Sea freight rates reach record highs

MEAT processors are grappling with another round of rising ocean freight rates for refrigerated and frozen containers leaving Australia this year, further eroding margins.

“Freight rates for container exports have gone through the roof in recent weeks,” a disgruntled export processor told Beef Central this morning.

“Costs have increased by around 60 percent on average since last year, but by 100 percent or more in some markets,” he said.

Markets such as Europe and the Middle East were hardest hit, but all trade routes that accepted Australian red meat had seen massive jumps in shipping costs.

“Shanghai lockdown caused by COVID is the latest issue causing big problems. We can’t bring meat in or take out containers,” a company spokesman said. “And when it comes to market after long delays, our chilled meat is approaching its 120-day shelf life. It’s a nightmare.”

To be clear, almost all Australian export beef is sold on a cost, insurance and freight (CIF) basis. CIF trade terms are typically used for sea freight, where the seller is responsible for loading the shipment onto the ship and paying for shipping and insurance. These costs are integrated into the price of the goods. The seller will also procure the necessary paperwork, licenses and inspections that may be required.

The export manager of an Australian processor told Beef Central this morning that freight rate increases should be reflected immediately in his company’s buying and selling costs.

There are several reasons for the recent increase in container freight costs, he said, but the main reason is the global increase in consumer demand for consumer goods, which is pulling demand for shipping services “in different directions” — mainly from Asia to North America and Asia to Europe.

As a result, to compete for access to a service, the cost of shipping meat in containers from originating points such as Australia has had to increase.

“Due to COVID, people around the world are spending their money on consumer goods instead of travel and leisure activities. This puts enormous pressure on all freight services,” said the dispatch manager.

As detailed in previous Beef Central articles, when COVID 2019 first hit back, shipping companies halted construction of new vessels and additional shipping containers. This had left a huge capacity hole that needed to be filled now that the consumable trade was so high.

In addition, there were enormous increases in the cost of diesel fuel for shipping companies this year. They would normally be factored into bunker fees, but they had now corrected sharply higher, fueled by recent global fuel hikes caused by Russia’s attack on Ukraine.

And rounding out the shipping industry‘s troubles this year has been the lack of crew. About 30 percent of European ships’ crews came from the Russia/Ukraine region, which has now disappeared due to the conflict, leaving large gaps in crewing levels.

While the main global demand has currently been for “dry” boxes (non-refrigerated containers) for consumables, this has also impacted beef processors as raw materials such as hides, meat meal and other non-perishable items have also been hit by the severe container shortages currently experiencing.

“There are problems not only with the refrigerated and frozen refrigerated containers,” says the shipping manager. “You can still get them with refrigerated containers if you pay through your nose. But dry containers are almost unobtainable, no matter the price.”

The recent rise in shipping costs has been compounded by sharp increases in domestic transport surcharges, diesel and other inputs before the product even arrives at the port.

About Christine Geisler

Check Also

Ferry bookings will open for crossings to the Isle of Man TT in 2023

News about ferries and car ferries The Irish Sea ferry industry is like any other …