Brett Charlton Overview of Freight Thank you to Ian of the Other - PDF document

Brett Charlton – Overview of Freight Thank you to Ian of the “Other Side” and the Tasmanian Fruit and Vegetable export facilitation group for hosting us today. I would also like to acknowledge my fellow presenters that have significantly challenging roles. Thank you to Michael Byrne in heading up the IFAM program which is essential to the success for many Australian and indeed Tasmanian exporters. I am sure Peter Liddell’s perspectives from living in Shanghai for three years will be valuable for this session. For those online that attended the TASMANIAN FREIGHT AND LOGISTICS UPDATE WEBINAR a few weeks ago I apologise as there will be some repetition today. Since the beginning of the COVID-19 pandemic the transport and logistics industry have met regularly (virtually) through fortnightly meetings chaired by Minister Ferguson. If one can find positives in a mad world then it is the collaboration between government and industry on all levels – and from my observations the transport and logistics industry have excelled at being open and engaged from the outset and continue to be so. From exemptions for international services calling Tasmania to implementation of COVID – 19 protocols for warehouses and trucking operations as well as general open discussion around challenges and solutions – the industry has shined in this regard. The often understated transport and logistics industry has come to the forefront as an essential service and living on an island at the bottom of the planet (whilst definitely has excellent advantages) always has few extra layers of complexity to overcome when it comes to transport and logistics supporting inwards and outwards trade. Tasmania is handling the current situation well, the COVID 19 plans are in place, the distribution centers are working on contingencies for maintaining stock supplies, our services across Bass Strait are working well and effectively with high caution, airfreight is being directed to Sydney to assist perishable exporters with a federal government IFAM program extended to support, international carriers are servicing importers and exporters ….. There are challenges, but by and large toilet paper is available and I have had no reports of concerns that currently shows a disruption to the supply chain in or out of Tasmania that directly relates to transport or logistics issues presently. That said, this does not mean we take this period of time for granted – we are in our “low period” presently and despite

COVID-19 we have had challenges in the past with industrial actions, ship repairs, congestion and cyber-attacks – all disruptive to the flows to and from Tasmania and usually at the most critical time (peak season). Whilst COVID19 is our main focus at the moment, these issues should be very much in our forward vision. In regards to COVID 19 - The Tasmanian Transport Association should be praised for their extensive work on COVID – 19 safety plans for the industry – I very much recommend that anyone working on such plans for their industry or work place review the TTA website – many of our contemporaries on the Mainland use Tasmania as an example as to how it should be done. Whilst the movement of goods to and from Tasmania is working effectively, I did mention there are challenges………and here are some of the ones that we deal with on a daily basis. Importers are having a very difficult time of it at the moment. This time last year Australia had the ability to move 38,000 20’ containers a week into Australia ex China. At the moment the shipping lines have the capacity to move 28,000. This is on the assumption that trade would contract considerably between China and Australia – however this has not been the case in Australia and we find ourselves in what would be considered peak season conditions in what is traditionally the low season for freight. When there is less space and more demand think like oil – you turn the tap back to flow less oil and the fuel prices go up – it is the same with freight. This time last year a 20’ container from Shanghai to the East Coast of Australia would cost around US$300.00. Now the price is around US$1200.00 per container with most industry people suspecting it will go to around US$1400.00 at least by the end of the year. In the shipping world all eyes are on Maersk Line to see if they will implement the YOYO service back into the China to Australia trade (additional tonnage) in September – if this comes there may be a flattening of upward curve in costs (everything is a curve these days) – if this does not happen, we should expect rates to continue to increase as mentioned previously. Add to this port infrastructure fees increasing as well as port costs, fluctuating fuel pricing and other factors – the reality is that at the moment there appears to be no downward trend on pricing expected for some time. A majority of the re use of 40’ equipment ex Australia is for the recycled market (or wastes) – recycled paper, plastics and metal. At the moment there is some conjecture around permissions to ship such goods to China (some lines have refused to take bookings for this

commodity to China presently). This can throw the balance out of an exit channel for this type of equipment and if it is not used as cargo paying freight then repositions empty to other markets will have to occur – the lines will look to recover some of these costs so importers using 40’ equipment shoul d be watching what happens with waste exports closely as it may impact them financially. We are not alone in this situation – Freight rates from China to the US have doubled and space is very tight on that trade lane. India report that there is a shortage of drivers and equipment presently with inland local trucking increasing 25%. Importers ex China would be wise to think about September and October shipments now with there expected to be significant pressure when China pretty much shuts down for a week in the first week of October (Golden Week) – expect space before and after to be very tight as shippers rush to get goods out of China before the holiday starts and the inevitable congestion for all of those containers that did not make the sailing thereafter. The volumes for trade are all skewed at the moment and the shipping lines are in the difficult position of trying to accommodate what will be moving. Lock downs, consumer spending, warehouse stocks, manufacturing trends all are rapidly evolving beasts that need to be considered when planning vessels and trade routes – it is a tough gig presently. Take approx. 10,000 containers out of the weekly mix coming into Australia and th is causes issues for exporters. Tasmania is traditionally a 40’ container importing State and traditionally a 20’ container exporting state. With less containers coming in to match the export demands, exporters need to think very carefully around their volumes and where the equipment will be coming from. At the moment we hear stories of lack of export equipment for certain trades that causes issues and costs for exporters where they find themselves either delaying contracts until equipment is available or needing to look for alternatives to accommodate export movements (usually at a higher price to what they are used too). Some commentary is that the East Coast grain trade will be significantly better this year. A lot of these commodities move in 20’ contain ers – this could add additional strain to Tasmania having the equipment to accommodate our export markets. Reefer containers are in short supply around the world and before December this year we will need to learn which lines are looking to support our chiller freight ex Tasmania. Shipping