A GLOBAL shortage of container vessels, as well as the refrigerated shipping containers they carry, is creating major headaches for Australian red meat exporters trying to supply customers around the world.
As a consequence, charges for container freight have risen dramatically since around April, and long delays have occurred in getting product into some markets, export contacts have told Beef Central this week.
Higher value chilled product has apparently been worst affected, due to shelf-life issues.
Routes relying on trans-shipment (swapping containers from one vessel to another in hubs like Singapore or Malaysia to reach the final destination) appear to be impacted most.
Some vessels are completely omitting major beef markets like Japan at the moment, due to the shortage of ships and containers, Beef Central was told.
“There’s a worldwide shortage of reefer containers,” one exporter said. “Older containers that were retired earlier in the COVID era when shipping volume collapsed have simply not been replaced with new ones,” he said.
“Similarly, there is currently a serious lack of reefer vessels, for what appears to be the same reason.”
To top it off, some port and cold storage facilities overseas continue to suffer due to COVID restrictions, further slowing container and product movements.
Big stockpiles of empty containers were also building up in countries like China, because it was more lucrative for shipping companies to use their scarce vessels to ship full containers, rather than returning empty ones to exporters in countries like Australia.
Customer regions like the Middle East appeared to be the worst affected by the current conditions, one beef exporter said.
His company, which tries to consign chilled beef weekly to the Middle East region, has seen big upsets to schedules, with normal transit times of around 23 days blowing-out to more than 40 days in some cases. Add the loading, unloading and customs clearance time to that, and some containers destined for the Middle East region are not being unloaded by customers for 50 days or more after packing.
While some Middle Eastern customer countries now accept a 120-day shelf life on Australian chilled product, others are as little as 80-90 days, leaving only limited time to distribute and utilise the chilled product, in the current shipping environment, the exporter said.
As competition for the available shipping capacity has risen, there have been significant rises in costs to exporters, Beef Central was told. One company said charges had recently risen about US$1000 per container, up about 20 percent over the past two months. Containers typically hold between 680 and 700 cartons.
Airfreight charges skyrocket
But as sharp as the refrigerated shipping container cost rises have been, they paled into insignificance compared with airfreight cost rises, one exporter said.
“Air freight has gone through the roof, despite the support of the Australian Government’s International Freight Assistance Scheme, which continues to pick up somewhere between 30 and 40pc of the charge on each air consignment. There was talk of dropping the subsidy in September, but it is continuing at this stage,” he said.
While there was not yet any sign of export product backing-up in Australian cold-storage, the shipping congestion was certainly creating a huge level of frustration and major logistical challenges for exporters, another contact said this morning.
“Imagine trying to run a chilled program in some of these countries, when you don’t know when your cargo is going to turn up,” he said. “The logistics challenge is enormous, let alone the additional cost and time.”
“Shipping companies are omitting certain ports from their schedules, and there is generally just less space available, due to fewer vessels servicing different routes. Logistics teams are pulling their hair out, and the work this has created for them is just mind-boggling,” the exporter said.
“Chilled is definitely worst affected, due to the time/shelf-life factor, but frozen has its challenges as well – in just getting the product out of the country.”
The only positive in the situation was that Australian slaughter rates are currently so low. MLA last week in its mid-year Projections Update suggested the national beef kill this year will reach just 6.4 million head – a 35-year low.
“If we were still killing cattle at rates seen in 2018 and 2019, the freight access situation would be just that much worse,” one exporter said.
Another large Queensland operator said current shipping issues had the potential to become a real ‘show-stopper’ for Australian beef exports.
“One large shipping company has advised us that it is suspending services to Middle Eastern ports for at least the next month, due to severe port congestion, limiting services to these destinations,” he said.
“At this end, one shipping company told us it would omit certain Australian loading ports altogether – at least in alternate voyages.”
“These challenges are escalating, and a number of exporters are already getting into trouble around getting product offshore,” he said.
Shipping lines appeared to be ‘cherry-picking’ where they can reposition the scarce number of containers at their disposal, to re-use again, the exporter said.
Another non-packer exporter said shipping services out of Australia had been getting progressively worse, and more expensive, over the last 12 months.
“Some destinations appear more affected than others. Shippers seem happier to service the shorter-transit Asian markets, but it’s getting much harder to service more distant destinations, heading to North America and Europe for example. New Zealand and South American beef exporters are in exactly the same boat as us, in terms of shipping challenges, especially into markets like China,” he said.
“In some cases, shippers are only offering delivery US East Coast, and not West Coast ports.”
The exporter suggested some consignment charges had gone from US$2000-$3000 per 40-foot container, out to US$8000 or more, over the past three months.
“A US$6000 per container freight rate, spread across 25 tonne of beef it contains, represents an extra 25c/kg that has not been factored into the sell price,” he said.
“Shipping companies were losing a lot of money on container freight only a few years ago, and they feel like the current ‘golden patch’ is their turn to make some real money,” the exporter said.