4-minute read (4-minute watch)

Ever wondered where your package goes on its journey to you?

Well, it’s quite a team effort involving several companies. If you want to track down your parcel, you’ll need to connect with either New Zealand Post, the courier, fast freight or the shipping company responsible for sending it.

They’re the ones handling the entire process, from receiving and storing the package to keeping tabs on its movement and delivering it to you.

While NZ Customs play a crucial role in checking items entering the country, they don’t handle package tracking and can’t trace your parcel for you.

When international parcels arrive in New Zealand, they go through checks carried out by both NZ Customs and the Ministry for Primary Industries (MPI).

After the inspection, the baton is passed to New Zealand Post, and they take charge of delivering your parcel to your doorstep.

However, if more details are needed or if there are charges to be paid, New Zealand Post will get in touch with you through a letter.

If your package is addressed to a person at a private address, and there are charges to settle, NZ Post will tell you that your package is awaiting Customs clearance and enclose a Customs invoice. Once the bill is settled, your package will be released for delivery.

But if your package isn’t addressed to a person at a private address, the letter will guide you to seek assistance from someone who knows the ins and outs of Customs rules and can arrange clearance, such as a customs broker or freight forwarder or you can get help from New Zealand Post directly.

Contact the Easy Freight team now for your Customs clearance services.

A common bugbear for senders can be delays. If you’re ever wondering why your parcel is held up, it could be as simple as understanding the NZ customs duty rates or NZ-prohibited items.

The accurate manifesting of parcel data to New Zealand Customs is a legal requirement and is important to ensure goods are not mis-declared, which can often result in a parcel being unnecessarily held.

It is also essential to know that NZ maintains comprehensive and strict security procedures. If you fail to declare international goods, especially ones considered risky or NZ-prohibited items, you may be fined or arrested, even if it was accidental.

Some items can’t be imported to New Zealand for health and safety reasons. These are called restricted goods.

Restricted items fall into two categories: prohibited goods you can’t send and some you can, so long as you have a permit. 

If you are unsure which category an item falls into, contact the New Zealand Customs Service before shipping.

The following items are considered either prohibited or restricted for importation into New Zealand.

Note this is not a comprehensive list, but these items are ones that are commonly attempted to be sent according to NZ Post but are prohibited.

Restricted Items

Prohibited General Category

3. Batteries & Corrosives

4. Explosives & Fireworks

5. Flammable Liquids

For detailed information, please refer to this link.

As with New Zealand Customs, the accurate manifesting of parcel data to the Ministry for Primary Industries (MPI) is important.

The increasing volume of trade and travel is placing pressure on New Zealand’s biosecurity system.

New pests and diseases not only have an impact on human health but can also damage agricultural and horticultural production, forestry and tourism, and trade in international markets.

The following are restricted:

* Used or second-hand equipment is of concern to MPI, brand new equipment does not concern them.

For additional information, please refer to this link.

Illegally or incorrectly shipping restricted items could result in legal consequences, including jail time, so do be careful! 

If you’re importing goods into New Zealand that cost less than NZ$1,000, you won’t have to pay anything to customs since GST is collected when you buy your items.

Regardless of the value, there will be NZ customs duty charges and GST on alcohol and tobacco products.

Use NZ Customs’ duty estimator to determine what charges there may be: What’s my duty estimator  

For all shipments (either commercial or private) over NZ$1000, you will need a Customs Number, and you’ll have to pay duty and GST when the goods arrive in NZ.

If you’re curious about why some packages require extra checks at the International Mail Centre, watch this video by the New Zealand Customs Service that explains the reasoning behind it and offers tips to make the process smoother.

So, remember that a bunch of different players work together to ensure your package reaches you.

Source: New Zealand Customs Service, NZ Couriers and NZ Post International guide to sending

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

5-minute read

If you are someone importing light vehicles into New Zealand on a Clean Car Standard Pay As You Go scheme, read this article to understand what you need to do to make payments and use credits from the 1st of June, 2023.

If you import a light vehicle into New Zealand, you need to meet Clean Car Standard requirements.

These requirements are there to increase the number of low and zero-emission vehicles imported into New Zealand.

Charges are applied to vehicles with emissions above a target, and credits are given for vehicles below a target.

The Clean Car Standard requires importers to have a CO2 account.

Your account holds details of vehicles you import – such as emissions levels, whether those emissions are above or below the target, and any charges or credits that may apply.

Separate CO2 accounts are needed for new and used vehicles.

There are two schemes within the Clean Car Standard: Pay As You Go (PAYG) and Fleet Average.

The Clean Car Standard is different from the Clean Car Discount. The Clean Car Standard is for importers and aims to increase the supply of low or zero-emission vehicles – while the Clean Car Discount is for car buyers and aims to increase demand for low or zero-emission vehicles.

You need to start paying charges.

From 1 June, as a PAYG importer, you will need to start paying charges on vehicles as they’re accepted in your CO2 account.

If you choose not to or don’t pay, you won’t be able to register your vehicles or obtain a WOF/COF until the charges are paid.

You’ll also be able to use credits to offset charges if you have them. You’ll be given the option to offset charges at the point of payment.

Payment will be through your CO2 account, using your credit/debit card or through POLi.

From 1 June, payment is due for charges incurred between 1 January and 31 May 2023 for PAYG importers. This is a one-off payment.

You can make payment in the ‘Pending Charges’ tab in the CCS system using your credit/debit card or POLi.

Waka Kotahi advises that if you haven’t settled your balance by 21 June 2023 and you have credits available, they will be used to offset the charges on your account. Any remaining charges will be payable at that point.

From 1 June, credits can be used for offsetting and transferring to other importers.

If you have credits in your account, you can use these to offset charges. You can do this once you are on the payment screen in your CCS CO2 account.

From 1 June, you can transfer credits between other CO2 accounts.

Credit transfers from one account to another take place within the CCS system.

Credits can only be transferred between accounts of the same type – that is, new-to-new and used-to-used.

They can also be transferred between PAYG and Fleet Average accounts (as long as the accounts are of the same type).

Note that vehicles accepted in Fleet Average accounts do not produce any tradeable credits until the end of the obligation year if the net position is positive.

However, Fleet Average accounts can still accept credits from PAYG accounts in the interim and transfer those credits.

While credit transfers take place within the CCS system, any payment for credits and terms of the trade will be managed between the two trading parties – Waka Kotahi advises that they will not have visibility of or responsibility for the financial agreement or monetary transactions.

You will need to meet Anti-Money Laundering (AML) requirements before you are able to transfer or receive credits.

You can also choose to go onto the CCS Account Register, which includes contact details for CO2 account holders wishing to trade credits.

Importers wishing to transfer or receive credits must undergo Anti-Money Laundering (AML) checks first.

This is a requirement under the Anti-Money Laundering and Counter Financing of Terrorism Act 2009 to help tackle money laundering in New Zealand.

In line with this legislation, Waka Kotahi is required to conduct customer due diligence on importers wishing to trade credits under the CCS.

This includes understanding importers’ ownership structures and verifying the identity of associated individuals.

Waka Kotahi also recommends that importers seek their own legal advice in relation to AML prior to transferring credits with other account holders.

To find out how to get verified, you can contact the Clean Car Standard team online through your CO2 account, call Waka Kotahi on 0800 141 801 or email [email protected].

Waka Kotahi is publishing a list of CO2 account holders and their contact details. This register is temporary to help importers to get in touch with each other if they are interested in trading CO2 credits to offset charges incurred between 1 January and 31 May.

It will be updated weekly and be available until 30 June 2023.

CCS Account Register can be found on the NZTA website.

CO2 account holders can choose whether to be included in this register. If you’d like to be added to or removed from the register, or you would like to update any of the information, get in touch with the CCS team at [email protected].

Waka Kotahi has developed this helpful video, which gives an overview of how payments and credits work and the different ways you can pay.

The above information is intended as a guide only. Regulations can change without notice, and more information, detailed guidance, and questions about the Clean Car Standard can be found on the NZTA website.

Information and video source: Waka Kotahi NZ Transport Agency

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

9-minute read (18-minute listen)

While many Aucklanders would love to see the cars and containers go, the scale of moving the Ports of Auckland has made for a contentious debate. 

So what would be involved in moving the port? Should it happen? And how long until Aucklanders get a waterfront with a view? 

Listen to the Front Page podcast here or read the highlights below:

Damien Venuto: Today I’m joined by economist and advocate for moving the port, Shane Vuletich, to hear why he believes it’s time to change the look of Auckland.

Shane, explain why there is such a strong desire among some to move the port from the Auckland waterfront.

Shane Vuletich: It’s not a new issue. I’ve been involved in two recent reports on port relocation, which were the 20th and 22nd reports on this issue. 

It’s an issue that’s been kicked around for probably 30 years now. There’s been a sense that we need to do something, and the reason we need to do something is two-fold. 

The first is that there is a growing capacity issue at the port. The port is constrained on all sides. 

On the oceanside, it doesn’t really have anywhere to go. And on the city side, it definitely doesn’t have anywhere to go. 

It’s becoming increasingly landlocked and surrounded by lots of activity that is not consistent with the efficient movement of freight. 

So there’s certainly a capacity and efficiency issue, but actually, the emerging issue and probably the most important one, is optimal land use. 

Cities need to continually look at how they’re using their land and ensure that they’re using their land in the right way. The more valuable the land, the more often you have to look at it and ensure that you’re doing the best you can with that scarce land resource. 

There are 77 hectares of prime waterfront land sitting under the port currently being used for a really low-value industrial use. That’s about twice the size of the Wynyard Quarter and about a fifth of the CBD area, so you get a sense of the scale of that land. 

This is about ensuring that the port is in the right place to serve Auckland for the next 100 years. The port was in the right place for a long period of time. It is no longer in the right place to serve Auckland the way it needs to be served. 

There’s a general consensus that the port needs to move. Lots of other cities have done this. The challenge is getting it done.

Damien Venuto: The main alternative often raised is for the port to be moved to Northland. Logistically, what would it take to move this operation from Auckland to Northland?

Shane Vuletich: It’s a good question. Northland was one of the options that had been put forward. It’s not the only option that’s being considered. 

The other two main candidates are the Manukau Harbour and the Firth of Thames, down southeast of Auckland. 

The Manukau Harbour, despite many people thinking it’s a great idea, in my view and in many experts’ views, is a terrible idea. 

You’re fighting nature. It’s not insurmountable, but generally, you don’t want to be fighting nature when you put a long-lived piece of infrastructure somewhere. 

It’s on the wrong side of the country in terms of shipping routes, which creates massive issues. 

My biggest concern is that even if it was technically feasible and made sense, perpetuating the use of land in south Auckland for that sort of low productivity isn’t a good long-term decision for Auckland.

South Auckland has massive potential, and if we keep putting containers on it and low productivity stuff in that area, we don’t achieve this potential. 

So, there are many reasons why Manukau is a silly idea. 

The Firth of Thames is not a silly idea. Technically it’s very feasible, but it is a greenfield site that would require lots of work and lots of connection. 

And most importantly, it’s south of Auckland, which is an issue because the Port of Tauranga is south of Auckland as well and that services a lot of Auckland’s freight. 

Much of our freight goes through the Port of Tauranga, which is 160 kilometres away. Having both ports south of Auckland would create massive demand for the rail and road corridors to the south of Auckland, which commuters want to use. 

Having all of our freight being dragged up through those already congested corridors doesn’t make sense. 

What Northport has going for it is that it doesn’t have that south of Auckland problem where it’s going to be competing with those congested corridors. That’s north of Auckland which creates a degree of resilience because you can attack Auckland from the North and the South. 

With the right infrastructure in place, you end up with a nice north and south port access model with a bunch of inland ports sitting between those two gateway ports connected by rail that allows freight to move efficiently. 

Northport is an operating port that’s consented. It’s already built. It needs to be scaled out, but it’s got lots of landside capacity. It’s a natural deep-water port. It’s already being used, so Northport may not tick every box, but it will be better than any other port solution. 

Damien Venuto: Shane, you have long been an advocate for moving the port, but there are also opponents to this plan. 

Can you look at the other side of the table and explain why some people think the port shouldn’t be moved at all?

Shane Vuletich: The port likes being where it is even though it acknowledges and accepts all of the studies that say it needs to move, and it needs to move relatively soon. 

It’s employed many stalling tactics to acknowledge it wants to move but never actually doing anything about it, which means it will never move. 

They do have resources at their disposal to make it difficult to move. You have politicians that are overwhelmed by the scale of the issue. 

When you’re confronted with a really big issue that will take many years to resolve, that’s not a particularly attractive political proposition because you generally end up writing the checks but not cutting the ribbons.

That’s possibly being unkind of politicians, but that long-lived stuff is really challenging to get into. As a result, it’s generally easier to do nothing than it is to do something. 

You have a freight industry that built its business models around the status quo. 

The freight industry is generally economically rational, and when confronted with the status quo versus a change scenario, the status quo is always more comfortable and safer. 

I don’t think you can have the freight industry crying out for radical change. They’ll generally want incremental change, which is just tweaking what we’ve got because that’s safe. I can completely understand that from a business perspective.

Damien Venuto: In an NZ Herald panel on this topic back in 2021, former Auckland mayor Phil Goff was quite critical of a report that you co-authored: 

“Look, it may be that the Manukau doesn’t work. I don’t know, I’m not the expert in this, but I would have at least expected, before you talk about spending 10 or $12 billion, that you look at all of the options so that you make sure that the option that you finally land on is the right option. The supply chain study failed to look at that.” 

He suggested that there wasn’t sufficient consideration given to other areas. He was a particular proponent of Manukau. 

Do you think that since that panel discussion and since that initial report, the question of Manukau has been answered properly?

Shane Vuletich: I believe there’s a piece of work, probably the 24th study, looking more closely at the Manukau to assess whether it is actually remotely feasible to either leave it on the table or take it off the table. 

It’s the piece of work that needs to be done to ideally put a stake in the heart of the Manukau because no one in the shipping industry believes this remotely feasible or remotely sensible. 

I think if there’s a study to be done that rules it out once and for all, it’s probably a good use of resources. 

I would like to see it ruled out so we don’t waste any more time on it. 

Damien Venuto: One issue that does come up quite a lot is the issue of jobs. How would moving the port impact the hundreds of employees who currently work at the port site in Auckland?

Shane Vuletich: The impact would be quite significant, but not in the way you’d expect. The impact on port-related jobs would be minimal because there are only a few hundred jobs on the port itself. 

I would say there are probably between 300 to 400 jobs on the 77 hectares of prime waterfront land.

The reason for this is that there’s very little economic value in the port itself as a business. Many think port as a business is valuable and creates lots of employment and value directly.

That value is created in the freight that goes through the port. The value isn’t embedded in the port itself. The port is just a gateway for things to come and go.

As long as imports and exports continue to move efficiently and as long as there is a port somewhere and that freight continues to move efficiently, almost all of the employment except for the direct jobs on the port itself will continue to exist. 

The net impact of moving the port would actually be significantly positive. 

Because if you take 77 hectares of prime waterfront land that currently supports a few hundred jobs and turn it into an area that supports tens of thousands of jobs, housing for people, green spaces, and schools, as well as social amenities. 

We only have to look across the harbour to Wynyard Quarter, which was port land and an industrial wasteland employing very few people. 

In 10 years, it’s supporting billions of dollars worth of businesses, thousands of employees, and thousands of residents. It creates great social value for the people of Auckland because it’s a public space, and you can walk around. 

That transition is really easy to see. What we’re proposing for the port is a very similar process of turning it from a place that people can’t be and can’t go and has low productivity and turning into a place that people can be. It’s highly socially and economically productive.

Damien Venuto: Last year North Shore councillor Chris Darby was on the Front Page, and he ran us through the complexities of big infrastructure projects and why they often take so long to get across the line: 

“We have taken our eye off the future, not just of Auckland, but the nation, particularly in infrastructure. And we’re always looking at what we should have been doing years ago, and the city rail link is a classic example of that. It was first suggested in 1924, and it’s going to be 100 years between first thinking about it to actually opening it and riding it.” 

How confident are you that this project will ever get off the ground?

Shane Vuletich: It will at some point because it has to. The port will get less and less efficient as urban encroachment grows. 

Those corridors that it is dependent on are not going to get less congested over time. 

People don’t realise that with the existing port and where it currently is, there will have to be significant amounts of investment in just keeping it at the current level of efficiency. 

On the port site itself, there is already a lot of capital investment earmarked by the Ports of Auckland for the existing site to build new buildings and infrastructure. We’re not talking tens of millions here. We’re talking hundreds of millions, probably over 10 or 20 years, being invested in a site that we all know doesn’t have a long-term future. 

That’s ratepayer money being invested in an asset that we all know is going to be shut down at some point in the medium term at the latest. 

That’s economic madness in itself. 

What we’ve also got is the port and the freight industry asking for major upgrades to rail and road into the existing port up Grafton gully to decongest those corridors. 

That comes at the cost of billions of dollars, once again, into an existing site that we know is not the long-term solution. 

The opponents to relocation have been successfully blocking relocation for at least 30 years, so I wouldn’t bet against them continuing to do that. 

I think we’re in a position where there will still be resistance to change and challenges. We have an owner of the port, the council, that is, for the first time, supportive of relocation, largely thanks to Chris Darby, who has done great work in that space.

Wayne Brown has really tipped the balance there. And the government is now at the table, so we’re in the best position we’ve ever been in, and we have the highest chance of getting urgency around this. 

Now is the time that, hopefully, the stars are aligned, and we can create urgency and a level of commitment to relocation that can’t be undone in future political cycles.

Source: iHeartRADIO, The Front Page Podcast. The podcast transcript was edited for clarity.

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

5-minute read

Before shopping online, be sure you think it through carefully and that you know all the possible pitfalls.

If you buy items from overseas that cost NZ$1000 or less, you don’t have to pay anything to NZ Customs, as GST is collected when you purchase your items. 

However, NZ Customs do charge Duty and GST for alcohol and tobacco products regardless of value.

The rules for importing tobacco have recently changed, and a permit is now required to bring or receive any tobacco into NZ, including gifts.

Please see our recent post for details of the new requirements for tobacco products.

If you are bringing items into NZ for commercial reasons, for example, to sell or for a business, you need to contact a Customs broker who will liaise with NZ Customs on your behalf.

Contact the Easy Freight team now for your NZ Customs clearance services. 

If you buy items from overseas for over NZ$1000, NZ Customs collect GST and/or Duty, and you must apply for a Customs Number.

You can do it yourself by following the below steps. 

Order items for over NZ$1000, arrange transport to NZ and apply for a Customs Number (Client Code).

The company that has transported your items will contact you when those items arrive in NZ.

Email NZ Customs with the following:

Alternatively, you can contact a Customs broker to manage the process for you at your own cost.

Contact the Easy Freight team now to reduce mistakes with NZ Customs and biosecurity rules.

Customs will issue you an invoice based on the Customs Value, which is the cost of the item in New Zealand Dollars (NZD), as well as the cost of shipping and any insurance. This charge will be made up of:

Pay your bill

Once you have paid, your transport company will receive an automatic notification that your goods can be delivered to you.

You are responsible for the information on Customs declarations being correct.

Please be aware that some websites may offer to declare an incorrect value for your item on the Customs declaration, so you can avoid paying GST or Duty.

If the sender gives incorrect information or doesn’t make a declaration, your item could be delayed and investigated. 

In some cases, NZ Customs may seize your item, and you will have to pay extra charges.

You may also face criminal charges for knowingly making a false declaration.

If you buy an item in any currency that isn’t New Zealand dollars (NZD), it will be converted into NZD to get the Customs Value.

NZ Customs use their own rates of exchange, which are set every two weeks and published 11 days in advance.

NZ Customs use the rate that is current when your item arrives.

NZ Customs have a handy tool What’s My Duty that can help you estimate any Customs charges and taxes.

There is a full list available of prohibited and restricted imports.

Examples of prohibited items include:

Other items need permission before you can bring them in. Examples of items that require a permit to import include:

If you return an item that costs less than NZ$1000, the company you purchased it from is responsible for issuing any refund.

If your item costs more than NZ$1000 and you return an item to the supplier, and they give you a free replacement, you don’t need to pay Duty and GST on the replacement. 

You will need to provide proof it’s a replacement, such as emails agreeing to a replacement or evidence that you returned the original item (e.g. shipping documents).

You are eligible for a refund on GST or duties you paid on an item if:

You are not eligible for a refund of GST or Duties you paid on an item if you changed your mind.

Please be aware that NZ Customs do not hold your item when it arrives in New Zealand and are unable to locate the item for you. 

That can be done by the company which transported the item on your behalf.

To find out where your parcel is, you need to contact New Zealand Post, the courier, fast freight or shipping company. 

They receive, store, track and deliver the parcels. 

Overseas mail parcels arrive at the New Zealand Post International Mail Centre in Auckland, where they are screened by Customs and the Ministry for Primary Industries.

New Zealand Post then delivers your parcel unless more information is needed or if you need to pay charges. If this is the case, they’ll send you a letter.

If your parcel is addressed to a person at a private address and you need to pay charges, the letter will say they hold your parcel awaiting Customs clearance and enclose a Customs invoice. When you’ve paid, they’ll deliver your parcel.

If your parcel isn’t addressed to a person at a private address, the letter will say you need to arrange for clearance through a customs broker or freight forwarder or by the New Zealand Post brokerage team.

In some cases, independent freight companies, including YouShop or E Retail, are responsible for receiving and delivering your parcel.

If more information is needed or if you need to pay charges, they’ll contact you by email, telephone or letter. 

In some instances, they’ll carry out the Customs clearance on your behalf, usually for a fee.

Watch this helpful video by NZ Customs to find out why parcels are held for clearance at the International Mail Centre and what you can do to make the clearance process easier.

The above information is intended as a guide only. Regulations can change without notice and for specific guidance and information, please visit the NZ Customs website.

Source: New Zealand Customs Service

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

2-minute read (30-second watch) 

Shandong Provincial People’s Government has shared insights into its automated container terminal at Qingdao Port as part of the 2022 Qingdao Multinationals Summit.

Shandong Port Group and Qingdao New Qianwan Container Terminal explained that Qingdao Port is now one of the world’s leading automated container terminals equipped with state-of-the-art technologies, a high degree of automation and high loading and offloading efficiency.

It is also the first fully automated container terminal in Asia. The port has achieved average productivity of 36.2 containers per ship per hour, peaking at 52.76 containers per hour, a production efficiency that is 50 per cent higher than other ports with similar automated terminals.

Have a glimpse of the working day in Qingdao port. The automated trucks and unmanned cranes are simply wonderful to watch.

Qingdao Port can accommodate 24,000 TEU container ships with an annual throughput of 5.2 million TEU as one of the world’s largest automated terminals.

In June last year, the world’s first intelligent overhead container delivery system (in a pilot phase) was put into operation at the automated terminal.

The system was co-developed by a team of Qingdao Port engineers and the R&D team at CRRC Yangtze, with the goal of integrating the leading suspension transport technologies into the port’s operations to resolve that most difficult ‘last mile’.

The aim is to maximise efficiencies in delivering containers between the terminal, ships, transfer stations and stockyards and meet the requirements for low cost, short loading and unloading cycles, greater efficiency, full automation, higher safety and zero emissions.

Qingdao Port has claimed that it is the world’s first ‘hydrogen + 5G’ smart ecological terminal, pioneering hydrogen-powered crane technology and systems by developing a hydrogen energy-driven solution for the fuelling of equipment needed for the operation of a large port.

The system reduces carbon emissions by some 3.5 kilogrammes and sulphur dioxide emissions by 0.11 kilogrammes per TEU.

Calculated on the basis of an annual capacity of 3 million TEU, 21,000 tonnes of carbon dioxide and 640 tonnes of sulphur dioxide emissions are estimated to be cut annually.

Source: shippingazette. com

Video Source: YouTube by Mariner Diaries with SAMRAT

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

5-minute read (40-seconds watch)

Ports of Auckland’s new tug Sparky cruised into the port last week, notching a milestone as the world’s first full-sized ship-handling electric tug.

Ports of Auckland chief executive Roger Gray says welcoming Sparky is an exciting day for everyone. 

“Sparky is the first e-tug of its type in the world and was a truly innovative project for us. Her arrival marks a big step towards the ports’ decarbonisation of operations and towards our long-term emissions reduction goals,” he says. 

Ports of Auckland signed a contract with Dutch company Damen Shipyards in 2019 to buy the fully electric port tug.

The Damen RSD-E Tug 2513 has a 70-tonne bollard pull, the same as the port’s strongest diesel tug Hauraki, also built by Damen. 

It features 80 battery racks holding 2240 batteries, totalling 2784 kWh of power. The e-tug is expected to do up to four shipping moves on a charge of batteries. The recharge time is approximately two hours.

Sparky is anticipated to save around 465 tonnes of CO2 in diesel emissions annually.

To ensure safety, it also has two 1000kW backup generator sets, which will only be used in cases of emergency or some fault that is not part of business as usual. 

The expected cost of operating Sparky is less than a third of the cost of running a diesel tug.

“I would like to thank the port’s Marine team and acknowledge our partner Damen for their work,” Gray says.

“When the project started, there were no emissions-free ship-handling options; however, Damen were up for the challenge, and now they’ve changed the game with our e-tug Sparky. 

“E-tugs are the future for ship handling, and Ports of Auckland are proud to have led the way,” he says.

Ports of Auckland marine and multi-cargo operations general manager Allan D’Souza has been leading the e-tug project for the port and was looking forward to the arrival day. 

“Back in 2016, when we first pitched the idea for a fully electric tug, we were told we were dreaming. To see Sparky in real life like this is that dream coming true.

“Due to the pandemic, we were unable to travel, so we’ve been watching the build, launch and initial sea trials online. To welcome her to Tāmaki Makaurau now is incredible.

“You’ll be able to spot Sparky on the water as her superstructure is painted bright green, unlike our diesel tugs. What you won’t notice is noise or smoke; being electric, she’s a lot quieter and cleaner than our current diesel tugs.” 

Sparky was named via a public competition and vote in 2020.

While Ports of Auckland welcomed Sparky last week, the directors have also made the stunning but bold decision to end the long-running automation project at the Fergusson Container Terminal.

This decision, they said, is in the best interests of the company, its stakeholders, and the efficiency of a national supply chain.

The project has been controversial because of its on-off-on course through the pandemic years 2020-22, including a months-long hiatus during the peak of the border lockdown that prevented physical support from the technology suppliers.

The rather breathtaking decision to end the project will likely intensify the controversy. The cessation will mean a significant one-off multi-million write-off on the port company’s balance sheet, which is a 100% Auckland City-owned business.

But the decision will also clear the air and let the port put its foot down on a return to manual processing of containers that has already begun.

Ports of Auckland board chair Jan Dawson said, “We have made this decision after careful consideration of the current status of the project, advice from independent experts, and the work required to achieve full terminal automation.”

The ‘qualified experts’ concluded that more money and time were needed to make the system fit for its purpose. Yet, neither could confidently say how long or how much investment that would take.

The automation project is now two years over the initial delivery date and remains unable to meet operational targets. The primary reason for the ‘end now’ decision is fundamental: automation is understood to have serious shortcomings.

The automation project was a complex integration of multiple vendors, equipment, and software applications to design and implement an operation with targeted productivity levels and the necessary level of system safety assurance.

Ms Dawson says, “Our review indicated that despite the best efforts of our team and our supplier, the project is experiencing continuing delays to full terminal roll out, the system is not performing to expectations.

And to put it plainly, the directors said,

“We do not have confidence in the projected timeline or cost to completion.

“With these uncertainties and the need to transform the port’s performance, the board has determined the best course of action is to cease automation of the Container Terminal.”

Ports of Auckland has been operating in overload during the pandemic with a split operation. Chief executive Roger Gray said, “this is a positive decision which will come as a relief to many at Ports of Auckland and in the wider supply chain.

“It gives us certainty about the future and allows us to focus on our core job: safely providing a great service to New Zealand importers and exporters.

“It will also help us get the business back to the level of profitability we have delivered in the past.

“The end of automation does not mean the loss of all the investment and work that went into it. The new infrastructure built as part of the project – for example, the new wharf and cranes – provides extra capacity, which is essential for future growth.

“We will, however, have to write off approximately $65 million in investments which will no longer be used, mainly the automation software and guidance system,” which is unable to be returned.

“Ports of Auckland attempted automation for the right reasons: to lift capacity, productivity and profitability without further port expansion or reclamation.”

The project was about halfway through, and the port would have eventually gotten it to completion. 

The automated area was variable in the speed of equipment clearance. Mr Gray told us that sometimes performance was barely adequate at 20 or more moves an hour crane rate, “but it was spasmodic and inconsistent. We had to continually manually intervene, and the software would run slow.”

The port asked the vendor when the system would perform stable and achieve a reasonable crane rate. But that question could not be precisely answered. The absence of certainty as to when the system would be stable was core to the decision made by the board.

“It was a very brave decision. It will allow us to really focus on a go-forward approach to serving our customers and the community.”

The port has already rolled back to manual processing, evident in the increased capacity data in the terminal.

A recruitment programme for port workers is underway. Ship calls remain disrupted.

“There’s an acknowledgement coming from the sector that we’re starting to turn the corner on performance. Shipping lines have lifted congestion surcharges.

“We’re effectively turning 13,000 TEU a week, and our objective is 15-16,000 TEU by the end of the year.”

The infrastructure capacity upgrade work was delivered as planned. This included the new Fergusson North wharf and cranes, major pavement upgrades, a new truck loading area, new refrigerated container capacity, and other upgrades.

The dismayed response from Auckland City to the port board’s move is understandable and the call for an investigation of the fundamentals equally unsurprising. Mr Gray confirmed that an independent investigation is to be initiated. 

Source: TransportTalk / The New Zealand Shipping Gazette

Video Source: Ports of Auckland

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

3-minute read (4-minute listen)

After two months of lockdown, Shanghai has ended many ‘unreasonable’ conditions, allowing businesses to resume work, starting from June 1.

The gradual reopening occurs just as the peak approaches for the Chinese export season to the retail markets of North America, Europe and the Australasian spring-summer retail season.

However, the supply chain could continue to be an issue, even as the world’s biggest port fully reopens. 

Shanghai has been operating at a severely reduced capacity since March. Many shipments have been cancelled, postponed or rerouted to other Chinese cities. 

In an interview with Mike Hosking, infometrics economist Bred Olsen explains how the supply chain issues could worsen as manufacturing sites reopen, and the ports in Europe and the US could have the capacity issues to handle the influx of goods. 

Mike: Shanghai is back and open for business. The city has fully reopened following these big restrictions since March. Of course, all eyes are on the port and what it means for the movement of goods. 

How big of a deal is Shanghai out of all the ports we deal with?

Bred: Shanghai is huge. It’s the biggest port in the world in terms of throughput, and it has been operating throughout this lockdown at a very reduced capacity.

So being able to reopen is encouraging news not only for the world economy but certainly for New Zealand, given how important China is as our major trading partner.

Mike: What about Shenzhen? Is it just as important?

Bred: Anything in China at the moment is critical. We’ve seen much movement between those ports in recent times, depending on the capacity. But that, certainly, hasn’t got us through all the disruptions and some big delays. 

Probably the big question now is, given that the ports have been operating but at reduced capacity, with manufacturing sites back on board, we could see the supply chain issues get worse throughout the middle of the year.

Not in China, but the rest of the world, as you will have every ship available filled, particularly to Europe and the US. Will those ports have the capacity to handle this influx of goods?

It comes when we know that things are still very disrupted and makes you wonder about the blockade of ships that might be coming for other ports around the region.

Mike: Does anyone know when it gets smooth again, if it ever gets smooth again?

Bred: The port of Shanghai is saying that they are hoping to get back to the same level of shipments that they had at the start of this year by the fourth quarter, so towards October. 

There’s a worry that the next few months could have slippage, particularly in the US, because there’s just so much cargo that wants to get over there.

Interestingly, one of the freight price indexes that gives an idea of how much it costs to move stuff around the world has been going down a touch. 

It’s certainly not affordable as it is still five times pre-pandemic level, but it has gotten better recently. 

So you do get a bit of a feeling that the momentum is building for things to change, certainly for shipping to become a little easier.

Mike: Any idea of what’s driving this from the Chinese? In other words, when they get another outbreak, do they lock it down again, or have they finally woken up to the fact that we’ve got to move on?

Bred: It’s a difficult thing to try and figure out. There’s much discontent around from people on the ground, from local citizens, urging state officials to open, and a real challenge to keep Omicron under control. 

So I think there’s a little bit of give from the Chinese side about wanting to reopen and hit the growth targets they’ve set themselves. 

We know that they’ve been very forthright on trying to keep Covid down, to keep those Covid cases as isolated as possible. 

I don’t think we should read into this that they’ve completely abandoned that strategy. 

And certainly, compared to New Zealand and the rest of the world, they are still facing a much stricter level of operations than we are. 

So it is worthwhile keeping in mind, given that we keep hearing about the second wave through winter, I don’t think they are done yet.

Source: Newstalk ZB. This interview was edited for clarity.

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

On the carrier’s 175th anniversary, The Loadstar podcast editor and producer Mike King asks Hapag-Lloyd, the world’s fifth-largest container line, how the carrier is managing the chaos of the here and now?

What is being done to help shipper customers? Where will the windfalls of the last two years be spent? And what does the future hold for container shipping over the next 175 years?

Listen to the full podcast here or read the best parts below

Mike: Hello, everybody, and welcome to another episode in Lodestar’s big interview podcast series. 

I have a question for you. Does anyone out there know Hapag Lloyd? I bet you do because you’ve seen their ships or the containers even if you’re not in shipping. 

Hapag Lloyd is the world’s fifth-largest container line, with a global market share of just under 7%, according to Alphaliner. This interview is well-timed because the venerable Hapag Lloyd is 175 years old this May 2022. 

Yes, you’ve heard that right. Hapag Lloyd was shipping cargo and passengers to New York in 1847 when Queen Victoria was on the British throne and the US was at war with Mexico over Texas. 

We have Dr Ralf Belusa, Managing Director for digital business and transformation and TED Veteran on space treasures.

And in her first interview since joining Hapag Lloyd, after a high-flying career with IBM and Bosh, we have executive board member and Chief Information Officer Donya Amer. 

Mike: Hapag Lloyd is now 175 years old, but you only joined the company and the board in February this year. Since then, there have been so many disruptions to container shipping.

We’ve got a stop-start of the export supply chain out of China due to COVID lockdowns. We’ve got a looming crunch on the US West Coast, where a new dockworkers deal is under negotiation. Of course, we’ve got this terrible war in Ukraine after a pandemic that has thrown the world and its supply chains into a demonic flux.

So, the question is, how are you finding liner shipping so far? Is it keeping your attention? 

Donya: The last two years, the world has been more or less upside down, and it doesn’t matter which industry you are in.

Nothing is as it was before, so joining Hapag Lloyd for me was a fantastic step forward because I am now part of a company with the oldest history and the most global company I’ve ever worked for. 

We are operating our business in more than 137 countries, and we are shaping our sustainable logistic future together with our teams in an even more connected world. 

What I like the most about Hapag Lloyd is its open company culture. We have our values, and we live up to the values. We care, we move, and we deliver.

I see and feel it here every day when I talk to our people and customers. It’s a culture of connecting the world and connecting people with all our logistics supply chains, with all ups and downs we’re facing today in the market. 

Mike: Ralf, you’ve been in this business a little bit longer, and I know you’ve had a chance to speak to Lloyd’s archivists in the head office in Hamburg.

In your research, have you found any historical precedents for this level of chaos over the last 175 years of Hapag Lloyd operations? 

Ralf: That’s a good question. As a shipping company with 175 years of experience, naturally, we have successfully managed some major shifts in the markets, technologies, society, and unexpected changes and disruptions. The change is ongoing.

Looking into the company’s history, we radically altered our corporate policy by moving away from the passenger trade, or the loss of the entire fleet during the First and the Second World Wars, or the impact of the financial crisis in 2008, so this is a changing world. 

But we wouldn’t be here to celebrate our 175 years as Hapag Lloyd if we had not demonstrated our capabilities and experience to adapt and change to all the events like this. 

Mike: Let’s look at the here and now. We’ve had two years of record profits for the top container lines during this pandemic. The latest forecasts suggest a collective 300 billion dollars due this year. Much of this is due to higher rates because of disruptions, port congestion, etc. 

Although from a liner point of view, there’s also been an effective strategy of blank sailings at various times. 

We’ve had shipping lines executives in the past say that the only way out of the current scheduling and equipment mess is lower demand for services, so these bottlenecks that have built up, especially at ports, can be ironed out. 

Essentially, consumers should stop spending if they want their products on time. Is that how you see it, and perhaps what is happening now as the cost-of-living crisis bites?

Ralf: Yes, as we all know that the COVID-19 pandemic and all its implications are causing many of the current disruptions along the transport chain, particularly with the ports, the terminals, the hinterland, the trucks, the rail and so on, for example, lockdown in Shanghai, so thereby limiting transport capacities and supply. 

That’s one side and the other side, as we know that the current customer demand has significantly gone up in many markets due to COVID. That’s why we have had to adapt to that, thereby initiating many countermeasures initiatives for our customers to solve it and get some relief. 

I just want to mention some of them, like optimizing our transport infrastructure, inter-land connections, and terminals and adding capacities as you have seen in the press with many more boxes or the additional vessels. 

In addition, to further help our customers, we are improving our digital solutions, adding IT capacities and workforce to make a business as easy as it gets for our customers. 

Mike: In a traditional year, we would have a mini peak in demand for the Chinese New Year as exporters try and get their shipments out before factories close in China. 

Then we would tend to have a lull in the second quarter. Then it would build-up to the peak season when people are restocking inventories ahead of the holidays in the fourth quarter. 

So based on the traditional demand in Q2, we get a chance to get our equipment and ships back in order and get those schedules back on track. That’s not happened due to the nature of COVID demand.

Is that more possible in 2022 because in this Q2, we’ve seen a slight drop in freight rates? But we’ve also had these closures in China due to COVID lockdowns. Is this helping you reset networks? 

Donya: First of all, capacity and space are there. We have severe operational challenges, especially with terminals still being the main bottleneck. This is causing disruption and delays along the entire transport chain. Shipments are not as reliable as they should be. 

We understand that this is a challenging situation for our customers. That’s why we have our best interests to make life for our customers easier. 

We have already implemented many countermeasures, such as rerouting cargo in case of closures in Shanghai, shipping guarantees to offer our customers a better chance of planning, and new digital solutions, like Quick Quote Spot. 

We are all hoping and expecting that liner shipping goes back to normal, and we’re doing our utmost together with other container liners. However, you can’t take it for granted that it will happen because nobody could ever imagine what has happened in the last two years. 

We are trying our best to go back to a normal business environment where we have more transparency about where our containers are but overall, it’s hard for us to give a robust outlook. 

We can only work with the current environment and current information status. Looking forward, it will come back more to normal by the end of this year. 

Mike: These lockdowns happen so quickly. It’s hard to strategize. It’s just a case of managing that disruption.

Donya: Absolutely. Otherwise, if you’re not agile enough and are not flexible enough to react to these really big disruptions, you are in big trouble. 

That’s why we are doing our utmost to support our customers’ quality and deliver the containers as expected. But if there are restrictions from governments, for example, and ports are closed, we have to react; otherwise, we don’t have a chance to be a sustainable partner for our customers. 

Mike: I know many of your customers would like more reliable services. That’s not just related to Hapag Lloyd. That’s across the line.

When talking about container shipping, shippers and smaller forwarders are not necessarily complaining about high rates, even though they find them difficult to swallow. Quite often, it’s a case of actually just securing space irrespective of the price they are willing to pay on particular trades. 

Some of your rivals have been quite open about this strategy to focus energies and space on the largest shippers and forwarders. Some even have said that they want to sell direct to shippers in the future. 

Where does Hapag Lloyd fit into this? Are you still courting SME shippers and forwarders with a view to a future where the demand-supply equation looks a little different, and they’re still important customers for you?

Ralf: I think all customers are important. The small, the medium-sized, and the large customers. There is a demand, and we would like to support it. We want to help our customers in all aspects of the quality, delivery, and ease of doing business. 

Mike: Many of your peers are investing heavily in their logistics footprint. Does Hapag Lloyd have ambitions to offer more than port to port liner services? Maybe you’re looking to start an airline, as some of your rivals?

Donya: I’m a big fan of focus. The core focus of Hapag Lloyd, at least when I decided to join this company, is container shipping. That’s where we are best in. That’s what drove us to become 175 years. 

For sure, we have demand to expand our business even further. That’s what we did, for example, with the merger in West Africa but also with terminal investments like Wilhelmshaven. 

These are critical investments for us, but the focus for us is container shipping. Nevertheless, investments in digital solutions are something we grow our footprint in the market. 

We have a sustainable strategy we call “prepare for tomorrow”, which is our strategy to ensure that after 175 years current generation within the company supports growth to hand over a better Hapag Lloyd to the next generation. 

That’s where we are simplifying our processes. We are strengthening our portfolio but still around our core business. That’s why we are investing in our people and capabilities. 

But at the moment, our focus is container shipping and everything, which makes our life and the life of our customers easier. 

We also invest in equipment, like vessels and boxes, for example. 

We want to increase the quality for our customers with investments like Quick Quote Spot, our digital solution for customers to have a better experience when booking with us. 

We’ve also invested heavily in sustainability in the last two years. We are trying to reduce our carbon footprint by 30% by the end of this decade. And, I think we are quite brave in communicating our goal to be net-zero by 2045, which is faster than expected.

Mike: To clarify those targets, you’re planning to reduce fleet emissions by 30% by 2030 and aim to be climate neutral by 2045. 

How will you make sure that this is transparent to your customers? Do you plan to invest to achieve those cuts? Is 30% by 2030 enough?

Donya: In general, as ocean carriers, we have a big responsibility for combating our climate change. We are facing the challenge of ensuring that the fuel, for example, we are using to run our vessels, is available and accessible and that we have enough around the world to operate our vessels.

We have 90% of all goods worldwide transported by ship, so we can make an impact here. However, our ships only account for less than 3% of the global CO2 emissions, so that’s also something you should keep in mind when we think about the impact of our industry. 

We drive the decarbonization, and the entire industry must be joining forces here. It’s nothing that just one company can do on their own. 

We face a challenge of infrastructure and accessibility and need to figure out alternatives.

There’s no one big bet at the moment we can count on. We have several options in the market to tackle the challenge of climate change. 

Bio-fuels, for example, are important for us, and we are investing expertise and insights to take on the challenge together with other container liners. 

Mike: The key question, Donya, is there going to be enough alternative fuels available to make these emissions cut work? 

Donya: If you ask me today, the answer would be no, definitely not. 

First, we need more green electricity to generate these kinds of fuels, and then you have to make sure they are accessible. 

It’s quite comparable to what you see in the automotive industry with electric vehicles. Everybody is saying we need more electric vehicles, but we first need infrastructure that is reliable and accessible. And also, from an economic point of view, it needs to be payable to the users.

The question then is, what are you doing with all the batteries when they pass a lifetime? 

So the same discussion goes on for ocean liners and shipping. How can we make sure we do have a proper infrastructure in place? How can we join forces? How can we force science to invest more in figuring out a good solution? Do we have alternatives? Is there any other technology we never thought of to date? 

Many companies are investing, and Hapag Lloyd plays a vital role in this game and is a part of the discussion and leading it in many ways. 

Mike: COVID lockdowns saw many industries adapt and adopt digital technologies to improve productivity. That was also true in shipping, freight and logistics. Is there no turning back now from a tech-driven future?

Ralf: We see technology as an enabler to better serve our customers. It’s not only just simply improving productivity but also better understanding our customer needs. 

We see technology as an opportunity for our customer-centric approach, which means ease of use, transparency and efficiency. 

We connect to our customers on multiple online and offline touchpoints. Also, internally we are working with the latest tools available to extend further our digital product offerings and solutions for our customers.

In the end, we see technology helping us in the customer-centric approach to make our lives with the customer much easier to fulfil our quality promises. We will see technology as an enabler to better serve our customers.

Mike: Hapag Lloyd announced an investment of $250 million in tracking technology for your dry container fleet of 1.6 million boxes in late April. Is it part of this digital investment strategy?

Ralf: Yes, we are in the middle of an intelligent transformation where smart usage of data and emerging technologies will play a broader role in all of our businesses, so there is no end to digitalization. It’s accelerating, and we see that the future is automated, personalized, and optimized. 

That’s why we continue investing in all digital products and solutions to meet all the customer needs and offer the benefits to our customers. 

Mike: Finally, we started this interview by discussing Hapag Lloyd’s 175th anniversary. What does Hapag Lloyd or container shipping look like 175 years from now? Does it even exist? 

Donya: Absolutely, I’m brave enough to say yes because we overcame a lot of changes in the last 175 years, but for sure, nobody knows what’s coming next. 

We are shaping a sustainable logistic future together in an even more connected world. We are investing in many directions, not just in digital solutions but also in our people and how we would like to deal with customers. 

We’re doing our utmost to give the next generation of Hapag Lloyd a high chance to be as successful as the current generation is at the moment. 

I genuinely trust that container shipping is the most sustainable way to transport logistics from A to B. That’s why we are investing our time and our patience into this business. 

Source: The Loadstar. This interview was edited for clarity. 

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

13-minute read (45-minute listen)

Lockdowns, ports congestion, war, lack of slots and flights – you name it, the supply chain has seen it all.

In this podcast of the Loadstar, a news resource for the global logistics industry, Mike King looks at the implications of more Covid-19 lockdowns in China, the latest on air and shipping capacity and prices, port congestion challenges, and what war in Europe is doing to air cargo markets.

Listen to the full podcast here or read the best parts below

Mike King: The big story in Asia right now is China’s very strict Covid lockdown policies that continue to impact global container and airfreight markets. Let me welcome Peter Sand, the chief analyst at Xeneta.

Peter, before we look at rates, let’s look at these lockdowns in China and how they have affected shipping these past months. And when I say shipping, we are not just talking about that port-ship interface, where we already have a lot of congestion in some of those Chinese ports.

I’m talking about the wider logistics network, the trucking, different internal borders that are making things very difficult to organise, and how this affects the ability of manufacturers to keep up with production schedules. So, now these lockdowns are really having a detrimental impact on economic growth. 

In late March, this got a step worse with this two-stage lockdown of Shanghai, the largest container hub in the world. How are you reading this plays out for our industry and global trade flows?

Peter: On the heels of the lockdown in Shenzhen, this is, of course, another curveball being thrown at global supply chain logistics.

I must also say that the Chinese authorities, even though they always claim that port terminals are operating normally, which is useless information when the manufacturing facilities are closed down — the issue with truckers and end-to-end logistics that’s a worry here.

We expect longer delays and more congestion. We see rapid rising congestion also because Shanghai is just so essential for the world of the global container business. Shenzhen is huge, but Shanghai is epic.

Intra Asia has seen more disruption than perhaps meets the eye in terms of the slowdown in exports out of the wider Asian region. These lockdowns come when Asian exports are coming down, and you also see that, of course, in spot rates that have been trending down for quite a few weeks now.

Mike King: Just looking at how that might have a domino effect on those global shipping patterns.

If we have a lockdown now in Shanghai, let’s assume there isn’t another series of lockdowns in the next few months and this lockdown in Shanghai lasts until mid-April. What does that two-week “break” in exporting volume mean for the trans-Pacific or the Asia Europe trades? And then, is there a knock-on effect for the peak season?

Peter: If we jump to the opposite side of the Pacific, I think the ports of Los Angeles and Long Beach are making the most of this weakness. They’re running down the long list of ships waiting in line to call the port. They are actually improving on the productivity in that massively congested area that has been the centre of a lot of attention over the past year and a half.

The most important thing is that they keep up the turnaround, the throughput of the boxes to prepare not only for the upcoming labour union discussions but also for the peak season coming around very soon.

Lines, forwarders, and shippers face another round of issues with the lockdown in Shanghai right now. As you suggest, we see cargo being diverted down to Ningbo, which will also plug up if this extends into mid-April.

So fingers crossed it will not do that, but I know from history that we may only see a couple of weeks of specific lockdowns, but the knock-on effects are felt for months ahead in terms of end-to-end logistics.

So these disruptions are the essence of what has driven up the markets in recent years. We just see one obstacle being removed and two new added – that’s not going in the right way.

Mike King: You mentioned that we’ve seen a reduction in port congestion on U.S. West Coast. How has all this been playing out in terms of spot rates in the Trans-Pacific and Asia Europe? They’re weakening a bit, yeah?

Peter: I think that’s been the talk for quite a few weeks now. We still see a strengthening of contract rates as more shippers and lines seek to lock in volumes with big key priority shippers, but will they deliver the resilience that they all seek? I think the jury is still out on that.

We have still much to see in terms of improvement of schedules, but the easing of spot rates is likely to extend for the coming weeks, and perhaps even to a larger extent than what we have seen in the most recent weeks with a gradual drop but time will tell as we move into early April.

The anecdotal evidence tells us that tables have turned on some key trade lanes where lines have requested the forwarders for more boxes to be shipped. So maybe we are at somewhat a turning point in the whole story regardless of the many different obstacles that we constantly see, most of them are COVID related, but in terms of demand, we may be at a turning point right now. 

Mike King: You mentioned earlier that lines are turning back to forwarders and looking for cargoes to fill their vessels. This is a very interesting development when we’ve been in the trend of lines moving towards their bigger shippers or the BCOs directly.

Later in this podcast, we will hear from a forwarder struggling to find space with carriers on certain trade lanes. Do you have any advice for people in that particular boat?

Peter: Every shipper needs to look at their own freight procurement strategies, and they need to find a way to position themselves as the shipper of choice for the carriers. To be a significant counterparty to the lines, they need to be selective and fully understand their freight requirements. That’s where you pitch and make yourself heard with the carriers.

If you’re just moving a few boxes, carriers are more than happy to have you on digital spot market platforms and take your money. But if you can position yourself as a key player, you may end up with the other hand in the negotiations.

Mike King: We’ve heard how these lockdowns are hurting trade flows, but it’s not 100% clear how this is impacting each port necessarily. Mike Wackett, [The Loadstar’s sea freight correspondent], do you see lockdowns in China remaining a key disruptor in the months ahead unless there’s a policy change? 

Mike Wackett: Absolutely, I think they may have to review this zero-tolerance policy at some stage because what we’re seeing is lockdowns are extending indefinitely. What I heard yesterday – it was a total mess. The ports are still working, but if the warehouses are not open and there’s no trucking, the terminals might as well be shut.

We heard yesterday that 2M [Maersk and MSC alliance] were blanking one of its loops, and we expect some of the other two alliances to do something similar because even though rates are still very high for the cargo they have, they will be less inclined to sail the ships half empty.

Mike King: In China, we’ve also got disruptions at airports due to some things you mentioned. It’s not just about the airports themselves functioning or the carriers impacted by some of these restrictions on their personnel; it’s also about trucking companies getting cargo to the airport. This puts downward pressure on international air freight prices, somewhat offset by higher fuel costs and new fuel surcharges. 

Let’s look at air markets by how charter operators have been faring through all of this. This ties in with the invasion of Ukraine, which has changed the shape of this particular sector due to the loss of much capacity as a result of this. 

I would like to welcome Glenn Hogben, the CEO of the Air Charter Association. 

We’ve had two years of a pandemic that has nuded the air cargo industry of capacity, and we’ve had all of these different companies: retailers, container lines, forwarders – all trying to get hold of the air cargo capacity of any sort. This has all been great for your members, certainly in terms of rates? 

Glenn: Yes, the last two years have significantly changed the air charter landscape. It’s really rejuvenated the air cargo industry.

It’s fair to say the industry was having quite a tough time before the pandemic. Rates were squeezed down to the minimum, trying to compete with other more economical methods of transport. But the pandemic allowed the industry to demonstrate its flexibility and adaptability to meet a huge increase in demand.

Most importantly, the key advantage of the speed of delivery is its overriding factor. 

It’s been amazing to see the creativity and motivation to increase capacity around the whole industry in an effort to support various humanitarian, PPE, medical, and urgent cargo deliveries. And it’s definitely had a positive knock-on effect on charter rates, and anytime demand outstretches supply, that is an inevitable impact. 

I would probably estimate that rates could have been up to 30 to 40% higher than in 2019. However, it’s important to note that that’s not all converted into profits, as operators’ costs have also increased significantly.

We’ve had rising fuel prices, additional crew requirements managing the various challenging travel requirements, and restrictions that have required additional resources to be focused on. So costs have gone up, so there is a bit of a balance. However, overall it’s been a very positive time for the cargo sector of the industry.

Mike King: Can we just zoom in on the disruptions we are seeing in the air freight market right now? At Chinese airports, particularly Hong Kong, we’ve had various COVID regulations that have affected crews and the airport operations for these two years. Everyone’s been after capacity, which has drained that capacity.

At the moment, we’ve also got this terrible war in Ukraine and the restrictions of airspace. We’ve got rail and ocean cargo shifting to air because it cannot go from Asia to Europe at the moment on those rail services via Russia. How has this affected demand for your member services or charter operators? 

Glenn: The market was already under capacity pressure due to the supply chain issues that the pandemic has exasperated. Now the capacity is reduced due to various sanctions and airspace restrictions over Europe.

Flight distances, flight times and fuel costs all increased, which will cause more cost increases as airlines have rerouted their flights between Asia and Europe to avoid Russian airspace.

For some operators, longer routes can be extended by three to four hours of flight which is a huge increase in cost. Some carriers have even cancelled those routes from Asia to Europe as they face longer and costlier routes. Those carriers that continue to fly will pass on the higher fuel costs, and the weight of that additional fuel will limit the amount of cargo they can carry. 

Mike King: As you mentioned, Glenn, there are a lot of moving parts in this market at the moment, and there’s very little visibility about what lies ahead.

So this is a very broad question of what, in your view, would need to happen for air freight markets to go back to something like late 2019 state, or is this not necessarily desirable for people who’ve got charter capacity.

Glenn: Well, that’s an interesting question, and I’m not sure it will happen in the near future. There are so many factors that continue to impact the world that the need for fast and efficient cargo transport is almost certainly going to continue.

We hope the peace returns to Europe and the pandemic continues to be suppressed, so the restrictions are removed.

Ultimately the air charter industry is cyclical, and, personally, I don’t think this is any different. We’ve seen a much sharper change due to the global level of the recent demand drivers. As other forms of transport stabilise, some demand will reduce. I hope pricing will fall back in line accordingly.

The air charter remains an attractive option for fast, efficient deliveries, which is important for the industry. It’s almost impossible to predict what might happen. 

Mike King: As Glenn pointed out, there is not much scope for getting the air cargo market back to pre-Covid levels. Well, certainly not right now. But this is also true on the ocean. These unsustained higher costs, scheduling reliability and simple inability to find space are not going away.

Mike Wackett: You’re right, and I take my hat off to some of these smaller forwarders and NVOCCs that have to navigate the market for the past 18 months or so. But by and large many of their customers have stayed quite loyal and know that they’re fighting even harder for them.

I think that some shippers that have been poached by carriers now regret losing that entrepreneurial quality of a forwarder. 

Mike King: That’s a good point, Mike, and I think it’s probably a great point to bring in Chris Higgins, commercial director at AFS Global, a U.K. based forwarder.  

Chris, we’ve highlighted that smaller forwarders and their customers are being squeezed out on some ocean trades as carriers have started focusing more on selling to direct shippers or concentrating on their largest BCO customers. Can you tell me how this has been affecting your business?

Chris: As freight forwarders, we’ve really felt the effects of these changing carrier strategies, focusing directly on the importer themselves or valuing the volume-based importers. Pre pandemic space available for forwarders and smaller importers has changed.

We supported three of the four major carriers for the last 15 years and found that there’s been no loyalty reciprocated back from those carriers in the change of the strategies. We’ve seen allocations that we had previously reduced or even removed.

Our largest VIP customers felt the biggest impact, who supported Maersk throughout 2021 and committed all of their volumes to Maersk.

Although Maersk had publicised its desire to implement this strategy and go direct, when that changed, the impact on the cargo of forwarders and importers using the Maersk service meant a lot more cargo was back in the market for other carriers.

One of the carriers told us, for example, that they had phone calls with importers that they’ve been chasing for years and never had the opportunity to support.

And now, with this abundance of cargo in the market, the remaining carriers can be more selective about which commodities or trade routes they take. Therefore, there are fewer options for the smaller but still solid size volume importers to be able to pick.

So I think it was the overall impact not just from the Maersk move, but the appetite for the carriers to then decide what they wanted to carry and therefore leaving companies like us and our customers with reduced options. 

There’s also a huge element of the rates being particularly high. So one carrier in particular also chose not to offer long term contract allocation because the spot market was so high.

Basically, a yield-based strategy means that there is no loyalty. And this is probably our biggest challenge. We’ve been loyal to the carriers for a long time, riding through previous challenges with them. And when we needed them most, we found that there were other factors they considered first rather than that loyalty.

Mike King: Presumably, that means you won’t be loyal in the future or forwarders like yourself will have no incentive to be loyal when you’ve been treated poorly in this high rate environment.

As with any market, eventually, these rates will decline so that the boot will be on the other foot at some point. Is that something that carriers or their representatives aren’t taking into account or thinking far enough forward?

Chris: I think it’s a really interesting point around loyalty. When this all calms down, and believe me, we’re all looking for the new normalisation from an end customer, importer, forwarder point of view.

So when it all calms down and we can understand what the future market looks like, we will still be in a position where if the carriers come back with allocations, we need to take them because there are only a few options and lines available for us to move our customers’ cargo.

Mike King: You mentioned premiums when you get an allocation, and you’re willing to pay more. What sort of premiums are you being forced to pay? Can you give me an idea of the percentage or the actual rates you have to pay over and above? 

Chris: We’ve all seen in the last 18 months peak season surcharges come in, port congestion surcharges added to contracts, whereas previously, a named account allocation would have been inclusive of any or the majority of the surcharges outside of any force measures or anything significant.

But it’s more the delivery of the contracts as well. For example, one of the carriers gives us a or has maintained allocation for us throughout the pandemic. However, their ability to control their empty equipment, which we know is a challenge for the carriers.

We understand their equipment challenges and delays and charges and restitution of equipment in different areas. However, I think the key thing for our customers has been the desire to be able to plan when allocations are in place, bookings are released, and then there isn’t an empty container there to load the goods, the customer is unable to ship.

As freight forwarders, our credibility is challenged because we agree on these contracts on behalf of our customers, and then when everything seems to be in line, empty containers aren’t there to be filled. Fundamentally we lose credibility, and so, therefore, that challenges our business model as well. 

The rates have been particularly high for the spot market, which has been well documented. This year, we see that the named account rates are in line with the other forwarders and other BCOs. They started to settle but are still two to three if not four times what they were in previous years. 

In 2021 we started to see an increase, but many contracts were fixed at the start of the year. Therefore, the full impact of the rate increase wasn’t felt in the named account agreements. And when we came to renew in December and the end of quarter one, we’ve started to see levels that are easily two, three times above what they were previously.

And also, shipping lines are looking for longer-term commitments. Typically, a named account agreement would be up for 12 months to give protection and allocation. We’ve got the contracts for 12 months and 24 months, so a slightly longer-term approach.

Source: The Loadstar

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.

10-minute read (23-minute listen)

Exporters are forced to charter private ships to ferry produce to foreign markets amid Covid driven cargo crisis. Meat producers and fresh fruit and vegetable producers are struggling to get goods to overseas buyers because of the ongoing containership congestion problem.

As more goods are being shipped and delays lay siege to best-by dates, meat company Affco has resorted to chartering private vessels to get exports – valued at close to $120m – to their overseas markets.

The company’s third ship recently set sail from the Port of Tauranga carrying 6,000 tonnes of frozen meat, destined for California and America’s emptying meat aisles.

And it’s not just Affco. Rival meat companies and other primary producers are on board. In fact, half the space in the first export vessel chartered in June last year was taken up by pip fruit exporters.

RNZ is talking to Simon Beale, both logistics manager for Turners and Growers and Chair of the NZ Council of Cargo Owners, and Mark de Lautour, head of Affco Sales and Marketing. Affco has chartered three ships so far. Mark predicts that this predicament is set to continue for three years.

Listen to the full interview here or read the best parts below:

Katherine: Mark, can you start with the shipping scenario New Zealand’s meat exporters were facing that led you to this move?

Mark: It probably started about a year ago. We were looking at what was happening around the world, obviously with Covid and the impact on the global supply chain. We were seeing the trade of goods around the world really increased volumes on the shipping count going up every month.

I guess as no one was travelling and going on holiday, eating out at restaurants, they were all looking to upgrade their TVs and do-up their kitchens, so a lot of product was being traded around the world.

The first issue we saw was that the demand on the shipping lines was increasing, but at the same time, we started to see first problems in the key logistics areas like ports, trucking, warehousing and labour shortages around those areas.

We saw a pinch point coming, and it inevitably did. So we are glad a year ago we started looking at that. It was June last year we jumped onboard the vessel called the Lagoon Phoenix with Turners and Growers, and we went halves with some apples and meat.

Simon: For our business, it’s been quite tough. Since Covid hit, we decided that year to start looking at getting back into charters.

We’ve been out of them for about 5-6 years due to more container services available and also SeaTrader, which used to bring charter ships to NZ, changing to a containerised service, which is now the PAD service run by CMA CGM.

Two years ago, when Covid hit, and we saw ports around the world tightening up and closing down under restricted staff and trucking, we got a vessel in for Europe. Last year, we arranged four vessels – one which we shared with Affco – and then we did another one to the US and two up to the UK and Continent.

We got facilities in our cool store in Antwerp where we pull up outside, and the cool store is around 20 meters away, so it’s a very efficient way of doing things for us.

Katherine: So for you, was it a case of dusting off the old plans, the old charters that ENZA used to do?

Simon: Correct. We used to do over 100 charters a year back in the day, and some of these relied on the services shared with meat companies, especially up to the States.

When Affco and us got together, it worked out well because we both could utilise space to markets where we had limited volume at the time.

Now more exporters are getting together and sharing vessels with other people. We are looking at locking our programme now and doing the same with other primary industries.

So there is a lot better communication between parties and exporters in New Zealand. Also, MPI ran workshops on charters which Mark and I have been part of.

The biggest problem is getting charters these days because many of them are being scraped, and only a few newbuilds are coming on board. Zespri have been lucky to use the new ones on their service to Japan and China.

Katherine: How locked is your access to the charters because, as always, when there is a shortage, the price goes up. Is it going to be the next point of competition?

Simon: Correct. It already is, and there is a lot of vessels going to South Africa and taking products from South Africa up to Europe. This year, the Chilean and South American programmes are quite strong up to the States and other regions.

Charter pricing has gone up, and it depends on who you are and your size, volume, and commitment.

Katherine: Can you give us an indication of what’s it doing, first, to your costs? Second, what’s it going to mean for the price for the consumer?

Mark: From an Affco point of view, this isn’t a cost-saving exercise. It is also the ancillary cost.

One thing I will say is that containers are great. There is a reason that container vessels and container shipping have become the most common exporting method in the world – its convenience and efficiency, and the whole network is built around it, so it’s not necessarily just the charter cost in itself.

It’s the fact that for the 2nd vessel, we put on just over 4000 tones ourselves as Affco. That required that all of our sites build up and stage that volume for one load port over a couple of days of loading. This method relies on you being able to stage, freeze, and hold big volumes that get loaded over a period of time.

Whereas with containers, you can load 20 tones in every container and ship it out every day. So it’s not just a charter cost, it’s the overall cost of holding inventory and managing the trucks.

For example, we had about 24 trucks going back and forth between our sites and the port for the vessel just left Tauranga. And you need to hire those trucks for the whole day, so there are a lot of costs, and unless you can plan it very well, it is not for the faint-hearted when it comes to paying the invoices.

Katherine: Presumably, that will be reflected in the price that the consumer pays and the exports in the first instance?

Mark: 100%. There is no doubt about that. We are not in the game of subsiding our export customers, but we were very keen to come up with a way of getting the product in the market.

Katherine: How exposed are the other parts of the primary sector exporting to a different part of the world? I’m interested in which parts of the world this is working and which parts perhaps it’s not. We’ve got a big export market to China, for example, across various goods. Is this viable?

Simon: We are concentrated mainly on Europe and the States because those are our key markets where there is a lot of congestion. The West Coast of the States is the worst market to get to. Ships are sitting off Long Beach for up to 40 days because they can’t get a birth, so what used to be a 2-3 week transit is now 60 days to get a container.

Zespri have been concentrating on Europe for the last few years and Asia – Japan and China – with a very good network. And you need a good network. You need some good people on either end to put a product on the vessel and get it out efficiently.

Katherine: So Mark, is China or other parts of Asia and the Middle East, for example, challenges for exports?

Mark: China ports have largely held up basically through their extremely strict management of Covid, and they reacted very quickly when they have had outbreaks.

America was definitely the first target for us as they felt full grant of Covid and their infrastructure went down very quickly, so that’s been the primary focus for us at this stage.

We would very much be keen to do it with other markets, but there is so much that has to be done beforehand. That is making sure that port officials are in line, customers are ready to receive 5000-6000 tones of product in one go and maintain that cold chain. It’s quite a long process to go through.

In the US, the infrastructure and the expertise had been retained to some extent. For other markets, such as the Middle East and China, it’s been a generation since frozen meat and bulk carriers have shipped there.

Katherine: Can we talk about the problem with the logistics of containers? As often you end up with containers in the wrong place? It is a very precise mathematical process for ensuring the right number of containers is at the right port at the right time to take products to another port.

Mark: That’s right, you’ve got one hold up in one link of the chain, and then the link ahead empties out, and you have the surge. So what we are experiencing is big blockages in the pipeline.

Simon mentioned 38-40 days vessels have to anchor outside Long Beach before they can get in, so those containers are effectively out of the circulation for a period of time, and that’s the issue.

When you are looking for empty containers to load, and they are sitting at anchor at Long Beach, that’s not really helpful.

The Covid pandemic and the impact around the world doesn’t seem to be going anywhere quickly. Our view is that even if it miraculously disappeared tomorrow, it would probably take a year to 18 months before people decided to jump on the plane and go to Bali for a holiday and spend money on more service-related things rather than goods.

So we think this will last three years and we have to keep going. And it may be that we go longer than that because it’s risk insurance for us. We are a company that exports over 80% of our goods, so it’s our lifeline being able to ship, and there should be a risk mitigation. I think this is probably something ongoing for quite a period.

Katherine: How long is it sustainable?

Simon: It’s about finding more efficiency in the supply chain and infrastructure around New Zealand and around the world and making sure things are flowing efficiently. Getting products from A to B in New Zealand is reasonably difficult. We need better access to ports.

As an example, Port of Tauranga is our main port out of New Zealand and getting consent for extended birth is taking two years to date.

We need more people on the ground in the supply chain around the world, and we need more truck drivers. The USA is short of 100,000 truck drivers. New Zealand is short of around 5000 truck drivers.

With covid happening, the supply chain tightened up and slowed down, and we need to keep things moving. If the container ship is delayed five days and it happens every week, instead of 52 sailings a year, we are getting 40 sailings a year. Everything complies up as we try to get more products out on fewer vessels. So many things around the supply chain need to be looked at to make it more efficient.

Katherine: However, you predict the disruptions will last three years to one extent or another?

Mark: I just can’t see it improving earlier than that. Certainly, this is the period of time we are planning for. Even if container services start improving, space availability improves, and costs come down, likewise, we would probably see the bulk carrier charter rates come down proportionally, but it’s a matter of risk mitigation.

Katherine: Finally, I’ve heard about some smaller producers pulling back on production because they cannot get primary sector goods to market in time. Is that happening in smaller sectors, and is there any support for them?

Simon: We have worked with other pip fruit exporters to put products onboard the vessels we are securing, and we are very open to other parties joining us who hadn’t dealt with T&G for a number of years. Having the same product on the vessel is nice and easy if we had to change temperatures. Things like that might get a bit harder for smaller volumes of product.

Katherine: What else would help? For example, do you feel your supply chain business is sufficiently supplied with RAT’s? I know there are a lot of issues with the supply of rapid antigen tests at the moment. Is that another concern you have for your domestic industries?

Mark: From my point of view, I’m more concerned about the infrastructure side of it, such as the New Zealand ports, trucking companies and the likes. We have pretty strict protocols internally, and we can control our destiny to some extent.

It’s more the ancillary part of the industry that’s probably the main concern. We’ve seen where the ports have failed around the world, and trucking has become unavailable. I would have been looking around in New Zealand now, ensuring that we’ve got safeguards to keep those ports, warehouses and trucks flowing.

Katherine: Can we speak about the Ports of Auckland, which I understand, had a long-running container upgrade project there. Is it relevant to this situation?

Mark: From an export perspective, our main ports are Tauranga, Wellington, and down the South Island. Auckland is the main import port, and it has its challenges. It’s probably one that people drive past in Auckland and see the mountain of containers built up. That’s largely symptomatic of the bigger picture rather than necessarily the Auckland port challenges.

Katherine: Is the internal supply chain of getting products around the country in each of your industries flowing smoothly, or is that also providing some issues with container logistics?

Mark: I suspect we are about to see that. To date, New Zealand’s Covid response has allowed those key industries to keep going, but I think there are challenging times ahead on that front.

Katherine: What do you believe is the impact of an Omicron peak in March and an outbreak that continues perhaps for two months or more?

Simon: That could affect everything from harvesting, storage, packing, trucking, ports, so there is a component everywhere that could be affected. That could be very challenging for everyone.

Source: RNZ. This interview transcript was edited for clarity.

P.S. Easy Freight Ltd helps New Zealand importers & exporters to save money on international freight and reduce mistakes by guiding how to comply with Customs and biosecurity rules. 

➔  Contact us now to learn how we can assist you.