Changes in freight and shipping costs to impact industry

The increase in freight and shipping costs across Asia, coupled with the impact of COVID-19 is causing disruptions and increased costs to the print industry, especially when consumables, paper, board and other materials are involved.

At a recent Visual Communications AGM presentation, shipping agent Agility Logistics manager Benjamin Wilson said over 80 per cent of cargo arriving into Australia is via passenger aircraft and that while global air cargo capacity was down 75 per cent in early April as a result of widespread passenger flight cancellations, air freight rates are still rising due to capacity availability, ocean freight downturn in capacity and the increase in e-Commerce.

Wilson mentioned that with air freight rates currently only being honoured by carriers for 48 hours, order and freight forecasting will now be required well in advance, and that the industry cannot expect stabilisation on rates and capacity until international boarders are open.

As for ocean freight, he said rates have been the highest since 2009, averaging at about US$1,600 per twenty-foot equivalent (TEU).

He added that ocean freight demand has outweighed supply by 10 per cent and forecasted this trend to continue until February 2021.

Wilson also added that with port congestion surcharges coming into effect and operators utilising smaller vessels – which has resulted in capacity being reduced by about 12,000 TEU per week into Australia – the industry is going through equipment shortages in Asia Pacific as vessels could not accommodate empty repositioning.

Ball & Doggett procurement manager Michael Tsagaris told Sprinter that the changes in freight and shipping is expected to cause a downflow effect in the industry and derail its recovery from the coronavirus pandemic.

“The demand and supply issue in shipping and freight is happening because they’ve taken some of the capacity out of the network. Based on this, market prices are increasing sharply,” he said.

“Many businesses across Asia are pushing more product at this time to get ahead of Chinese New Year [in February 2021]. This usually happens every year, but this time around it’s a bit different as shipping lines are controlling supply amounts, creating this demand.

“If you looked at the middle of this year, you’d have paid around $1,000 per 20-foot container out of Asia. Now, you’re looking at costs of around $3,000 per 20-foot container. I doubt this change in pricing will ease off around Chinese New Year as a lot of the bottle-necks will take a few more months to clear – healthy pricing can only be expected around April or May 2021.”

According to Tsagaris, this price hike has put pressure on the cost of Ball & Doggett’s solutions and has also impacted lead times for products.

“What this has done is put pressure on the costs of our goods – the industry can expect this to increase by $150 a tonne. In some cases, we’re seeing this immediately as we control the freight but in other cases, we’re starting to hear about it now through our supply network as they’re passing on the costs,” he said.

“Another problem is that lead times for products are impacted as the chances of getting space on a vessel is less, meaning you may only get product on to subsequent vessels.

“A lot of services aren’t going direct, meaning they stop at another country’s port and get offloaded, then reloaded onto a subsequent vessel. But again, because of demand, the likelihood getting on to the next vessel is low. These disruptions add up, resulting in delays by four to six weeks.”

Tsagaris added that the printing industry should plan ahead as the downturn in capacity may last for about six months.

“It is unprecedented times and with this comes a lot of unsurety. Managing inventory in accordance to standard lead time is cause for danger as lead times have blown out. If the printing industry can plan better, at least they can guarantee that they’ll get product when they need it,” he said.

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