The longer Australia’s live export ban to Indonesia lasts, the more likely it will be that ships servicing the market will be lost to other routes, vessel operators say.
As Australia’s live export industry saw when the Indonesian market closed during the Asian currency crisis in 1997/98, once boats disappear over the horizon it can be difficult to get them back.
Shippers with larger vessels suited to long-haul journeys have several re-positioning options including the live cattle trade from Uruguay and Brazil to other South American destinations and the Middle East, the dairy heifer trade from New Zealand into Asia, the various dairy and beef cattle routes throughout Europe and the US and Canadian breeding cattle trade into Russia and Turkey.
Exporters who spoke to Beef Central yesterday said the uncertainty surrounding how long the suspension will last has already caused some shippers to re-deploy vessels elsewhere in search of other work.
Leaving multi-million dollar ships to stand idle was a costly exercise, particularly where demurrage fees in harbours were an issue.
“They have already done that,” Sid Parker from South East Asian Livestock Services said in Darwin yesterday.
““They are already going to America and South America and New Zealand. They can load out of Brazil and there are cattle going from America to Turkey and Russia.
“There is demand for boats in those trades.”
In his own company's case, Mr Parker has a smaller ship specialising in the South East Asian trade for which longer haul journeys are not a viable option. He secured an order to the Philippines for 1100 head which left from Darwin last Friday, and said SEALS was also looking at possible orders from Brunei, which it supplies three to four times a year.
While rumours have been circulating of increased orders from the Philippines and Malaysia, the volumes still pale in comparison with the gap left by the suspension of the 500,000 head per year Indonesian market.
Malaysia took 17,084 cattle and the Philippines 16,244 cattle from Australia last year. Were the lower prices created by the Indonesian suspension enough to encourage the Philippines and Malaysia to double their imports, the volumes involved would still amount to a drop in the ocean compared to the breach left by the ban.
Egypt, which took 56,441 Australian cattle last year, offers another potential market for northern live export cattle, particularly given that market’s success with Brahman type cattle in recent years.
An industry source yesterday confirmed that a second closed feedlot/abattoir system has now been built by a Middle Eastern company in Egypt, and a final sign-off by the Egyptian Government is all that is required before that facility can begin taking imported cattle.
However the economics are not as attractive as supplying Indonesia. Egypt is a more price-sensitive market and involves a longer and higher-cost voyage for exporters – a 20-day sea journey from Australia, compared to just four or five days for Indonesia.
While Turkey has been a star performer for Australia’s live cattle trade in recent months, taking 27,605 cattle in March, its preference is for European type cattle, not bos Indicus.
“Over the longer term, livestock movements will be happening somewhere around the world and ships will get repositioned,” an export industry source told Beef Central yesterday.
“It just a question of when and how quickly.
“If someone was to reposition their ship doing a South American – Middle Eastern run, to encourage them to come back to Australia it is all going to be about price and availability of animals and availability of markets.”
In mid-June Australia’s largest live exporter Wellard Rural Exports delivered a consignment of 680 dairy cattle from Townsville to Jakarta via its vessel the MV Ocean Swagman, which has a capacity of 6500 cattle.
A spokesman for the company said that where possible exporters were redirecting vessels to other markets, but most were less economically viable.
The dilemma facing shippers is whether to take the risk of sending vessels on three to four week sea journeys to service other markets, when the Australia-Indonesian market could re-open during that time.
Against that is the cost of leaving ships sitting idle while the ban lasts – which the Australian Government has stated could last for six months.
Elders redeploys vessels
Elders' exporting arm North Australian Cattle Co was impacted in early June when the Elders-chartered livestock carrier The Falconia was not granted permission for leave to load out of Port Hedland.
The Falconia subsequently sat off Port Hedland for eight days before it was released by Elders’ commercial commitments. Elders was only committed to the Falconia for the single shipment.
Elders was able to deploy the livestock vessel Sahiwal Express (typically deployed exclusively for Indonesia) to its long haul dairy/breeder market. The Sahiwal Express is currently en route to China with a shipment of dairy cattle from Portland, Victoria.
An Elders spokesman said all other livestock vessels within the Elders fleet were exclusively utilised by its long-haul (non-Indonesian) markets and were fully deployed.
Historically 75pc of Elders live exports went to Indonesia, but in the past 12 months the company’s long haul business has accounted for a much larger share, approximately 40pc.
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