Port Nelson moves record number of containers, a reflection of global shipping volatility
Port Nelson achieved an off peak-season record of 5141 container movements in a week during August. This news will be a positive signal to the exporters of Te Tauihu who have been hard hit by shipping disruptions for much of 2021, but regrettably does not mean that shipping reliability issues are over.
The record level of movements does not indicate an end to on-going shipping reliability and capacity challenges for the region, the Port, or the rest of the country.
The nature of importing and exporting challenges impacting the region is a result of the global and national crisis.
In early 2020, COVID-19 first spread around the world, and countries went into shut down. This had the effect of leaving ships unattended outside ports and cargo creating congestion on the ports. While volumes continued to move, they did so at a slower pace and services became irregular.
Around June and July 2020, the shipping crisis entered a new phase, this was triggered by the world’s consumers coming out of lockdown with an appetite to spend. Dramatic increases in the demand for products saw global cargo volumes rapidly increase. This created unprecedented congestions in the system with ships waiting at ports to berth and cargo overflowing at ports while waiting to be distributed. The graph below highlights the dramatic drop in the reliability of global container traffic schedules. These fell from 75% to 35% over the period July 2020 to January 2021.
This congestion was felt by import and exporters as a dramatic reduction in the ability to obtain products in a timely manner and an equally dramatic shift in the costs of container movements. The global index for container freight cost jumped 600% between June 2020 and July 2021.
In response to the high demand, shipping lines directed scarce ships and containers to their more profitable lines such as the China to West Coast USA route. This had a consequential effect of removing capacity from the Southern Hemisphere.
In February 2021 shipping lines and ports adapted to the new normal and began to make incremental improvements and efficiencies. This saw a slow improvement in reliability numbers.
Alan Murphy, CEO, Sea-Intelligence, comments on the recent 2021 reliability levels “Despite continued port congestion, schedule reliability has not gotten any worse. However, it is still at a very low base, hovering around the 40% mark since March 2021. In June 2021, schedule reliability improved marginally by 0.8 percentage points M/M to 39.5%. On a Y/Y level, schedule reliability was down a massive -38.2 percentage points. The average delay for LATE vessel arrivals continued to deteriorate in June 2021, increasing by 0.38 days M/M to 6.41 days. The level of delays in 2021 have been the highest across each month compared to previous years.”
The National Shipping Challenge
As an export-oriented nation, New Zealand has been strongly impacted by the global shipping challenges. Unfortunately, these have been accentuated by some local factors. Firstly, waterfront labour issues on the east coast of Australia, created delays in container supply. Secondly the overwhelming of Auckland Port’s capacity due to the uplift in cargo volume coming at the same time as it was implementing a new container handling strategy and had labour shortages. The result was significant delays in vessels unloading cargo at Auckland and the distribution of that cargo around the rest of New Zealand. Port of Tauranga stepped up to take on some of the import load from Auckland, however its capacity and the ability to distribute cargo via rail was soon overloaded.
As a result of these impacts, the reliability of container vessel services plummeted. Over the period February 2020 to April 2021, shipping reliability at New Zealand ports dropped to near-zero levels.
- Ports of Auckland – 78% to 6%.
- Port of Tauranga – 82% to 5%.
- Napier Port – 92% to 16%.
- CentrePort Wellington – 78% to 0%.
- Port Nelson – 100% to 0%.
- Lyttelton Port Company – 88% to 7%.
- PrimePort Timaru – 100% to 0%.
- Port Otago – 79% to 0%.
Data from SEA Intelligence
Over and above the shipping capacity and reliability issues, local importers and exporters have been hard hit by the dramatic increase in freight costs. There is less of an impact for larger exporters locked into long-term contracts with shipping agencies due to the volume of goods that are exported. However, the impact on New Zealand’s smaller exporters is drastic. Smaller exporters are struggling to export their goods to international markets due to space availability on ships and delayed or cancelled vessels coming into Port.
Key exports from New Zealand are chilled and perishable goods, which require cool store capacity and refrigerated containers. Shipping congestion has coincided with New Zealand’s export replenishment of chilled food and perishables for the North American and European summer retail season. Demand continues to out-pace supply of container equipment causing issues exporting these products with limited shelf life.
Port Nelson Impacts
The typically reliable container shipping service through Nelson has been caught by these global and national challenges. A particular local challenge that Nelson provides for shipping lines is the tidal nature of the port. Occasionally vessels, under time pressure due to disrupted schedules, will choose not to wait for the tidal window and by-pass Nelson. Addressing this risk for the region’s importers and exporters as well as providing for the nature of 24/7 worldwide shipping, it is essential for Port Nelson to also operate on a 24/7 platform.
Over the period 1 July 2020 to 31 June 2021 container volumes through Port Nelson were 13% below expectation. However, the bulk of the negative variance occurred in the last six months of that period, when nearly 20 of the expected 80 vessels omitted the Port.
The intensification of these issues has unfortunately resulted in Te Tauihu exporters dealing with the brunt of these impacts. Lack of equipment, shipping disruptions, and increased costs are key issues that exporters are navigating. There is also high utilisation of storage facilities at this advanced stage of the peak export season in Nelson causing additional pressure.
At Port Nelson, the perpetual vessel schedule changes, cargo rollovers, and space capacity issues, require the Port to constantly reorganise the container depot and the resourcing of its team.
In May this year, space became a premium at Port Nelson. Full containers were stacked in the empty depot, roadways were adapted for 4 high export stacks, and general containers were filling available space in reefer towers. The container terminal had come to a critical point and had gone over and beyond its capacity. For the first time in Port Nelson’s history, Port Nelson was forced to close for receivals.
Coming back to the Port’s record week in August; For the week commencing 9 August, the Port received 5 vessels, including 2 from MSC.
Port Nelson’s containerised volumes moved for the week were 5141 Twenty Foot Equivalent Units (TEU). The highest number of TEU in one week in the last 4 years and the highest moves outside the apple season (March to May).
The team broke new records with the Port importing a record number of containers in the week of 1021 Twenty Foot Equivalent Units (TEU) which was the result of another record-breaking week for wine and bottle imports and exports standing at 1096 combined TEU with bottle imports making up over half of this volume with 626 TEU – another new record.
The Port’s QuayPack team, the on-site logistics and warehousing division, also had a record-breaking week by de-vanning 230 40-foot containers after receiving 380 to de-van at the start of the week.
The pressures from ad-hoc sliding of vessel calls are unlikely to quickly abate. Shipping volatility will continue to impact global shipping for the next 12-18 months and freight costs will remain high. In the long term as congestion levels ease, record high freight costs should reduce in time, however industry experts suggest this may not happen for another two years.
According to New Zealand Trade and Enterprise, spot rates for containers and ships have stabilised but remain at record highs. High demand and limited availability are expected to impact the global flow of goods in the coming months. The new vessels and equipment ordered by shipping lines are not likely to be available until late 2023. The hope is this will increase the supply of shipping space and hopefully balance freight rates.
Port Nelson has been working to resolve the key issues of delays to export shipments and can assure exporters and importers that the importance of continuing to provide regular services to the Te Tauihu community are well known to the shipping lines and the freight forwarding sector.
As we head into spring, Port Nelson is navigating the challenges of another nationwide lockdown. The Port is continuing as an essential service, while ensuring the safety of our staff and contractors. Our focus is to ensure goods continue to flow in and out of the region whilst safe-guarding our workers and the community. The Port continues to monitor the global shipping crisis, normality is not upon us yet, but as shipping reliability continues to increase, we will see the crisis move in a more positive direction.
Media enquiries, please contact:
Jessica Ammundsen (Communications and Engagement Manager)