International Trade Supply Chain are in disarray

11th December, 2020

Shipping operations have never been in a worse state with our ports congested, limited services, record high freight rates, increased detention charges, staged empty containers movements, congestion surcharges, ongoing terminal access charges, new stevedore tariffs and to rub salt into the wounds, Biosecurity document assessment, inspections and treatment release timeframes at commercially unacceptable levels.

CONTAINER GRIDLOCK AT PORT BOTANY

• Over the last 15 months we have had a surplus of import over export containers coming into Port Botany. This is not uncommon and in normal operational times, shipping lines will bring in unladen vessels (referred to as ‘sweeper vessels’) to evacuate many thousands of empty containers to clear local congestion and for the equipment to be used again back in Asia.  
• Things became complicated with industrial action during the course of the year at Patrick, DP World and Hutchison meaning the stevedore servicing of vessels slowed down and schedules were delayed. Further complicating matters, infrastructure issues occurred at Port Botany and there were adverse weather events. This prevented container shipping lines to deploy sweeper vessels, due to unavailability of berths, with the situation further compounded by capped equipment exchanges leaving vessels sailing open from Australia, instead of utilising the capacity to evacuate equipment from Australia.  
• The extent of the container imbalance is estimated to be 75,000 TEU currently sitting in Empty Container Parks and transport operator yards throughout Sydney. If a sweeper vessel averaged 3500 TEU, it would require over 20 dedicated sweepers to clear the backlog. That would take 5 months to clear if a sweeper vessel was deployed on a weekly basis.  
• The bottom line from transport operators is that without any significant and immediate relief, the glut of empty containers will move Sydney’s container logistics from the current state of “congestion” to one of “gridlock”. We also understand that empty container volumes are also significantly increasing in Melbourne.  

CONTAINER DETENTION CHARGES

• The decreased capacity in the Sydney Empty Container Park market is seeing shipping lines advise that they are unable to provide de-hire locations for their empty containers. Transport operators are forced to fulfill many ‘re-directions’, fill their yards (which are now also congested and reaching capacity) and complete multiple lifts to access containers within stacks. Understandably, transport operators are generally passing on this cost down the supply chain.  
• Shipping lines are continuing to charge container detention for ‘late’ dehire (returns) maintaining a stance of responding on a case by case basis as industry still does have the limited ability to dehire on an intermittent basis.    

FREIGHT RATES CONTINUING TO INCREASE

• As a result of the mismanagement of sailing schedules and empty containers shipping lines are raising ocean freight rates to levels not previously seen, in many trade lanes, rates have doubled in the last 8 weeks. Traditionally we would be expecting to see rates start to reduce post Chinese New Year, with the suite of global shipping issues, this may not be the case for 2021 rates.

MANUFACTURING LEAD TIMES 

• In addition to the global ocean freight challenges many manufacturers are reporting extended lead times in their manufacturing processes, reasons are varied but the closing of many international borders has caused a reduction in available labour and supplies as a key to the many countries manufacturing strengths. At SCC we have been advising customers all year to allow additional lead times when placing orders. Unfortunately, we expect this to continue throughout 2021. When you combine the extended manufacturing lead times with shipping delays new buffers will need to be considered when placing orders with overseas vendors.

IMPACTS ON EXPORTERS

• Some vessels between now and Christmas will bring in import containers and will focus on a quick turn-around of moving large numbers of empty containers. While this is an understandable measure to evacuate as many empty containers as possible, it is unclear how well this will serve exporters and what it means in terms of available capacity in the coming months, especially with a bumper grain crop almost ready to reach markets.
• Many vessels are bypassing Sydney and those that are serviced are limited by how many export containers they can load with stevedores imposing move count restrictions on shipping lines.
• While we have an over-supply of empty containers, members continue to report limited availability of serviced Food Quality equipment for use by exporters of agricultural products.  

INFRASTRUCTURE SURCHARGES

•  The referral of the Infrastructure Surcharge to the National Transport Commission (NTC) is unlikely to provide the required relief to Australian exporters and importers with anticipation that state governments will follow a process similar to that recently instigated in Victoria. While stevedores will have to ‘jump through a few more hoop’s and will face increased scrutiny in terms of any variation to Infrastructure Surcharges (Terminal Access Charges), it is likely that this process will see industry receive incremental increases on what are already exorbitant fees.  

CONGESTION SURCHARGES

• Shipping line imposed congestion surcharges are continuing to have devastating impacts on the industry. The lack of transparency on this surcharge appears to be primarily focused on ensuring that shipping lines recover costs at the expense of exporters and importers to extend record profits reported during the pandemic and global economic downturn.

DELAYS IN BIOSECURITY PROCESSING

• The Department of Agriculture, Water and the Environment continues to struggle to manage the increased “surge” in import volumes resulting in unacceptable delays to the processing of entries through the COLS systems, inspections and release of containers post treatment.  
• It is apparent that limited departmental resources are being further stretched by the need to re-deploy staff to manage the Khapra Beetle threat.

Extracted from the Freight Trade Alliance. To review the full article: FTA News – ATIC – Critical Trade Updates (ftalliance.com.au)