The New Zealand economy has been built on the export of food, kicked off in a big way by the first successful shipment of frozen meat on the ‘Dunedin’ to Great Britain from Totara, in Otago, in 1882.
Of course, there was exporting before that, with the first trades sent via canoe, then sailing ships, steamships, and finally air and the massive container ships of today.
Back in those early days, having a New Zealand-based shipping capacity and businesses made sense. There was little international interest in serving a teeny-tiny economy at the bottom of the world. We had to solve our own problems, and creating our own network to get our goods (and people) to the world was one of the solutions. As a result, the Union Steam Ship Company was born in 1875.
The history of freight is more complex than that but, interestingly, with us now facing skyrocketing container charges and global shipping companies rubbing out New Zealand sailings from their schedules, talk has turned to the idea of putting our own ships on limited routes. Admittedly the suggestion, borne out of frustration and supply chain fatigue, has not been a serious one, but there is a kernel of an idea that collaboration and new approaches could be required. As in the late 1800s, we’ll have to find our own solutions, because no one else will.
The business behaviour of ‘big shipping’ recounted to me has been frustrating, unfair and unethical in some cases, but what can exporters and importers do, apart from pay these higher rates or not send or receive their goods (if it still makes economic sense to do the trade, that is)?
It’s true the logistics nightmare is a global one, but New Zealand has been affected more than most due to our market’s size and location. Global shipping firms have had no hesitation raising prices 400% in recent months (some suppliers quoting a 1000% increase in 12 months), breaking supply contracts, adding ad hoc extra charges, and bumping booked cargo for better offers.
To be fair, some of the decisions to cancel sailings are based on sense, given long delays and constraints at our ports.
With the pressure on elsewhere in the world, particularly the northern hemisphere where COVID has caused congestion, why would they risk having ships sitting off Auckland for weeks waiting for a slot? Time is money.
We also face the consequences of industrial action at Sydney and Melbourne ports. If global shipping firms bypass Australia, they bypass New Zealand. If they bypass us to drop goods off, then there’s less space to take goods back. It’s becoming a vicious circle that compounds in impact, costing sales and ultimately jobs.
We have KiwiRail and subsided Air NZ freight so maybe it’s time to consider government-owned options for supporting or securing shipping to ensure we can get goods in and out.
Among the ideas, one from the Customs Brokers and Freight Forwarding Federation is worthy of serious consideration: create a hub in Australia to where we ship our exports in smaller ships to be picked up by the big shippers heading back to northern markets. In turn, our ships return with our imports delivered by the big shippers.
Of course, that would require Government support, but it’s the sort of thing we should be considering because indications are this isn’t getting better anytime soon. Some don’t expect to see new global ship and container capacity before the end of next year or early 2023, and we’re likely to be one of the last countries to benefit.
Even then there’s no guarantee, meaning freight rates double those to Australia will continue to put huge pressure on prices of our imports and make our exports less competitive.
The Government should be treating this as a matter of urgency.
(originally published in FMCG Business Magazine)