The global shipping industry is currently facing significant challenges, leading to a sharp increase in shipping rates and potential disruptions in supply chains. These issues are expected to persist in the coming months, primarily due to military tensions in the Red Sea and a drought in Panama.
Diversions and Delays
Dave Ross, Chief Executive of Kotahi, reports that approximately 80% of container vessels have rerouted from the Red Sea and the Suez Canal to avoid military tension off the Yemen coast. These ships are now taking the longer route around the Cape of Good Hope at the southern tip of Africa. Additionally, a drought in Central America has led the Panama Canal Authority to reduce its daily transit capacity significantly, from 38-40 to just 18 per day. These changes are particularly affecting routes to Europe and the east coast of America.
Rising Costs
A recent report by market analyst Container xChange indicates that the average rate for a container on the China-Europe route has risen dramatically, from $US1500 to $US5400. This increase is attributed to the tensions off the Yemen coast. The demand for containers has also surged as ships take the longer route around Africa, compounded by the rush to meet orders for the Chinese New Year.
Longer Transit Times and Surcharges
Ross notes that what was initially thought to be a short-term disruption is proving to be more serious, with the expectation that these issues will continue through the first quarter of the year. European market shipments are still ongoing but face extended transit times of 10 days to two weeks, along with additionalsurcharges reflecting the increased costs.
Adapting to Changes
Kotahi is actively working with its customers and carrier partners to manage cargo movements amidst these disruptions. Ross suggests that if the situation persists, there could be shifts in the destinations for New Zealand exports. New Zealand exporters might find increased competitiveness in Asian markets compared to those in east coast America and Europe. This shift could present an opportunity for exporters to adapt to the changing dynamics.
Daily Developments
The situation in the shipping industry is evolving daily. Kotahi, with strategic partners like Maersk, is equipped to navigate through this period of disruption, ensuring the movement of New Zealand products.
Implications for the Meat Industry
Sirma Karapeeva, Chief Executive of the Meat Industry Association, highlighted that if shipping lines avoid the Red Sea route, this could lead to extra costs and longer transit times for meat exports to Europe. This change is particularly concerning for chilled meat products. Additionally, prolonged disruptions could affect the shipping of Indian buffalo beef to the Middle East. If this trade is impacted, Indian exports could be diverted to other markets, competing with Brazilian beef and potentially influencing New Zealand beef exports globally.
