Australian Financial Review - Supply squeeze hits wharves as Visy backs calls for reforms –

Monday, May 24, 2021

Emma Connors South-east Asian correspondent, Australian Financial Review


Singapore | Australia's trade-dependent companies are backing calls for a regulator to examine shipping practices as global freight bottlenecks hit imports and exports.


Paper and packaging giant Visy has backed the regulatory change. In late March, a shipment of paper reels manufactured in Australian paper mills arrived in Singapore, bound for South Africa. They were supposed to have got to Durban by April 21. A month later, they are still stuck in Singapore.

Visy's shipping line has advised it has a backlog of 3000 containers destined for South Africa it is trying to get out of Singapore. In ports across the world there are similar delays, with demand for ships and containers outstripping supply.

In the United States, an inquiry into ocean freight is under way, sparked by the global supply-chain challenges that have exposed gaps in the laws governing ocean freight. Visy is among those calling for similar action in Australia.

"Any support that can be extended to the Australian exporter to help them serve their customers is crucial," said Visy Logistics' executive general manager Sean Richards. He backs the call by shipper and freight groups for more scrutiny of shipping practices.


Paul Zalai is the director of Freight & Trade Alliance (FTA) and the Secretariat of the Australian Peak Shippers Association (APSA) that represents Visy and many of Australia's largest exporters, importers and logistics providers. He says he has never seen global shipping in such dis-array.


"Reports from members indicate weeks of delays at major trans-shipment ports, particularly Singapore, jeopardising contractual obligations in reaching global markets," he said.

What is totally unacceptable is that freight rates and surcharges can be imposed without notice.

— Paul Zalai, director, Freight & Trade Alliance

"Furthermore, we have exporters who have finally benefited from rain and have bumper crops but incredibly are now struggling to even find space on vessels loading from Australia to meet export markets. Those that can get goods shipped are now subject to exorbitant freight rates and surcharges."

Mr Zalai notes that if it were not for the geopolitical tensions with China, preventing the exports of major produce such logs and barley, the capacity issues would be even worse.

Exporters are competing against demand for empty shipping containers by shipping lines keen to serve the lucrative ex-Asia market.

"Over the last 18 months we have had a huge demand for import goods with local consumers spending up during the pandemic," Mr Zalai said.

"The challenge for shipping lines is how do they manage to reposition these predominantly larger [40ft] empty containers back to Asia while still supporting the high demand of export goods shipped predominantly via smaller [20ft] export containers.

"We understand that supply and demand will drive up prices but what is totally unacceptable is that freight rates and surcharges can be imposed without notice."

The industry groups want a new regulator, along the lines of the US Federal Maritime Commission, that would facilitate trade while safeguarding the interests of Australian shippers.

With limited supply of ships and containers, shippers are getting stung as shipping lines raise charges on contracted freight already booked.

On high volume, low margin goods, these charges erode profits. One exporter told APSA he could cop increased shipping costs on freight not yet booked. Raising shipping costs on goods already on their way to the port, or just days away, was another matter. He compared it to a consumer buying a fridge and then, a week before delivery, getting a call saying the price had gone up.

FTA and APSA want shipping lines to be required to give a minimum 30 days' notice of pricing changes. This would match regulation in the US.

"That would give exporters half a chance to stay commercially viable, allowing them to decide whether to ship, and at what price, rather than operating with diminished margins and in some case at substantial losses," Mr Zalai said.

The call for competition regulation is among the changes the industry groups have asked the Productivity Commission to consider in its inquiry into vulnerable supply chains. The commission's final report is due to be handed to the government in July.

Visy's Sean Richards said he "absolutely" backed the call for a new regulator.

"Australian exporters are price takers," he said. "We compete against domestic producers so there is a ceiling to what we can charge. Anything beyond goes to margin erosion."

He said the changes sought by FTA and APSA would not remedy the situation, but they would help. "There is no doubt this is hurting exporters," Mr Richards said.