Dear members
It’s hard to believe that this time last year we were focused on preparing for the introduction of low sulphur fuel and the associated potential for disruption to shipping. IMO2020 and its implementation from the 1st of January 2020 was the hot topic in 2019 and was expected to be one of the dominant narratives for this year. But it was the onset of the COVID-19 pandemic that created the upheaval and has eclipsed the significance of the impact of IMO2020. Some commentators note that the reduced impact of the low sulphur fuels regime was the result of smooth implementation preceded by extensive planning and preparation, the timely stockpiling of fuels in strategic locations ahead of the transition and the softening of global crude prices in December and January. It has also been observed that the supply of very low sulphur fuel oil has proven to be more than adequate, while the call on marine gasoil as an expensive alternative has been less than expected. As noted in our last newsletter, further IMO rule changes governing carbon emissions are now under consideration to influence the cleanliness of marine fuel – something to watch out for in 2021.
For now however, it is the impact of COVID-19 on every facet of the global supply chain that is creating havoc for cargo owners. Throughout this challenging year Council has actively supported members’ interests: in meetings with Ministers and government officials, forums with shipping lines and supply chain partners and producing a range of communications to keep members well informed of developments. The need for effective articulation of shippers’ views has never been greater. We appreciate your continued support for the Council as we move forward in these unprecedented times.
We hope this holiday season brings you rest, recuperation, and good health for the year ahead.
Planning underway for NZCCO OGM – Wellington, February 2021.
At the time of writing we are still awaiting confirmation of Minister Wood’s availability as the guest speaker at the Council’s 2021 OGM in February. We are working towards a meeting date in Wellington during the week of February 15th. This will be a long overdue opportunity to finally get together in person after a long year of zoom meetings and webinars. Details of the meeting will be advised as soon as the Minister’s availability is confirmed.
Ministry of Transport – NZ Supply Chain Update
The following detailed update has been received today from Harriet Shelton, Policy Manager, Supply Chain, MoT:
This year has been a challenging year with COVID-19, which has put unprecedented pressure on global supply chains. Restrictions on passenger travel across international borders has affected global air freight. An unexpected surge of global demand has defied initial expectations of a slowdown in trade. This has led to worldwide disruptions in shipping schedules, heavy congestion at ports, and an imbalance in container cargo flows.
As you are all aware, New Zealand has not been spared from these impacts and is experiencing significant supply chain congestion as well. These pressures are being amplified here as we are now in New Zealand’s usual peak import/export season, and are contending with some challenges unique to New Zealand. These include, but are not limited to, our remote location and small size which makes us particularly vulnerable when international shipping is disrupted. Like most countries, New Zealand’s freight system is optimised primarily to be efficient. This means we see limits on spare capacity to deal with the current freight flow challenges.
In line with the Ministry of Transport’s system steward role, we have been reaching out to industry to better understand the supply chain congestion and identify where government can facilitate market-led solutions to reduce the impacts. We recognise that our supply chain is a highly complex system, which is largely commercially-operated. We therefore need to carefully consider where government can assist in the short term. While we cannot directly solve operational pressures on the ground, we can enable the right discussions and feed into government decision-making for the transport system and the supply-chain to work in a more seamless manner.
In that regard, we have been working with the Ports of Auckland to assist with their labour shortages where possible. KiwiRail is ensuring that they put on as much additional capacity as possible to support the increase in freight movements. We have also been engaging shipping lines to discuss their plans to reorganise their services and enable the repositioning of empty containers.
In our conversations with industry, we are encouraged to see how the various players (including cargo owners, freight forwarders, road and rail transport operators, domestic and international shipping lines and the ports) are pulling together to find resourceful solutions.
In addition, the International Air Freight Capacity (IAFC) Scheme has been extended until the end of March 2021, which will facilitate the import/export of time-sensitive critical goods. I am pleased to share that support from the IAFC scheme has since helped restore air freight volume to around 90 percent of pre-COVID levels.
The data shows:
– Total import and export container movements in 2020 have generally tracked below 2019 and 2018 values. In November, total container movements were 7.3% down on 2019 levels.
– Import container movements have been down on 2019 levels more than exports. Import movements in November 2020 were 10.8% down on 2019 levels, compared to 3% down for exports.
– Export container movements have tracked closer to 2018 levels but fell significantly in September. September is a low season for New Zealand exports but 2020 levels were lower than 2019 and 2018.
We expect to be able to report December 2020 data in the New Year. In the meantime, provisional data to mid December 2020 indicates that empty and full container imports to New Zealand are generally running above 2019 levels. Nonetheless, we understand from anecdotal reports that supplies of specific container types and congestion at container depots continues to be a concern.
Separately, we are coordinating through the Supply Chain Interagency Group (which includes Maritime New Zealand, Ministry of Foreign Affairs and Trade, Ministry for Primary Industries, New Zealand Trade and Enterprise and Customs, among others) to consider ways to assist importers/exporters, and ensure that the regulatory environment does not obstruct market-led responses to congestion.
I’d like to remind you of the different support which is available across agencies:
- Customs has a dedicated email address criticalsupplies@customs.govt.nz to identify and expedite border clearance of critical supplies, which includes personal protective equipment (PPE), medical equipment and pharmaceutical supplies.
- NZTE is continually speaking with our exporters to understand their challenges and directly helping them by providing access to one-on-one supply chain experts. These private sector industry experts work with the individual customer to undertake a review that assesses their inbound and outbound supply chain and identifies risks and opportunities.
- MFAT is utilising the offshore ‘NZ Inc.’ network to monitor and report on New Zealand’s global supply chain connections and is supporting the international flow of critical goods such as medicines where necessary and able to do so.
- Exporters can report any problems they’re experiencing by emailing exports@mfat.net,calling the MFAT Exporter Helpline 0800 824 605, or logging trade barriers at www.tradebarriers.govt.nz.
Finally, I want to thank everyone for your hard work keeping New Zealand’s supply chains flowing. You all play an enormously important role in the supply chain system whether that is planning or operations; land, air or maritime. A big thank you as well for readily sharing your insights/information and working so collaboratively with us in government, and I hope to maintain these regular channels of communication as we head into the New Year.
Direct costs of congestion data
As noted in our December 11 update, when Council representatives recently met with Ministry of Transport supply chain officials to help them better understand the impacts of the current congestion issues and how the government might be able to assist, we undertook to provide them with as much data as possible about the direct costs to our members of the congestion issue. This data includes such costs as extra trucking, storage, additional movements, port fees for late receivals etc plus a comparison of costs for moving the same volumes in the previous year.
This level of information is extremely useful to support our discussions with MoT – the more we can build a picture of direct cost impacts of supply chain congestion the more effective we can be in helping government to understand the significant NZ-wide implications of this matter. We are very keen for all members who are experiencing additional costs to provide us with summary of costs to date (or over a specific window). We’ll treat the information as confidential e.g. use aggregate figures only. Thanks to those who have sent through data – more welcome to executiveofficer@nzcco.org.nz
Global snapshot: container rates soar and schedule reliability plummets
COVID-19 apart, 2020 will also be remembered as the year in which ocean freight rates spiked to extraordinary levels and continue to rise. The massive change in consumer purchasing behaviour and a stronger than expected recovery in demand following the slowdown of Q2 2020, has seen strong demand for the movement of goods from Asia to USA, Europe and the rest of the world.
This in turn has resulted in the activation of all available ship tonnage and containers to the extent that in the 3rd quarter of 2020 there has been an unprecedented demand leading to extraordinary freight rates. According to Sea and Freight Resource, the Global Container rates went up 106% between May and Dec 2020. In some trades, rates went up 4 times in a single month in the recent past in 2020.
Last week, Sea-Intelligence released its Global Liner Performance Report for November. It found that average global carrier schedule reliability across 34 trade lines fell to just 50.1% last month. It is the worst global score recorded since Sea-Intelligence introduced its reliability measure in 2011. The second- and third-worst scores were recorded in September and October.
Unfortunately, the news for shippers gets even worse. It’s not just that delays are becoming more frequent. It’s that delays are getting longer. Sea-Intelligence calculated that the average delay for late vessels had risen to 5.1 days in November. That’s an 11% increase from average delays of 4.51 days in August. And while November’s number is still below 2020’s peak of 5.48 days in May, the situation in May was different. In Q2 2020, carriers “blanked” an unprecedented number of sailings. The lower number of vessels in service was easier for carriers to manage, so schedule reliability improved. While delays were longer in May, schedule reliability had rebounded to 74.8% that month. In contrast, November suffered a worst-case combo of much higher unreliability plus extended delays.
Pandemic underscores the need for digitalisation
The restrictions imposed on global trade and cargo movements by the COVID-19 pandemic have painfully demonstrated the need for increased digitalisation in the shipping and freight industry to improve efficiency of processes.
This year Council facilitated webinars with both NZ Customs and MPI to find out the state of play with the digitalisation of our border processes. The pandemic has really strengthened the case for digitalisation and minimising/eliminating paperwork in the shipping industry, including in ports, and bringing to the fore the need for standards and interoperability in electronic documentation, and we will continue to engage with Government to ensure a focus on advancing digitalisation is maintained.
Global Shippers Forum – Cargo Integrity Group documents
GSF has made available the documents produced by the Cargo Integrity Group – a collaboration that promotes higher standards of container packing and improved awareness of the international Code of Practice for packaging goods in cargo transport units. Both The CTU Code – A Quick Guide and the Container Packer’s Checklist are available for download here.
https://www.globalshippersforum.com/media/1357/ctu-code-a-quick-guide-eng.pdf
https://www.globalshippersforum.com/media/1358/container-packing-checklist-eng.pdf
Government preparing for all Brexit eventualities to protect NZ’s interests
At the time of writing there is still little certainty about Brexit. The Government has released a statement noting that it continues to work with New Zealand businesses, industry representatives and other stakeholders to ensure that they are prepared for all Brexit eventualities from 1 January.
Minister for Trade and Export Growth, Damien O’Connor said that regardless of whether a deal is concluded, there will be changes at the border between the UK and EU from 1 January. These changes will have implications for New Zealand businesses who trade between the UK and the EU and, in some cases, those who trade directly with the UK. Delays at the border are a possibility.
Minister O’Connor said that in recent months, the NZ Government has intensified its Brexit preparations, and strongly urges all New Zealand businesses engaged in the UK and the EU markets to confirm upcoming arrangements with their business partners, customers, and logistics suppliers to make sure they are prepared for these imminent changes.
Throughout the Brexit process, the Government has sought to protect New Zealand’s interests, including by prioritising the importance of continuity and stability for New Zealand traders. Government agencies have successfully worked with their UK counterparts to replicate key EU regulatory arrangements and agreements, for example covering veterinary trade, which underpin our trade to ensure continuity.
Further information on how the changes might impact New Zealanders and New Zealand business can be found via the following links:
- Ministry Foreign Affairs and Trade www.mfat.govt.nz/en/countries-and-regions/europe/united-kingdom/brexit/
- New Zealand Customs Service: www.customs.govt.nz/brexit
- New Zealand Trade & Enterprise: www.nzte.govt.nz/blog/brexit
- Ministry of Primary Industries www.mpi.govt.nz/export/brexit-and-what-it-means-for-new-zealands-primary-industries
