International Trade

Kiwi exporters down but not out

April, 2021

By: Catherine Beard

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Ever Given’s blockage of the Suez Canal was the tip of the iceberg for a multitude of challenges facing global logistics and supply chains, but there is an end in sight.

The ship blocked a route for six days that around 30 per cent of global container ship traffic passes through, and insurers estimate the cost to global trade was about $US6-10 billion each day.  

Some New Zealand cargo is likely to have been held up in the backlog of vessels.

The indirect impact saw a further escalation of global sea freight congestion impacting New Zealand as global shipping schedules were disrupted and a reduced flow of empty containers from Europe to Asia added to container shortages.

In New Zealand, I’ve spoken to manufacturers and exporters who are renting extra warehouses to store inventory.

A lot of Kiwi businesses are surviving, but they’re not necessarily thriving. Exporters are struggling with the unpredictability of the system. The shipping lines have applied extra costs adding to other additional costs when there are no dedicated berth time slots. This uncertainty and these costs are weighing heavily on businesses.

But there is light at the end of the tunnel for our exporters, with logistics and shipping channels expected to slowly increase efficiencies and get back to normality.

The announcement of a trans-Tasman bubble this month is the first good news for our export and tourism sector. Bums on seats will reduce freight costs to and from our second biggest trading partner Australia.

As the global vaccine rollout progresses, I expect more boarders to open and air freight costs to come down.

However, more than 99 per cent of New Zealand’s import and export volumes are shipped by sea and this poses an enormous challenge for our country.

Behind the scenes, officials are working hard to minimise supply chain congestion and reduce the significant delays in freight and shipping, but the downside of the sharp recovery in global consumer demand during COVID-19 was that it compounded congestion in the containerised supply chain and disrupted international shipping, which drove costs up and placed immense stress on businesses.

The Ministry of Transport recently hosted a workshop to discuss supply chain congestion issues with 43 representatives from a range of importers, exporters, shipping lines, ports, freight forwarders, and transport operators in attendance.

The group agreed on the problems in New Zealand and identified opportunities market players and government could explore to reduce the current congestion.

In terms of freight movements, the group identified a range of issues, including a lack of empty containers from overseas markets, congested container yards (resulting in delays and charges) and customers overbooking ships and then not using all the slots.

There are several short-term actions identified that need further coordination and collaboration across businesses and the wider industry. For example, aligning operating hours, investigating alternate routes and increasing container brokerage.

The group recommended increasing stockpiles of empty export containers, relocating distribution centres to enable more efficient freight movement, and incentivising more efficient freight movement. Recently Maersk also announced a new service to reposition empty containers from North to South Island to aid exporters.

It is clear there is no quick fix for the shipping industry. We must wait patiently for the inefficiencies to be ironed out.

Next year will be a big year for trade – the World Trade Organisation’s latest global trade forecast predicts the volume of world merchandise trade is like to increase 8 per cent in 2021 after having fallen 5.3 per cent in 2020.

So, my advice for local operators venturing into export markets for the first time is to be patient and realistic. Do your research and market entry strategy this year, consolidate local sales as that will fund your export journey and plan to travel in 2022. 

There are courses and seminars through ExportNZ offices around New Zealand and while there are less foreign students in the country, tapping into the overseas diaspora at Universities is a very cost-effective way to do market research and focus group studies to test your product or service.

Most importantly for current exporters, hang in there, things are improving.

Visit www.exportnz.org.nz for updates.

ExportNZ executive director Catherine Beard

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