The farm commodity export pipeline is straining to cope as a monster grain crop clashes with a shortage of suitable shipping containers and the unhelpful consequences of an early Chinese New Year.
Space and freight rates are under pressure, particularly in the pulse grain segment.
Massive shipping industry rationalisation, including last September’s costly collapse of South Korea’s big Hanjin line, has added further complexity to the export picture.
With bulk grain export elevators also running near to capacity after a 58 million tonne national winter harvest, containerised exporters have spent the past two months scrambling to secure food grade six-metre (20-foot) containers.
In fact, shortage problems have been brewing for years, primarily because most containers arriving in Australia are big capacity 12-metre (40ft) boxes.
The 40 footers are too big to fill with a heavyweight grain cargoes.
Australia’s containerised sales have been climbing rapidly of late, with chickpea exports in containers rising from 380,000 tonnes in 2015 to 462,000 last year, and wheat up from 258,000t to 363,000t.
A late 2016-17 pulse harvest aggravated the current squeeze because some shippers could not keep boxes waiting on the wharves while crops were still in the paddock.
Meanwhile, container arrivals in Australia have almost flatlined in recent months, reducing the chances of extra space being available to carry a surge in crop volumes destined to overseas buyers.
“And when container stocks get tight and the pressure is on to segregate and clean 20ft units, you find some exporters complicate the problem by booking more than they need to cover their requirements,” said one shipping industry specialist.
The Chinese New Year’s arrival in early February had also reduced shipping activity when a big flush of new crop exports would normally be leaving Australia.
Other container users are still enjoying competitive price discounting, but exporters needing food grade boxes are paying up to 30 per cent more than a year ago.
Certain trade lanes, including routes to the sub-continent, also tend to be more expensive as they attract less shipping competition, and backloads, than Europe or North Asia.
On the route between Brisbane and India’s biggest container port, Nhava Sheva on the east coast, “all in” containerised freight rates have jumped as much as $530 ($US400-plus) for each container, said director with freight logistics booking service CargoHound, Pete Johnson.
Current peak prices may add at least $20/t to cereal and pulse freight costs, and nearly $5 a bale for cotton.
“The Brisbane to the subcontinent trade lane is probably experiencing the most acute pressure, but we’ve seen issues on other routes,” he said.
Shipping lines were being forced to shift empty containers from traditionally import heavy ports, like Melbourne, to Brisbane to handle export demand, particularly for chickpeas.
However, Nidera Australia’s containerised grain trader, Owen Goddard, said box shortage issues were spreading to all east coast ports.
Shipping slot availability had also tightened, partly as a consequence of restructuring and consolidation by carriers.
“It’s no secret the shipping business has done it tough in recent years, with major lines posting huge losses and Hanjing collapsing last year,” said Mr Goddard in Toowoomba, Queensland.
“A number of lines have reduced services to and from Australia, or are not calling here at all.”
Carriers were testing the market with higher rates, while peak season surcharges and late transfer fees were adding to costs.
A new Indian government import service tax on shipping lines would also ultimately be passed on to exporters.
Mr Johnson said container packing plant congestion was also growing as many exporters struggled to find boxes to move product swiftly, particularly from Brisbane.
“We’ve had increased activity on the CargoHound platform from larger grain and cotton traders seeking alternative freight quotes online,” he said.
“These are exporters who would normally go direct to shipping lines to source freight, rather than intermediaries.”
Although it was early in the cotton harvest calendar, he questioned if cotton exporters were ready for the challenge of handling a near record crop this year – up from 2.7m last year to about 4.4m in 2017.
Industry chatter suggested the strong demand for container space from agricultural exporters was unlikely to wane anytime soon given a record cereal crop would prompt more containerised sales and a fair portion of the sorghum harvest would also go in containers.
However, Auscott’s cotton marketing manager, Arthur Spellson, was relatively confident the big cotton crop would find enough container space and competitive freight rates, primarily because its export schedule ran for 12 months.
Cotton buyers were world-wide, enabling shipping programs to spread across many different routes and dates, with freight prices likely to stay competitive.
“We shipped a bigger crop than this one in 2013 and although Brisbane got a bit tight, Melbourne and Sydney handled the situation well.”
Like Auscott, the need for food grade containers is not an issue for big wool exporter Techwool Trading, but shipping manager, Tricia Reynolds, said uncertainty had grown in the past year as shipping lines posted more profit downgrades.
The Hanjin line’s collapse left an $8 billion debt, almost 100 ships stranded around the world and about $14 billion in goods stuck on ships or wharves, including wool from Australia, which had to be repacked and re-consigned.
While big shipping mergers could see the carriers curtail some sailing schedules or lift freight rates, Ms Reynolds said bigger container ships were also being launched which would make routes even more cost competitive.
Last year saw China’s two big carriers merge, Germany’s Hamburg Sud was bought by Danish giant, Maersk, and Singapore’s NOL merged with French container ship giant CMA CGM.
Japan’s big three shipping groups, K Line, MOL and NYK, are set to integrate their container shipping businesses this year.
The story Container strain tests ag export logistics network first appeared on Farm Online.