Sea freight costs may have peaked, but more ships are needed to bring them down
The cost of sea freight got out of hand during the pandemic, but there are signs that it may have peaked.
Key points:
- NFF concerned about rising costs and competition in ocean freight
- Shipowners say rising costs are due to increased demand
- There are signs that freight rates may have peaked, but new ships are still a long way off
Australia is an exporting country, therefore the transport costs are very important.
National Farmers Federation (NFF) chief economist Ash Salardini said Australia is already paying the highest cost for freight and shipping companies could agree to keep prices high.
“It costs as much to ship a container of grain from Canada to Indonesia as it costs to ship one from South Australia, even its shorter 10,000 km,” said Ash Salardini.
“There is additional demand but we believe there is also a bit of anti-competitive behavior on the part of shippers.”
The Australian Competition and Consumer Commission has said it is conducting an ongoing investigation into whether anti-competitive behavior has caused prices to rise in the container shipping industry, which the NFF believes is in the process of raising prices. happen.
The shipowners rejected the allegation of anti-competitive behavior.
Shipping Australia policy adviser Jim Wilson said he was unaware of the collusion and that price increases can be explained by supply and demand.
“Shipping companies are in intense competition with each other. They do not discuss prices with each other,” he said.
Transport costs could stabilize
Shipping Australia said ship owners face a lot of cost pressures.
According to Wilson, the cost of renting a vessel has increased 800% lately, but he said those rates have stabilized.
Bloomberg financial analysts are reporting lower container rates on some routes in part due to the holiday season in China.
The price of a 40-foot container on the China-US route fell nearly $ 1,000, down 8.2% in just one week, according to the Drewry reporting service.
It is too early to tell if container rates have peaked, especially given the stacking of ships in the United States.
On Sunday, 60 boats were waiting for a berth to disembark off Long Beach, California.
The average wait for a berth is now over 11 days, down from about eight days in April, and each day costs the shipping company about $ 150,000.
While these types of delays at ports around the world are likely keeping freight costs high for a while, Wilson said several companies have placed very large orders of 20 or more ships with very large capacity.
There are approximately 619 container ships of varying sizes on order around the world and this increased capacity will ultimately drive freight rates down.
“These ships could carry 8,000 boxes (containers), so this is a massive increase in capacity.”
However, it will take another 18 months to build them, so the high ocean freight costs are likely to stick around until then.
Mr Wilson also pointed out the slow movement of freight in Australian ports.
“There was a big international study done by the World Bank and our container ports performed very poorly,†he said.
Apart from Brisbane, most Australian ports were ranked at the bottom of more than 350 ports surveyed worldwide.
Mr Wilson also argued that there was no shortage of ships or containers.
“The ship calls are more or less the same, the ship numbers are more or less the same, the box numbers are more or less the same,” he said.
The rate hike was driven by growing demand from consumers here and around the world ordering consumer goods during the pandemic, Wilson said, but that will subside as life returns to the country. normal and people will start spending again on travel and restaurants.
Air freight rates continue to rise sharply
Australian exporters also rely on air freight to bring fresh produce to overseas markets, although this is only a fraction of the volume of ocean freight.
Summerfruit Export Development Alliance chairman Ian McAlister said costs were “apparently doubling and tripling every week,” but he hoped opening Australia’s borders would push them back again.
Eighty-five percent of Australian air cargo passes through the belly of passenger planes.
“If we have more flights, we have more air cargo, so let’s keep our fingers crossed on that,” McAlister said.
Horticulture and seafood must be airlifted to get to markets on time.
Dianne Tipping of the Australian Export Council said the government’s International Freight Assistance Mechanism (IFAM) helps exporters get their perishable goods to international markets, but there is not enough capacity.
“What we hope will happen when the borders open up internationally is that we will see this capacity increase,” she said.
“It will depend on which countries our flights can go to and which countries passengers can return to.”
She said Singapore Airlines planned to resume in December.
“They are prepared to do six or seven flights a week,†Ms. Tipping said.
“Qantas is already planning to travel to the UK via Darwin in December, [and while] that won’t serve the world, that’s a good start. “
Even if international borders open up, the industry may still have problems moving freight across the state borders of Queensland and Western Australia.