Shockwaves from the Islamist Houthi's 200-day war on shipping in the Red Sea are now hitting Australia where exporters and importers face a surge in container freight costs and space shortages on key maritime routes.
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Shipping industry analysts say the outlook looks increasingly uncomfortable for important agricultural commodity exports such as grain and meat, particularly in the lead up to this year's grain harvest.
The pro-Palastinian Houthi militants' strikes on ships in the Suez Canal have subsequently added almost two weeks to sea freight times between Asia and Europe as vessels divert around Africa's Cape of Good Hope - unless they have armed escorts to accompany them in the Red Sea region.
With global shipping schedules only just normalising last year after massive disruption and huge cost rises in the COVID pandemic, the past six months of drone strikes and ship hijackings have taken a new toll on shipping schedules, and created costly port delays.
Freight times have almost doubled on Europe-Asia routes, while extra ships have also been brought into service to help keep freight moving, creating more congestion in key northern hemisphere ports.
With containers kept on the water for longer, fewer have been available for reloading, a problem compounded by bad weather slowing port activity in China, Malaysia, and Singapore earlier this year.
Trump factor
Further complicating the ocean freight predicament has been drought-reduced shipping access to the Panama Canal linking the Atlantic and Pacific oceans, and the "Trump factor" in the US.
A mass of pre-presidential election demand for Chinese-made goods has seen shipping orders hitting new highs as US retailers and manufacturers rush to beat steep import tariffs of up to 75 per cent promised by presidential hopeful, and likely election winner, Donald Trump.
"Shipping lines are rubbing their hands together prioritising resources to service this lucrative peak demand," said Freight and Trade Alliance and Australian Peak Shippers Association director, Paul Zalai.
Port congestion has been particularly bad in Singapore, the major trans-shipment freight hub linking Australia with many of our export destinations and import sources in Asia or further afield.
"There's a massive backlog of containers trying to unload in Singapore - about two million containers sitting in the waterway, trying to unload," observed northern division livestock general manager with meat processing and marketing giant, JBS, Edwin Cooke,
He told a recent protein conference on Queensland's Darling Downs there were "great challenges involved in the international shipping lines at the moment".
"We're facing shortages of containers, similar to what we saw back in COVID, which is quite scary and adds huge costs."
Rabobank global markets research strategist, Ben Picton, said to date, Australian traders and ports had been spared much of the impact of the northern hemisphere dislocation.
However bulk and container shipping schedules had gone awry overseas, costs were rising and the impact was set to hit home in Australia, just as the lag time had caught up during the pandemic.
"I've been told to expect `COVID Mark II' in coming months," said Toowoomba-based grain trader and Australian Pulse Council chairman, Peter Wilson, at Wilson International Trade.
While Australian traders were still getting reasonable container rates and shipping schedules for exports heading north to Asia, going west was already problematic on several fronts.
Supply routes to the subcontinent and the Middle East were restricted, and made more complicated by newly opened sales opportunities to India.
"We've already got people making sales, but struggling to get freight into India - deals negotiated on $20 a tonne freight might suddenly cost $80," Mr Wilson said.
Meanwhile, he noted the "container supply job has not really recovered since COVID", with ongoing shortages in availability of 20 foot containers commonly used for grain exports.
Another exporter, in the meat industry, noted bunker (shipping fuel) prices were also volatile, shipping into the Middle East was "obviously problematic", and shipment arrival dates to customers were now much less reliable.
At the FTA, Mr Zalai said June's composite World Container Index had increased significantly - up 25.7pc to $US5117 for a 40 foot container.
That was a 233pc rise on the same period last year.
July had also arrived with a wave of early season shipping company price increases flagged for freight movements to and from Australia.
"Cost rises are definitely happening now, and capacity to North America is becoming an issue for grain and beef and lamb," he said.
"But, while foreign-owned shipping lines are attributing spiralling freight rates to the supply and demand imbalances caused by global events, of particular concern to us is that long-standing commercial arrangements are now subject to change."
"Named account freight rates negotiated with major freight forwarders and importers are not being honoured, making it impossible for logistics operators to predict landed costs."
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
