happens more often than we think, and the occasional damage claim is not the only risk in trading internationally.”
Hence the importance of having comprehensive marine cargo insurance to the full value of the cargo shipped; and having cover with local New Zealand insurers, who have been able to respond more quickly than their counterpart overseas insurers to general queries, settling claims and negotiating with the salvors on recovering and on-forwarding any undamaged goods, as well as the salvage charges incurred.
Where containers were recovered from the Rena, these needed to have salvage claims promptly settled with the salvors and then repacked and quickly on-forwarded to the original destination. All additional and unexpected costs fall on the exporters.
Union strikes did not affect most Pacific Island carriers because they operate from Auckland’s general wharves, but PFL’s Henning Hansen says goods transferred through the container terminal were sometimes delayed.
Maersk ships continued to call at Auckland to deliver imports as the port asked, though with reduced port services, Bevis says. Producers had to take their exports elsewhere.
The strikes resulted in record volumes being handled at the Port of Tauranga, which is not good for New Zealand, says Mark Cairns. “New Zealand needs all its ports functioning as best we can because we are so far from export markets.”
The usual seven-day free export storage space was temporarily reduced to five days at Tauranga until the doubled container volume eased back.
“The Employment Relations Act needs to deal with this, rather than that we have latent capacity to deal with it again,” he says.
The Port of Lyttleton also experienced significant delays and schedule changes as a result of the Auckland strikes.
And, right through the crisis, the supply of empty containers was building up in Auckland.
QBE Insurance’s Graeme Orchard says exporters and importers can recover any additional costs in storage and local transit under marine cargo insurance policies with a “Strikes Diversion” expenses cover extension.
Pacifica Shipping’s Steve Chapman says its ships could only discharge and not pick up during the dispute, so it couldn’t ‘get under the cranes’.
It got to the point where, he says, “We are working at the general wharves with a shore mobile crane that is used for building warehouses and apartments, not a specialised container crane. It’s as slow as a wet week but we are willing to spend the time there because the supply chain is fast grinding to a halt.”
Truck companies added a surcharge for waiting at the wharves. Rail eventually had no capacity to move freight out of Auckland and road was so expensive exporters didn’t want to use it, says Chapman.
Pacifica’s calls went from weekly to fortnightly into Auckland via the conventional wharves, adding huge additional costs in exchanging cargo, which caused Pacifica to add a surcharge for the duration of the dispute.
“Imports will be more expensive because importers are paying for goods to be transhipped to Auckland, and we will see shortages on supermarket shelves.
“It just shows how important Auckland port is for imports and export markets. See what happens when it goes down; the rest of the supply chain cannot handle it well,” Chapman says.