Cost pressures on shippers

AN upturn in the global economy, and more specifically the phenomenal economic growth of China, is placing significant pressures on the shipping market, forcing bulk and container freight rates to all-time highs.

United Farmers Co-operative general manager sales and oper-ations and WA Shippers Council member, Phil Nixon, said Western Australian importers, like most others around the world, were paying more today than ever before, while there was similar pressure on export prices to many destinations.

Mr Nixon said that, as a result of the increased cost of importing goods, Western Australian businesses were being forced to pay more, not withstan-ding the benefits of the higher Australian dollar, which had provided some relief.

Large bulk exporters have been somewhat insulated from the tighter market and higher shipping prices with surges in some commodity prices, such as for most minerals, more than outmatching the freight rate increases.

The grain industry and small, start-up bulk exporters have been under increasing pressure as a result of lower returns and increased freight costs.

Ravenous Chinese demand for raw materials to feed its massive economic development is one of the major factors influencing the shipping market.

“China is paying very high prices to get its raw materials therefore this becomes a benchmark for everyone else,” Mr Nixon said.

The increased prices of the past year show no sign of abating, even with new shipping capacity expected to come online within the next two years.

In reality, however, it could be several years before extra capacity catches up.

According to SMS Shipping & Chartering and United Stevedoring Company Ron Jones, freight rates for bulk import costs are at all-time highs and are expected to remain very strong for the next six to nine months.

“Prices for bulk import freight over the past 18 months had increased 40 to 60 per cent,” Mr Jones said.

Freight rates for container imports had also significantly increased, as had bunker surcharges during the past six to nine months.

“While the strength of the Australian dollar has to some extent softened the blow of increased commodity prices and freight charges, at the end of the day the consumer of imported goods will pay that penalty,” Mr Jones said.

The cost of bulk exporting had also reached record levels and Mr Jones suggested this would continue for the medium term.

Prices for exporting containers are expected to remain competitive in real terms subject to fuel prices and currency factors.

But while there is an ongoing imbalance between import and export quantities, fluctuating world fuel prices are expected to have a contin-uing impact on bunker surcharges applied in the container trade.

One local business to feel the pain of the increased prices is Bibra Lake-based trading company Premier Exports.

Premier sales executive Trevor Dare said the costs associated with exporting on some routes had made business very difficult in the past 12 months.

He said North Asian demand for Australian meat, which had been booming since North America’s problems with mad cow disease mid way through last year, had really tightened up the shipping market on that route.

“As a result, shipping space has been swallowed up and the shipping companies have had a birthday,” Mr Dare said.

“They [shipping companies] are really holding a gun to our heads.”

Mr Dare estimated freight costs had risen by between 20 and 25 per cent since the middle of last year, with freight prices remaining high despite recent reduced demand. 

Chinese demand in general, he said, meant containers were often very difficult to get hold of, with up to month-long waits in some cases.

One of Perth’s biggest shippers, Geneva-based Mediterranean Shipp-ing Company, would not comment, while a spokesman for, Shipping Australia, was unavailable at the time WA Business News went to press.