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Expert warns of ‘perfect storm’ as Australian shipping costs set to rise further

Shipping Costs

Australian businesses and consumers have been warned of “further supply-chain related price hikes”, with the cost of shipping continuing to rise as a result of the increasing strain on inbound supply chains.

At the same time as tensions in the Red Sea escalate, DP World ports around Australia are experiencing huge container backlogs due to four months of industrial action.

Yemen rebel group, Houthis, vowed over the weekend to continue attacks on commercial shipping routes in the Red Sea after the US and UK’s third wave of strikes, following dozens of attacks and hijackings in response to the war in Gaza.

The conflict has caused major shipping companies to avoid one of the world’s busiest shipping lanes – which sees an estimated 12% of global trade passing through each year – instead taking long detours around the southern tip of Africa which is causing significant delays worldwide.

Meanwhile, the long-running dispute between DP World – Australia’s second-biggest port operator – and the Maritime Union of Australia has finally come to an end, at a cost of $84m a week since October.

Around 50,000 containers have piled up during this time at DP World ports in Sydney, Melbourne, Brisbane and Fremantle, with the backlog expected to take around six weeks to clear.

According to Brian Hack, managing director of major international freight-forwarding and WA-based company EES Shipping, this ‘perfect storm’ of conditions is pushing up prices.

“Just 12 months ago, we were watching freight rates plummet. It’s a different story this year, largely as a result of issues outside of the industry’s control.

“Two key factors are the tensions in the Red Sea, which is resulting in shipping lines avoiding the area, as well as industrial action at DP World container terminals across Australia.

“Both issues are blowing out wait times and vessel schedules, and these delays unfortunately result in extra costs, which is being factored into the overall price of goods and likely to result in the consumer paying more.”

In much the same way that a standard basket of grocery items has increased significantly in the past 12 months, Hack explains that a standard list of supply chain fees and charges have risen too, including:

  • Freight Rates: 2023 saw a significant drop in freight rates from the extreme highs of the pandemic years. However, prices are rising again as capacity becomes tighter across all trade lanes, and as a result of longer transit times due to the tensions in the Red Sea. Hack says it’s worth noting that while freight rates are rising, they’re still “much lower than peak-pandemic days”
  • Terminal Access Charges: Some ports have increased terminal access charges by up to 50%, as ports look to make infrastructure investments, such as adding or replacing cranes at major terminals
  • Landside Charges: Other landside charges – such as trucking costs – have also increased, with some operators adding additional fees as a result of delays caused by ongoing industrial action
  • ETS Charges: The European Union’s Emissions Trading Scheme came into effect on 1st January, which has resulted in a surcharge being introduced for all shipments to and from the European Economic Area
  • Detention Fees: Shipping lines traditionally only allow 7-10 days for containers to be returned before charging fees, however this can be difficult in an environment of delays and backlogs caused by outside factors. Added to this, detention fees can be charged even if containers are held up by customs and quarantine inspections

Hack points to detention fees as particularly frustrating, with cargo owners in Australia currently not having adequate protection against unreasonable detention practices – which he says was highlighted in the most recent stevedoring report from the Australian Competition and Consumer Commission (ACCC).

“The ACCC is again calling for reform in relation to detention fees, which is something we’ve also been flagging as a major concern for some time.

“But how many times does the ACCC have to make that recommendation, before action is taken?”

He adds that current issues in the industry again highlight the need for efficiency measures to be introduced across the supply chain, which would help ease some of the current congestion and delays.

“It was only late last year that we were warning the underlying issues within the supply-chain still haven’t been addressed and when the next disruptive event occurred, we would see the same problems emerge.

“Here we are again, and once again, it will be the consumer who pays the ultimate price.”

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