TL;DR: Global shipping challenges increase export costs due to conflicts, natural events, and infrastructure failures, with significant delays and inflation impacts. Innovations and new facilities offer some relief, but geopolitical tensions predict continued volatility in shipping and associated costs.
Shipping challenges continue to escalate costs for exporters, with recent disruptions adding significant delays and complications.
Global Shipping Disruptions
Silver Fern Farms’ CEO, Dan Boulton, has highlighted multiple global events contributing to the current shipping crisis. These include the Red Sea conflict, the collapse of the Baltimore Bridge, a severe drought in Panama affecting canal operations, and strikes at Australian ports. These events have collectively disrupted major shipping routes and schedules.
Temporary Solutions and Continuing Issues
There has been a slight relief as the Maritime Union of Australia reached an agreement to end their industrial action, and rainfall has resumed services through the Panama Canal. However, during the canal’s service reduction, cargo was rerouted via rail across coasts, causing significant congestion.
Major shipping lines are still avoiding the Suez Canal route due to military tensions in the Red Sea and Gulf of Aden. This diversion, routing ships around the Cape of Good Hope, extends travel times by two to four weeks in each direction, significantly impacting delivery schedules.
Economic Implications
JPMorgan has estimated that these disruptions will increase global core goods inflation by 0.7% and overall global inflation by 0.3% in the first half of this year. Additionally, rising tensions in the Middle East have caused Brent crude oil prices to increase for three consecutive months, further inflating operating costs.
Sector Resilience and Innovations
Despite these challenges, there is a silver lining with the introduction of new vessels which may help relieve some capacity constraints. However, Rabobank predicts that shipping volatility will persist into the next year due to escalating tensions between Israel and Iran, which could further complicate energy flows through the Strait of Hormuz.
Infrastructure Setbacks and Developments
Adding to the disruptions, the Scott Key Bridge in Baltimore collapsed after being struck by a container vessel. While this has not directly affected New Zealand’s freight, it has closed a major port which processes over 1 million containers annually, potentially affecting global shipping schedules.
On a positive note, global shipping leader Maersk has launched a new 18,000 square metre container storage and handling hub at Ruakura. This facility boasts state-of-the-art blast freezers and the highest-rated cold storage, along with direct rail access to major ports, enhancing logistical efficiency.
Rising Costs
Container xChange has warned that geopolitical disruptions are pushing up container prices, with average leasing rates for containers shipped between China and North America rising between 67% and 92% from the last quarter of 2023 to the first quarter of this year, further straining export costs.
