Shipping woes push up prices in shops, as ships queue to offload at our main ports

Woolston residents were horrified when towering stacks of shipping containers appeared mid-year on previously bare industrial land and disrupted their views of Christchurch’s Port Hills.

The thousands of mostly empty steel “boxes” stored at the Portlink freight depot are evidence of Covid-related bottlenecks at our ports, and although container mountains are diminishing as port delays ease a little, New Zealand’s shipping woes are far from over.

Vessels are still anchored out at sea for days waiting to berth, and while most Christmas stock will be here in time, prices paid by customers will reflect the higher cost of getting it here.

Capacity on international vessels is still nowhere near pre-pandemic levels, and shortages of truck drivers and stevedores are adding to slow turn around times.

The domestic shipping fleet is expanding thanks to a $90m investment from Government and industry, however, it will be late next year before all the new services are up and running.

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Freight rates still hurting

Although freight rates are slowly dropping, they remain much higher than pre-pandemic, and Retail NZ marketing manager Greg Harford says international shipping charges, combined with higher wages, are driving price rises and inflation.

“The cost of getting product down here has increased by up to 800% depending on who you talk to. It’s absolutely massive.”

President of Customs Brokers and Freight Forwarders New Zealand Rachel Madden says it was once possible to get a 40-foot container from China to New Zealand for as little as US$350 (NZ$600).

This time last year the price for shipping the same container was around US$10,000, but it had since dipped to US$5000 to US$7500, and on top of that importers pay port surcharges and levies of up to NZ$200 per container.

Madden​ says delivery times are still well up, and a port-to-port trip from China that took 17 days in 2019, is now closer to 30.

“For the US we are up to 55 days – it was 25 days – that’s a lot greater lead time.”

Delays and reduced shipping capacity forced importers to shift from a “just in time” to a “just in case” approach to ordering goods to avoid being caught short, according to New Zealand Council of Cargo Owners president Ant​ Boyles​ .

“It flows on down the whole supply chain from producer, to packer to warehouses to exporting”

Storing more merchandise for longer costs businesses, and Boyles​ says most can’t afford to absorb those additional costs, so they are passed on to customers.

At one stage Briscoes Group was carrying 20% more inventory than usual.

That halved as shipping improved, but managing director Rod Duke says things are far from perfect in terms of being able to reliably predict when goods would arrive.

“A lot is going to hang on the promises made by Ports of Auckland.”

All eyes on Auckland

Ports of Auckland, which is usually the first stopping point for international vessels, remains a major pinch point, and holdups there have a domino effect on other ports around the country.

Port commercial relationships general manager Craig Sain​ concedes berthing times have been highly variable, and earlier this year some ships were marooned out in the Hauraki Gulf for 14 days, but he says things have improved over the past month, and now the wait time is about two days.

Four shipping services, including Pacifica’s two coastal vessels, have fixed berthing windows, and the aim is to more widely reintroduce those guaranteed arrival times by March.

Meantime, there is still a lot of queueing out in the gulf and congestion at container yards.

In a container terminal update issued on Tuesday, shipping line Maersk put average delays for Auckland at 10 days, but for vessels without a berth window it was up to 20 days, and nine to 10 days at the Port of Tauranga.

Israeli shipping line Zim, a new entrant to the New Zealand market, recently opened an agency here and is planning to expand on its three or four trans-Tasman voyages a month, is also reporting long wait times at the Auckland container terminal.

Fix-it attempts

Ports of Auckland has hired extra staff to handle container cargo, and is trying to smooth out peak congestion by encouraging trucking companies to pick up containers at nights and weekends.

Those that do so pay $8.39 fee per container, compared with $35 for pickups during peak times, but Sain admits “it’s barely moved the dial,” and even higher peak prices may be required to change behaviour.

Tauranga and Lyttelton ports also want to return to fixed container vessel schedules to ease congestion, but Tauranga’s chief executive Leonard Sampson says they are hugely reliant on what happens at other ports, particularly Auckland.

“At the moment six of the 16 weekly container services calling at Tauranga are arriving on schedule, and the six are the ones that call at Tauranga first.

Slowly shrinking container piles

As port congestion significantly lengthened delivery times, containers were needed for longer, but as shipping returns to normal, that will no longer be the case.

Shipping data analysis by Sea-Intelligence estimates that next year there could be an excess of up to 13 million 20-foot equivalent units (TEU) globally.

New Zealand has accumulated its share of empty containers, and in the year to June Ports of Auckland handled an additional 35,000 empty TEU, an 18% rise.

Sain says shipping lines are desperate to get containers back to Asia, “they don’t like them sitting around too long,” and the port company’s Wiri storage yard is sitting at about 60% full, when it had been as high as 90%.

ContainerCo has a national chain of container depots and general manager Ken Harris says its total holdings of about 25,000 empties is 14% up, and his 12-hectare Wiri site is at maximum capacity.

Over recent months he says an extra 4ha has been made available in Tauranga for processing containers, and his company is moving non-core activities out of depots to make more space.

Harris estimates there are up to 55,000 empty containers in New Zealand, and says trying to get them in the right place at the right time remains a challenge.

“In New Zealand we have ‘freight tourism’ where a lot of freight moves around the country arguably without great purpose.

“Freight might move from the central North Island to Napier, and we then have to find an empty container that has to be relocated from Auckland. In an ideal world freight arrives at a port where there’s a container ready.”

Maersk Oceania’s head of market My Therese Blank​ says it has halved empty container numbers in New Zealand compared to peak levels during Covid-19 when services were badly affected by lack of trucking capacity, and shortages of labour and storage space at freight terminals.

The focus now is on containers for perishable goods, and she expects Maersk’s new coastal shipping service to help reposition empty containers from the North Island to meet demand from South Island exporters.

The Coastal Connect service was launched in July with two 2500 TEU capacity vessels visiting Timaru, Tauranga, Lyttelton, Nelson and Auckland, and Blank says demand has been strong.

Coastal shipping fleet grows

Currently, 93% of freight travels by road, 6% by rail, and just 1% by coastal shipping.

Even then, more than three quarters of domestic coastal freight is carried on internationally flagged vessels that have space for it alongside their import and export cargo.

Shipping Federation executive director John Harbord​ says it has traditionally been difficult for domestic vessels to compete with international shipping lines flagged to countries or states that charged little or no corporate tax, and that paid their crews considerably less than New Zealand seafarers.

However, the coastal fleet is undergoing a renaissance, with $30m in Government support via Waka Kotahi’s national land transport fund.

Four operators chosen to provide new barge, bulk cargo, container and roll-on-roll-off services are investing a further $60m into new vessels and infrastructure.

A month ago Pacifica launched a new service with Takutai Chief, a container ship capable of carrying 1300 TEU that will work alongside its existing vessel Moana Chief, and between them, they will make 400 port calls annually.

Parent company Swire​ Shipping received up to $10m in Government funding towards operating costs for the new vessel, and Pacifica line manager Jan-Hendrik Hintz​ says that assistance was important.

“It certainly gave us the confidence to proceed with it sooner rather than later, we have looked at it for a long time.

“We’ve been very pleased with initial demand, it’s very much in line with expectations, if not ahead.

Move Logistics Group got $10m to help meet the cost of two new roll-on-roll-off vessels able to carry trucked cargo into 13 ports, from the end of next year, initially operating between Nelson and New Plymouth.

Coastal Bulk Shipping received $5m to buy a second bulk vessel that will operate alongside its existing vessel Anatoki, and the Aotearoa Shipping Alliance’s $7m grant will help with the purchase of new barges, port upgrades and crew training.

Ia Ara Aotearoa Transporting New Zealand represents road freight operators, and while chief executive Nick Leggett wishes the new coastal shipping services well, he is dubious about their chances of success.

“If they haven’t been economic to date, then the Government intervention and subsidy is unlikely to change that.”

Instead of launching new services, Leggett argues it would be more sustainable to use spare capacity on international vessels calling at regional ports.

But Harbord points out we can’t bank on those services continuing long term because the trend is to build larger container vessels, some capable of carrying 6500 TEU.

Their size means they will call less frequently and may well struggle to enter our smaller shallower ports, and he says New Zealand flagged coastal vessels can pick up the slack.

“We’ll end up with a hub and spoke model where international lines will come into our major ports, unload and load up with exports, and sail off again.

“Then it will be domestic and small ships that will move freight to and from these export and regional ports.”

However, in its response to a Ministry of Transport paper on supply chain issues, the Council of Cargo Owners raised major concerns about the hub and spoke model.

Its claimed importers, exporters and consumers benefit greatly from the current model because it ensures intense competition between port companies and shipping lines, and any erosion of that would lead to increased costs.

Briscoes has used coastal shipping services in the past and Duke would consider doing so again if the economics stacked up.

“If the freight is in Auckland and you need it in Timaru, you have to decide how urgently you need it and how long you can wait for it.

“It’s a bit of a juggling act between the time it takes and the price. If coastal freight was 48 hours longer, but half the price, that’s very easy, you’d do it in a flash.”