Export

Container shortage applies the blowtorch at all levels

Henry Wells, January 24, 2017

AN UNPRECEDENTED up-country shortage of shipping containers for grain and pulse exporters to pack is causing delays and costs at all points from the farm gate forward, and is not expected to end any time soon.

Coonamble grower Bill Burnheim last week said his cash flow had been affected by the buyer of his chickpeas being unable to take delivery due to the shortage of containers.

Another Northern NSW graingrower said her harvest-time feedback was that more packing facilities were needed to accommodate bigger pulse crops.

“Growers were only allowed to deliver 50 tonnes a day to the packer; they were harvesting it at 50 tonnes an hour,” she said.

Systems are working flat out to catch up, following the late harvest, to move growers’ tonnages to export along bulk and container pathways.

The impact of the container shortages first became evident in Brisbane and is now seriously affecting shipments though ports in other states.

Storm toppled stacks of containers

The northern shortage was made worse in November when a storm toppled stacks of empty boxes at a container park near the Port of Brisbane, temporarily tipping the demand for boxes to pack against available supply.

Combining a late start to the 2016 chickpea harvest, bigger-than-expected yields and strong prices, the jump in demand for boxes has compressed a greater volume of freight bookings into a smaller time-frame.

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It is normal that at certain times of the season shipping companies’ freight slots will be overbooked because cancellations normally occur.

This year, however, the dice have rolled differently.

“The situation has continued into January with no end in sight. We are already worrying about what will happen in March and later,” said pulse trader at Australian Grain Export, Will Alexander.

Shipping lines in a normal year might count on 30 percent of all booked freight being cancelled and not used.

“We can usually book freight in advance for wherever we want – that is not a problem.  This year is different,” he said.

“The problem is that shipping lines are cancelling freight whenever they please. Previously they would roll you into a later vessel; these days they just cancel it. If they offer new freight at a later date, they have increased the price.”

“So, if you imagine in a market where the commodity has fallen in value, shipping lines then put us out of contract as we cannot ship on time, and our buyer has every right to walk away or demand a late shipment discount.”

A huge problem for traders

Mr Alexander said there was no recourse for the exporter.  This is a huge problem for traders.

“If we sell a product to someone we have a contract which we are bound by, and so is the buyer. Shipping lines have agreed with us to supply freight at a certain rate at a certain time, but they are not held responsible when they do not perform. It seems they can do exactly what they want if it suits them.

“In my opinion the shipping lines have overcommitted freight to exporters and underestimated demand for container freight.”

A specialist freight operator told Grain Central that bookings are made subject to availability of space and (suitable) empty containers.

Shortage affecting all commodities

Agrigrain’s Greg Kerr said the container shortage was currently affecting all commodities and destinations. The company operates packing plants at Narromine and Coonamble in NSW, shipping for export through Sydney ports.

“With the price volatility of chickpeas into the sub-continent at the moment, we have some major issues with shipping January contracts without copping massive penalties for shipments that will fall into February due to lack of available empty stocks and consequently have to roll shipments,” he said.

“The fact they can accept a booking knowing full well they can’t meet their commitments to supply without any penalty being able to be imposed on them is ridiculous. If we did that as traders, the GTA (Grain Trade Australia) or someone else would be all over us for not fulfilling our contract.”

Port of Brisbane

Containers stacked at the Port of Brisbane.

Mr Kerr said prior to Christmas, Agrigrain booked 140 containers to go out in the first half of January, but ended up with only 27.

“We then chased them up regarding the remaining boxes (and) they told us we had to collect from a completely different depot and needed to transfer boxes to the railhead at our cost — roughly $150 per container,” he said.

Another NNSW packer said the shortage in containers became evident after Christmas, and there was no recourse for packers when shipping lines were unable to supply the boxes needed for pulse exports.

“Forty-footers are easier to come by but 20-foot boxes have gotten tight.  You can load 25 tonnes in a 20 (foot container) and only 27 or 28 in a 40 (foot container),” he said.

In addition, growers and traders who had chickpeas booked on hectare contracts ended up with sometimes double the tonnage they had initially expected.

Dalgrains’ manager, Tobin Cherry, at Dalby on Queensland’s Darling Downs said a shortage of food-quality boxes had been the problem for chickpea packers.

Price goes up

He said trade into Sydney had been difficult since December, and container availability problems into Melbourne and Brisbane had also emerged.  “When a packer had to go to another shipping line to try to get space, the price had gone up,” he said.

Another packer said unloading delays in destination ports such as Chittagong in Bangladesh and Yangon in Myanmar were also tightening supply of containers; however they had encountered minimal problems with empty containers, by planning for flexibility to avoid bottlenecks and to minimize the impact of unexpected occurrences such as train derailment and storms.

A specialist freight operator, who asked not to be named, told Grain Central that a long-term decline in freight rates had made business unprofitable for many shipping companies, which made them disinclined to invest in equipment.

Standard freight rates today on many northbound services out of Australia return less than 40 per cent of the revenue those services returned in the 1990s.

It costs often less than A$400 (all-in, including local charges) to take 25mt of grain from Australia to a port in China, an outlay which 25 years ago would have been closer to A$1000.

Innovation has driven efficiencies in handling and management, but even so the low revenue puts extreme cost pressure on competitive operators.

Shipping lines make freight bookings subject to availability of equipment and space.  At the time they take freight bookings, possibly several months in advance, it’s a crystal ball as to exact import quantities projected to provide the empty food-grade 20 foot containers.

Around half of the inbound 20 foot containers may be suitable for upgrading to food-grade containers.

Southbound volume is progressively seeing more 40 foot containers used for transport of bulky (such as clothing or toys) goods.  Such trade volume has slowly reduced the availability of 20 footers for export.

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