It has been more than a year since the start of the pandemic, and business is booming for manufacturers around Australia. But high freight costs are keeping most owners awake at night.
”So, we have seen a 20% lift in rates in the last 12 months and that depends on the region, out of Europe it might have been even 50%,” said Jayne Pearson, Plasdene Glass-Pak General Manager. But some clients are paying even more. She added, ”We got a customer from the U.K. who are seeing more than 840% increase.”
Large government stimulus cheques and coronavirus restrictions have driven the appetite for products. And that has caused a global traffic jam at the world’s ports.
It’s obviously a Covid impact where there is huge demand for more shipping which shows increase demand but at the same time reduced capacity.
Over the past year, the median cost of shipping a 20-foot container from Australia to China has increased to nearly $1,500. The most expensive route from Shanghai to Rotterdam has soared 518% with a 40-foot box now costing a record $13,513 and the price of transporting those containers from Shanghai to Sydney has doubled to more than $5,500.
”Australia is predominantly an importer of goods so you’ll have an excess of empty containers and our shipping lines in the past 12 months have been working tirelessly in getting those containers out of this country,” Melwyn Noronha, Shipping Australia Chief Executive.
That means some vessels are being used to pick-up empty containers instead of transporting goods.
”We got one major exporter now who is very happy with finally getting rain after years of drought, they have got a bumper crop of 20,000 tones of chickpeas, but they can’t get capacity on any vessels to get to overseas markets,” Paul Zalai, Freight and Trade alliance director.
The director of the freight and trade alliance says the container crisis is challenging global supply chains. He added, it’s more like ”A struggle to get them back to the manufacturers back in China and other parts of Asia in a timely fashion.”
Shipping companies have cancelled trips to some ports to speed up journeys and not enough containers are being manufactured. Shipping Australia boss Melwyn Noronha says Australian ports must take some responsibility. ”There’s a build up of these empty containers right across the world because of port congestion and I think port congestion needs to be looked at very carefully.”
Some vessels have been unable to dock in China because of trade tensions and a blockage in the Suez Canal by a huge container ship in March has added to delays.
Major retailers in Australia like Woolworths are paying more to get imports. The reject shop says those costs will be passed on to consumers.
And according to Paul Zalai, some kind of government intervention is needed to regulate prices, ”So what we do need is just some level of regulation to make sure that pricing here isn’t artificially being inflated.”
But according to Melwyn Noronha, ”There is absolutely no economic justification to regulate the shipping industry, it’s a huge industry where you have multiple players competing against each other.”
The shipping squeeze has affected all sort of products from building materials, iron ore and consumer products. For most businesses, it has added hundreds of thousands of dollars to shipping costs which inevitably will be passed on to the consumers.
