Exporters and farmers are struggling to meet the new shipping costs. Previously, to send one shipping container by sea from Australia to China cost $1500AUD. This has now risen to $10,000AUD per container.
The issue is not a shortage of shipping containers, rather, the problem is that most of China’s shipping containers have ended up in the Northern Hemisphere after COVID shut down China’s factories. While China closed its ports, more lucrative shipping routes have opened up in North America and Europe.
Sheepmeat exporter, Roger Fletcher, says that his business has lost market share, and that his company’s costs have “gone through the roof”.
Mr Fletcher also exports skins and grain; products which he says have expiry dates that run out, causing huge product loss. He admits that the real issue is letting his customers down.
Another COVID-driven factor in the shipping container crisis is people sitting at home in lockdown, ordering items online. So whilst the government has injected money into the economy, stimulating online spending, there are no shipping containers to move the freight, and empty vessels sit idly in ports.
The sky-rocketing cost of sea freight has resulted in Australian farmers struggling to sell their produce. Farmers are waiting up to 2 months for a shipping container to become available, and then paying huge amounts of money for them.
The farming industry is tipped to become a 73 billion dollar industry in the near future, but this rising cost in international shipping freight may cause major disruptions to this.
Whilst the government has offered aid to the air freight industry in Australia, it is still engaged in round-table discussions with key players in the industry to bring the same relief to sea freight.
Meanwhile, exporters and farmers are spending large amounts of money on scarce shipping containers to move their product, losing money on spoiled products that are not being exported.
This will trickle down and affect consumers, as farmers and exporters will have to raise their prices in order to cover the costs of shipping and lost revenue, which in turn will mean increased food costs for Australian supermarket shoppers.
The increased prices for shipping containers is clearly impacting Australian food producers and distributors, and will have ramifications for other sectors along the line.
Those seeking opportunities in sectors that rely on domestic and international distribution need to pay close attention to issues relating to exporting goods and services in the coming weeks. Those interested in acquiring businesses will need to establish solutions, including conducting sound due diligence, exploring alternative shipping methods, and finding alternative revenue models to account for increased shipping costs.
Hopefully, large vaccination rollouts and measures to counter the disruptions caused by COVID will alleviate some of these pressures.