Exporters face the greatest disruption to shipping services since covid, as conflict in the Red Sea causes ships to re-route around the Cape of Good Hope, sending freight prices soaring and creating port congestion.
Ships are delayed from entering ports and freight is being stockpiled, especially at the ports of Singapore and Shanghai, which is reducing shipping reliability and causing shipping costs to rise 50%.
In a customer newsletter, freight logistics company Kotahi says Singapore, a key hub for vessels linking Europe and the Middle East with China, is significantly congested.
“Vessels are currently waiting up to seven days to berth, the highest since covid, and there are reports of nearly half a million containers stuck at Singapore ports,” Kotahi says.
Ships are diverting via the Cape of Good Hope to avoid the military conflict in the Gulf of Aden with the diversion adding four weeks to sailing.
This means vessels cannot meet their schedules, with some avoiding calling at smaller ports to recover lost time.
The port at Singapore has employed additional staff, reopened closed berths and announced plans to open three new berths later this year.
The port at Shanghai is reporting severe congestion with estimates 50 container ships are at anchor waiting to berth.
Silver Fern Farms chief executive Dan Boulton said one carrier servicing New Zealand has signalled intentions to limit consignment sizes to parts of Europe, Latin America, and Africa due to capacity issues in Singapore.
Boulton said capacity issues for shipments to the Americas, specifically the United States east coast, is compounded by strong export demand from both NZ and Australia, which share capacity on key services.
Joshua Tan, the executive director of Export NZ, said the issue has worsened, but dealing with the subsequent shipping disruption during covid has helped prepare exporters.
“They are putting into practice a lot of the resilience built up during covid.”
The shipping congestion problem was compounded by NZ last month setting new export records of $7.2 billion for May.
Tan said compared to prior to the start of the conflict last November, shipping costs have increased 50% but port productivity, measured as the time to get a ship into port and cargo loaded or unloaded, has declined 43% due to congestion.
Tan said as a comparison, shipping rate increases during covid were in triple figures.
NZ Council of Cargo Owners chair Mike Knowles said exporters are getting accustomed to disruption, having contended with covid, drought restricting use of the Panama Canal and now geopolitical tensions in the Red Sea.
This latest issue means exporters face surcharges, higher costs as ships are diverted around the Cape of Good Hope and logistical issues as cargo consignments and the relocation of empty containers are delayed.
He said the problem is outside exporters’ control and they are focusing on improving their domestic supply chain efficiency while seeking improvement in the performance of port companies.
