Shipping crisis will end when vaccinated people get to travel

Shipping lines have weighed into the vaccination debate, claiming the around and eat out, reducing the time and money they spend on online shopping.


Importer and exporters are furious about the rising fees they are being charged by shipping lines as freight rates hover at record levels.


A new quarterly review from the Global Shippers Forum (which represents importers and exporters) and UK transport research group MDS Transmodal claims that shipping lines’ operating costs “have barely moved over the past 18 months” but that their earnings per container have doubled over the same time period.


The Freightos Baltic Index, which represents the market rates of transporting containers on ships around the world, is trading at $US10,323 ($13,840), up from $US2,032 a year ago.


Shipping Australia, which represents big international shipping lines, argues that the costs to operate a ship are “massively escalating” due to unprecedented demand for consumer goods during the COVID-19 pandemic, leading full ships and congestion at ports. The costs of chartering a ship have risen by up to 773 per cent since May 2020.


Australians are ordering so many goods online that Australia Post has temporarily stopped collecting parcels to deliver.


Shipping Australia argues that the costs of chartering a ship have risen by up to 773 per cent since May 2020, and that the cost of operating a 4,250-box ship (the size that typically calls in Australian ports) has blown out from about $US30,200 per day in mid-June 2020 to about $US151,400 per day.


If the ship is delayed at an Australian port due to congestion and slow handling of containers, the costs rise further, the lobby group said.


It says that cost pressures will ease when more people are vaccinated and can travel and eat out at restaurants again, reducing their spending on consumer goods. New ships are also being built and will be put into service over the next few years.


“The path out of the container shipping crisis requires governments to buy and distribute vaccine supplies, for populations to get vaccinated and for governments to stop lockdowns where it is safe to do so,” Shipping Australia said.


But Paul Zalai, a director of the Global Shippers Forum and the Freight & Trade Alliance, said most of the big shipping lines either own their vessels or have them on long-term charter, so are immune to the recent surge in charter rates.


“There is no doubting many ports around the world have suffered and continue to suffer from COVID lockdowns and working restrictions,” Mr Zalai said.


“What needs to be questioned is how much of the chronic port congestion was originally caused by the mass cancellation then reinstatement of shipping services last year at the onset of the pandemic.”


Danish shipping line AP Moller-Maersk reported record profits in the second quarter, citing higher freight rates and volumes for earnings increasing to $US3.6 billion from $US552 million a year earlier.


While the company’s container handling costs rose, partially due to congestion, the increase was only slight compared to a 75 per cent jump in second quarter revenues to $US9.8 billion, while profit margins rose to 39.7 per cent from 20.7 per cent a year earlier.


Mr Zalai sent a letter to trade and tourism minister Dan Tehan in early August suggesting the creation of a new federal regulator, similar to the US Federal Maritime Commission, to stop shipping lines capitalising on their market power.


Mr Zalai told The Australian Financial Review that the federal government should review the competition protections given to foreign-owned shipping lines.


“We do not want government interfering with price setting as we need these entities to be incentivised to continue to service Australian trade,” he said.


“All we are asking is for these shipping lines to operate vessel sharing arrangements in line with laws faced by others in Australian commerce.


“If the government is sold on the need to give shipping lines continued exemptions from the Competition and Consumer Act, then we will clearly need a federal maritime regulator to oversee proceedings to safeguard Australian exporters and importers.”

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