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Shipping delays and cost blowouts are hitting suppliers' bottom lines after COVID-19 triggered a series of supply chain disruptions around the globe. But is there an end in sight? Claire Tyrrell explores
Kelly Crossley has spent the past two decades in the freight forwarding game and says she has never experienced such a great disruption to the industry as the dramatic events of 2021.
Crossley, who heads up Transitainer WA, a Freight Forwarder in Australia says there are considerable shipping delays and freight cost increases facing suppliers globally. “I have never seen anything like this, and I’ve never seen the rates as high as this – I just did a quote for a 40-foot container from China to the US and it was $US17,000. A few months ago it was $US4500, and prior to that it was $US3000,” she says.
The onset of COVID-19 in China and subsequent lockdown triggered a series of disruptions that have been exacerbated by issues including wharf worker strikes, Crossley says.
“We first experienced a plunge in air freight capacity and border closures, which limited passenger flights. Limited capacity and options meant exorbitant air freight rates,” she explains. “When you’ve got less air freight, it’s going to put more pressure on sea freight.”
She adds that the uneven recovery has led to a shortage of empty sea containers, with the regular flow of imports and exports shaken up by the pandemic.
“Adding to the lack of available empty containers, we have seen space constraints on vessels, congestion at ports, delays and skyrocketing ocean freight rates as demand far exceeds the supply,” she says.
Importers in WA face delays of up to eight weeks just to book space on vessels and even then there is no certainty as to when their goods will arrive.
The Shanghai Containerized Freight Index, which reflects the average cost to import goods from China, has soared from US$1000 per container in January 2020 to about US$3700 in June 2021.
While large operators can absorb the cost, small to medium-sized businesses are feeling the squeeze.
“We also have projects in New Zealand and with port charges in Auckland going through the roof as a result of congestion it is extremely difficult to cover these extra costs.”
“Previously we would spend about $6000 or $7000 in total on a (40-foot) container from Shanghai to Sydney and we recently paid $12,000 for the same service,” he says.
And as Transitainer’s Crossley explains, the disruptions have already dragged on for longer than anticipated.
“I think a lot of us thought we’d get past the Chinese New Year,and maybe the backlog and a couple of weeks or a month even we’ll be sort of seeing the light at the end of the tunnel,” she says.
“But to be honest, that hasn’t really happened. “It has eased slightly in terms of maybe getting space on vessels and the empty containers at the moment aren’t as bad, but the rates are still high … (and) the demand is there.”
that cannot afford and does not have subsidiary stock, they can’t afford to pay the freight, so they are effectively not able to import,” he says.
“Similarly, businesses who have already sold the goods prior to import and have not factored in the price rise, cost of delays through shipping etc., are forced to absorb those costs.”
Although the mining industry makes up a large proportion of WA’s economy, it isn’t just mining businesses that are exposed to supply chain disruptions.
“Thereare a lot of businesses that supply the mining industry – small,medium and large – who
She adds: “We should technically be coming into what we call our slack season now. But we’re still not seeing that. Before we know what, we’re back in September and you’re in the peak period.”
As CCIWA International Trade Adviser Neil Mclagan explains, the small to middle end of the market is being hit hardest.
“Some of them have stock that they can afford to store in a warehouse … but for a small importer have agreed to a contract already,so I definitely think there would be a few impacted by the cost of freight that can least afford it,” Mclagan says.
Mclagan adds that air freight is no longer a viable option for many companies because it costs about six limes as much as it did pre-COVID.
A lack of flight availability due to the downturn in passenger movements is also a problem, he says, leaving air freight as an option available only to companies that can afford charter services.
