Uncovering and minimising the impacts of - COVID-19 Short-term logistics disruption report - AgriFutures Australia
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Uncovering and minimising the impacts of COVID-19 logistics disruption Short-term logistics disruption report August 2021
Project scope and objectives
Project objectives
Minimise the impact of COVID-19 logistics disruption on agricultural export supply chains.
Conduct ongoing analysis of logistics disruption by assessing market impacts and providing timely and accurate
information to select rural industries.
Improve the resilience of rural industries to logistics disruption, by providing information to support businesses to make
strategic decisions.
Project scope
Develop short-term logistics disruption assessment reports on a monthly basis, including general agriculture logistics
information and three industry case studies.
Develop medium-to-long-term logistics assessment reports on a quarterly basis, to investigate longer-term factors such
as geopolitical impacts, customs and market access regulations.
2Cross-industry insights
A summary of the August 2021 key logistics disruption
insights with the potential to impact producers
August 2021 logistics disruption insights may be used to guide industry participants in their supply chain strategic decision-making over
the short and medium term.
Expert views that the global shipping crisis will experience some relief following the 2021 Christmas period have again been re-shaped by the
COVID-19 Delta variant’s impact on the global shipping industry. Snap lockdowns at many key ports under ‘zero tolerance’ policies, particularly
in China, pose a constant challenge to the efficient clearing of cargo. These disruptions continue to increase shipping prices; maritime consultant
Drewry estimates that the price of a 40-foot container from China to the US has hit record levels, rising to above US$10,000.1
Disruptions continue to be more lucrative for international shipping companies as they leverage limited vessel numbers to ship full containers
across key freight routes rather than returning empty ones to countries like Australia. This creates an imbalance that contributes to container
stockpiles in major global ports. This pattern is expected to increase in line with consumption levels in the lead up to Christmas.
Extreme weather events are also causing sudden port closures with little warning, disrupting already stretched supply chains. A large number of
typhoons are forecast to form in the Northwest Pacific and South China Sea regions from August to December 2021, the impacts of which will
lead to further increases in lead times for Australian exporters.
To offset higher transportation costs, many of the major global food and beverage conglomerates have passed on price increases to customers.
Many organisations fear that large shipping companies will make decisions to omit port calls through Australia in the coming months to fulfill
demand associated with more lucrative freight routes. This will threaten the efficient and competitive export of key Australian products, putting
pressure on bottom lines as well as trade partnerships.
Announcements about the extension of the International Freight Assistance Mechanism (IFAM) until mid-2022 will continue to provide relief for
Australian exporters reliant on air freight. However, global air freight capacity has seen little change in recent months and is not anticipated to
provide a competitive export pathway until global passenger air travel resumes.
While Australian port activity has not been impacted by recent lockdown restrictions across Victoria or NSW, select stevedores at the Port of
Botany have introduced mandatory vaccination protocols, which may impact labour availability. New Western Australian protocols on global
shipping from high-risk COVID-19 nations may also threaten key agricultural imports and exports.
1 China Typhoons Pose Latest Supply-Chain Threat as Ports Shut | Bloomberg
4Industry fears Delta variant outbreaks could cause a repeat of
shipping disruptions at a similar level as 2020
Key insights
• The sporadic closure of global port terminals due to COVID-19 is starting to happen repeatedly, posing major risks to global trade flows,
particularly in China.
• Experts predict the Delta variant will lead to more global port shutdowns in the months leading up to the 2021 Christmas period, pushing shipping
prices and container shortages to new levels.2
• In China, the Government’s strict ‘zero COVID’ policy means that pandemic mitigation is prioritised beyond any business or trade concerns,
with port terminals frequently shut down after single-digit case numbers.
• China is seeing the highest COVID-19 cases since the country’s initial outbreak in 2020. Lockdown continues to damage consumption growth and slow
exports amid existing floods and supply issues.3 Not only are port closures straining already stretched global supply networks, they may contribute to
a further decrease in China’s appetite for Australian goods in the short-to-medium term.
• Any forecasts on the return of the global shipping industry to pre-COVID circumstances are now closely tied to national vaccination timelines,
given the risk of sudden disruptions frequently caused by testing or snap lockdowns.2 Global commodity prices are expected to also increase as a result.
• The Ningbo-Zhoushan port, the world’s third-largest cargo port, closed its key Meishan terminal due to a single COVID-19 case in a
dockworker. This cut the port’s capacity for container cargo by about one-quarter with the swift suspension of container pick-up services.
• The terminal re-opened on 25 August 2021 following a two-week shutdown, however shipping analysts estimate that it will take up to 60
Ningbo,
days before operations at the port return to normal as workers and maritime pilots return from quarantine.7
China • Experts predict that this will further inhibit the surge in global trade, as retailers in the EU and North America race to stock up ahead of
the Christmas period.1
• Industry fears the ramifications of the Ningbo shut-down could be similar to that seen at Yantian in June 2021, when wait time for
processing shipments tripled from three to nine days and exports were slashed by about 70%.5 If a similar situation arises, substantial,
long-term impacts on exports are predicted that will affect the holiday shopping season and cause price inflation.
• Shanghai ports, where many vessels are being re-routed in response to challenges at Ningbo and previously Yantian, are reported by
Shanghai, Reuters to be experiencing the worst port congestion in three years.
China
• In response to the Ningbo outbreak, Shanghai ports have tightened disinfection and quarantine measures and have asked workers to
stay over at port. No operational disruption has yet been reported.6
1 Ningbo: Global supply fears as China partly shuts major port | BBC News 4 The US shipping crisis is not going away as 33 cargo ships float off the coast of LA waiting to dock | Business Insider
2 A COVID-19 shutdown at one of the world’s busiest ports threatens to worsen shipping delays and send prices even higher | Business
Insider Australia
Australia
5 China’s zero-Covid policy is so strict that it shut down a whole shipping terminal after just one case | CNBC
5
3 China’s New Covid Outbreak Puts Recovery at Risk: Eco Week | Bloomberg 6 Port, shipping firms divert vessels after a Ningbo terminal shuts | Reuters
7 The world's third busiest container port is back but the shipping crisis isn't over yet | CNN BusinessExtreme weather is expected to add further stress to already
stretched global supply chains
Key insights
• Heavy rain, strong winds and flooding throughout the 2021 Northern Hemisphere summer have added another risk factor to exports, impacting the
efficient travel of cargo along supply chains.
• According to the Meteorological Administration, 16-18 typhoons are forecast to form in the Northwest Pacific and South China Sea regions from
August to December 2021. Four to six of these are expected to make landfall in China and affect the country.2
• Hurricane season in the Northern Hemisphere is well underway, posing constant threats to shipping flows through key Transatlantic regions. Delays
have largely culminated within key US ports like Los Angeles (LA), a major Australian trading partner, particularly for red meat exports.
• Key Northern Hemisphere markets said to be most vulnerable to weather-induced trade disruption include agricultural products, like oranges from
Florida or sweet potatoes from North Carolina. Supply shocks may expand short-term export opportunities for Australia, pending freight availability.1
• Exporters and shipping companies worldwide are integrating weather analytics insights into supply chain planning to strengthen logistics systems.
• The Yantian port of Shenzhen temporarily stopped drop-off container services due to typhoon warnings in early August 2021.
• Shanghai’s Yangshan mega-terminal facility and nearby ports also evacuated ships in response to Typhoon In-Fa, which brought
widespread flooding and toppled containers stowed on a bulk carrier traveling to the US.
China and
South Korea
• Further disruptions are expected to continue, and coupled with the threat of snap COVID-19 lockdowns, container pile-up in key Chinese
ports is expected to worsen.
• A typhoon on 24 August 2021 also diverted dozens of ships from the world’s sixth-busiest container terminal at Port Busan in South
Korea. The port has since re-opened, however shipping delays in the area are expected to continue as a result.4 Given South Korea is a
key trading partner for Australian red meat products, this may impact exports in coming months.
• As of 11 August 2021, 38 container ships were anchored off the coast (pre-COVID levels are zero to one) waiting for a free spot to
unload at LA and Long Beach ports, driven at times by weather issues such as extreme heat impacting the productivity of port workers.5
Southern • The Port of LA has reported that it is already preparing for another decline in import volumes due to the Ningbo-Zhoushan COVID-19-
California, related shutdown,2 likely to be followed by increased congestion as backlog clears at Ningbo.5
United States
• Chief of the Port of LA reports that every sector of the Southern California supply chain is currently at capacity, and conditions are likely
to worsen just two weeks into peak shipping season.3
• Given Californian ports account for one-third of US imports, this will continue to hinder Australia’s US-bound exports.4
6
1 Bad Weather – Another Concern for A Stressed Global Supply Chain 5 California congestion nears new high, East Coast gridlock worsens | Freight Waves
2 China Typhoons Pose Latest Supply-Chain Threat as Ports Shut | Bloomberg
3 Difficult peak season awaits retailers shipping via LA-LB
4 Shipping Delays Continue as Typhoon Omais Hits Busan PortRecent COVID-19 outbreaks are impacting operations of key
Australian ports, as is the threat of industrial action
Key insights
• A 24-hour national strike involving thousands of Transport Worker Union (TWU) truck drivers took place on 27 August 2021.4 Only minor delays in
Sydney were experienced and extra services were run the following day to clear backlog. In contrast to other TWU industrial action in recent months, this
was a minimal disruptive outcome, boding well for the likelihood of future transport worker strikes and subsequent potential impacts on shipping.
• Mandatory vaccinations for port workers have been put in place by select stevedores at the Port of Botany, potentially impacting labour
availability. There is potential for this to occur at other key Australian ports in coming months as national case numbers rise.
• WA’s strict new protocols on international ship arrivals are reported to be creating major logistics challenges and potential threats to short-term trade.
• Inconsistency in regulations across state borders in the management of supply chains has been flagged as a concern for Australian trade.
State-by-state breakdown
• Essential port and logistics workers in Sydney’s south-western suburbs have been exempt from lockdown restrictions, with confirmation
they are part of ‘critical’ national infrastructure, enabling continued servicing of imports and exports through the Port of Botany.1
• The Port Authority of New South Wales will continue to follow the advice set by the Australian and state governments in relation to the
NSW entry of commercial vessels to NSW ports.6
• Hutchinson Ports and DP World have introduced mandatory vaccinations for wharf workers starting from 30 August 2021. This
requirement could impact labour availability and overall productivity of these terminals in the immediate term.5
• Lockdowns are not currently impacting activity at the Port of Melbourne, however exporters are advised to monitor the situation closely in
VIC case any outbreaks occur that may disrupt the clearing of cargo.
• The recent imposition by the Western Australian Government of new protocols and standards on international ship arrivals, with rights
reserved to turn vessels away due to threats of COVID-19 infection, pose significant risks to the delivery of key imports into WA, as well as
the supply of containers and bulk freight for exports. Processing vessels according to the new regulations is a major logistical challenge.2
WA • Ports Australia has called for the Western Australian Government and shipping companies to collaborate to prevent circumstances where
ships are disadvantaged for having passed through high-risk COVID-19 nations, and thus not deter key trade customers from passing
through WA.3
1 Workers in south-west, Western Sydney exempt from toughest COVID-19 restrictions part of 'critical' national infrastructure | ABC News 4 Linfox and Bevchain next in TWU Industrial Action Line
2 Coronavirus WA: Premier Mark McGowan announces new plan to turn away COVID ships | The West Australian 5 Sydney stevedores to block unvaccinated workers from terminals | Australian Financial Review
3 Ports Australia calls for calm in WA | Ports Australia 6 Transport for NSW response to COVID-19 for the freight industry | Transport for NSW
7Australian air freight exporters welcome the extension of IFAM,
yet global air freight movements remain volatile
Key insights
• IFAM has been extended to mid-2022 as of 27 August 2021.1
• Despite lockdowns, NSW and Victoria airports remain open for freight imports and exports.3
• The temporary closure of key freight terminals at the Shanghai Pudong International Airport due to a COVID-19 outbreak is worsening trade
disruption in the region, creating some global uncertainty in the reliability of air freight shipments.
IFAM extended to mid-2022
• On 27 August 2021, the Australian Government announced a further $260.9 million in funding to extend IFAM to mid-2022, ensuring Australian businesses
reliant on air freight have additional time to adapt to the continually changing international trade environment.1
Shanghai Pudong International Airport freight suspension due to COVID-19 outbreak
• Freighter suspensions at Shanghai Pudong International Airport due to a COVID-19 outbreak are worsening trade disruption in China, with cancelled flights
and delays of five to seven days for freight shipments, with freight capacity down by about 33%.4
• Suspensions implemented on 20 August 2021 will remain in place until cases reach zero, with no current view on when flights will operate again.2 Reports on
25 August 2021 indicated that it remains unknown when flight schedules will return to full capacity, however the situation is expected to ease in early
September.4
• As a result of air freight backlog, some exporters are turning to shipping via sea freight to Singapore and then flying freight from the Singapore Changi
Airport. As a major transhipment hub for many Australian exporters, this increased use could impact the supply chain connecting Australia to a number of
key Southeast Asian trading partners.
1 International Freight Assistance Mechanism | Australian Trade and Investment Commission
2 Shanghai airport terminal closure leads logistics firms to expect cargo delays | Supply Chain Dive
3 Transport for NSW response to COVID-19 for the freight industry | Transport for NSW
4 Delays of seven days for Shanghai cargo while ‘super peak’ approach | Air Cargo News 8New weekly connecting flights to Los Angeles may provide
some relief to ongoing congestion for sea freight exports
Key insights
• New weekly inbound and outbound flights connecting Sydney, Brisbane and Melbourne to Los Angeles may create freight opportunities for exporters
currently challenged by the ongoing congestion at Southern Californian ports, as is the case for high-value red meat exports.
• The end of flights to Tokyo on 30 August 2021 may impact Australian red meat exporters selling into the Japanese market. Returning to container
shipments may not yet be viable given on-water shipping delays.
• While an expansion of flights to the US may assist Australian agricultural industries in servicing rising global demand ahead of Christmas, given air
freight accounts for minor volumes of perishable exports, any reduction in the impacts of global trade congestion are expected to be minor.
Weekly inbound flights (supported by IFAM*)1 Weekly outbound flights (supported by IFAM)1
New weekly inbound flights starting in August 20211
Origin Destination Start date End date Freight rates
Los Angeles Sydney (via 27 August 2021 24 October 2021 Not applicable
Brisbane)
New weekly outbound flights starting in August 20212
Origin Destination Start date End date Freight rates
Sydney Los Angeles 26 August 2021 28 October 2021 A$1,995 AKE min charge^ A$4,845 PMC min charge^
(via Melbourne) A$2.90 per kg loose 1000+ kgs QGoFresh^
A$5.00 per kg loose 1000+ kgs live seafood^
New weekly outbound flights ending in August 20212
Origin Destination Start date End date Freight rates
Sydney Narita 24 May 2021 30 August 2021 A$1.60 per kg
9
1 International Freight Assistance Mechanism – Inbound Flight Schedule as at 23 August
2 International Freight Assistance Mechanism – Outbound Flight Schedule as at 23 August
*IFAM is the International Freight Assistance Mechanism, a targeted support measure put in place by the Australian Government to keep global air links open in response to the ongoing effects of the pandemicGlobal airfreight volumes have not changed compared with
July 2021 levels, container movements remain delayed
Key insights
• Minimal change in global air freight volumes suggests the need for continued reliance on containers for red meat exports, which will continue to
experience a global shortage and elevated shipping prices well into 2022.
• Flow of containers through the Port of Singapore remain relatively balanced, while Los Angeles is seeing the worst backlog.
Container Availability Index (CAx) July 2021 Inbound and outbound air freight movements June 2021* compared
with one-month, one-year, and two-year benchmarks1
CAx 0.5 same amount • Shanghai Port: weekly average 000 tonnes Inbound
of containers leave and 0.57, 3% decrease on July 80 0% Outbound
enter the port 2021 levels
-2%
CAx > 0.5 more 60
• Singapore Port: weekly average
containers enter than 44 43 42 43 41
0.48, no change on July 2021
leave 40 33 33 35
levels 31 30
CAx < 0.5 more
containers leave than 20
• Los Angeles Port: weekly
enter average 0.88, 2% increase on 0
May levels Jun 21 May 21 Apr 21 Jun 20 Jun 19
Takeaways Takeaways
• A significant surplus in containers entering over leaving at • There has been virtually zero change in global airfreight volumes between June and
the Port of Los Angeles is reflected in a high CAx. May 2021, with a slight surplus in inbound freight continuing to reflect ongoing
• A CAx with no change in July 2021 indicates Singapore challenges of exporters in meeting global demand for goods.
continues to have a fairly even balance of containers • No change in global air freight capacity is expected over September 2021, given
entering and leaving. very minimal change in inbound and outbound global freight volumes in recent
• A slightly lower CAx in Shanghai suggests a slight reduction months.
in their container backlog.
10
1 Bureau of Infrastructure and Transport Research Economics, 2021. International Airline Activity monthly publications, most recent available is June 2021
2 Container Availability Index, 2021Most major Australian ports experienced an increase in
container exports and a decrease in empty containers in July
2021
Key insights
• Reduction in the gap between empty and full containers processed at most Australian ports is indicative of more efficient clearing of cargo, however
this will likely be impacted by key global disruptions in recent weeks, such as the Ningbo Port closure and sporadic extreme weather events.
• Overall, the trend of progressive capacity increases is continuing.
July 2021
Containerised exports and imports at major Australian ports Full vs empty containers at major Australian ports
000 TEU 000 TEU
150 250
117 121 Export 202 Full
114 200
Import 167 Empty
100
150
60 63 61
100 89
50 71 73
28 32
50 35 33
11
0 0
Port of Botany Port of Melbourne Port of Brisbane Port of Fremantle Port of Botany Port of Melbourne Port of Brisbane Port of Fremantle
June 2021
Containerised exports and imports at major Australian ports Full vs empty containers at major Australian ports
000 TEU Export 000 TEU Full
120 113 240 220
108 105 Import Empty
200
80 160 146
58 57 54 120
34 75 79
40 29 80 67
52
40 32
11
0 0
Port of Botany Port of Melbourne Port of Brisbane Port of Fremantle Port of Botany Port of Melbourne Port of Brisbane Port of Fremantle
11
1 NSW Ports, 2021. NSW Ports Monthly Trade Reports
2 Port of Melbourne. 2021. Monthly Trade Reports
3 Port of Brisbane, 2021. Monthly Trade Reports
4 Fremantle Ports, 2021. Trade ReportsDomestic agricultural production continues to outweigh the
availability of supporting freight capacity
Key insights
• The capacity of top Australian freight routes increased from May to June 2021, excluding Sydney to Auckland.
• This is a favourable sign for air freight exports, particularly for red meat exporters delivering product to high-value beef markets in Singapore and
Hong Kong. While slow improvements to volumes are encouraging, this will not serve as a viable distribution pathway until international travel resumes.
• Exporters are experiencing difficulty with constantly shifting freight capacity and shipping schedules based on global disruptive events. Grains
exporters in particular are finding freight prices highly volatile.
What does this mean for…
Red meat Grains Citrus Cross-industry
• Red meat container exports • Grains exporters continue to • Continued strong container • There is a strong potential for container shortages in
out of Brisbane are turn to bulk freight export processing out of Port of Australia in the coming months due to temporary closures
performing particularly well, due to container shortages. Melbourne (top port for at Ningbo-Zhoushan Port in China, the third-largest
with 5225 TEU exported in • Exporters can expect to citrus exports) indicates container port in the world.
July 2021, a 5% increase on continue experiencing relative stability for the
• Resulting congestion and delays are expected to impact
July 2020. challenges in booking freight remainder of the citrus
freight capacity, particularly for containers, in Australia in
space, with reduced ability export season. There is
coming months.
to plan distribution based on potential to avoid impacts of
agreed freight prices with the anticipated increased • This impact will be worsened by predictions of incoming
shippers. global container shortage. extreme weather in the South China Sea.
000 tonnes Comparison of freight quantities carried on top Australian flight routes April to June 20211
10 Apr 21
8 8
8 7 May 21
6 6 Jun 21
6 5 5 5
4 5 5
4 3 4
4
3
2
0
0
Sydney to Sydney to LA Melbourne Sydney to Sydney to Perth to Singapore
Singapore to Singapore Auckland Hong Kong
12
1 Bureau of Infrastructure and Transport Research Economics, 2021. International Airline Activity monthly publications, most recent available is May 2021 (published 21 July 2021)Red meat: Industry snapshot
Red meat exporters continue attempts to diversify export
markets and navigate pandemic-induced demand swings
Update A global shortage of reefer containers Outlook for red meat exports to alternative Global red meat trade continues to be dictated
continues to disproportionately impact chilled markets is favourable, with substantial grant by demand in both retail and food service due
red meat exports. investments. to volatile trade fluctuations.
Context • Shipping companies have yet to replace older • As part of the Federal Government’s • Despite the strong performance of red meat in
containers retired early in the pandemic when Agribusiness Expansion Initiative, Meat and global retail markets, the rise of the COVID-19
shipping volumes declined, prolonging the Livestock Australia has been awarded $1.52 Delta strain in Europe, the Eastern
container shortage and continuing to reduce million to assist with exploring new export Mediterranean, Africa and the West Pacific may
export opportunities for red meat. channels in overseas markets. impact demand from the food service sector.3
• It continues to be more lucrative for shipping • Strengthening trading partnerships in Thailand, • It is predicted as unlikely that Argentina’s new
companies to leverage limited vessel numbers Vietnam and Saudi Arabia is said to be the beef export system will end in August, however
to ship full containers rather than returning focus of the investment. restrictions may ease. Argentina will be able to
empty ones to countries like Australia, make up export losses to partners China and
• Improvements to trade flows are anticipated
causing stockpiles in major global ports. This Israel, reducing supply gap opportunities for
for exports of Australian beef, sheep meat and
behaviour is expected to increase in the Australia. Overall, Argentinian beef exports to
goat meat, with new business opportunities in
consumption surge leading up to Christmas. these markets are predicted to fall by 9.5% by
trade, retail and foodservice sectors.1
the end of 2021, shifting logistics in the region.3
• As long as the container deficit persists, • While logistics to Thailand and Vietnam are
vessels are expected to continue omitting • US beef costs are expected to continue to rise
relatively established, increased red meat
stops at some of Australia’s major beef due to labour shortages at processing plants4
exports to Saudi Arabia in recent months,
markets, such as Japan.2 and rising food service and retail demand in line
particularly in response to a favourable
with peak summer. This may create more
• Recent Ningbo-Zhoushan Port disruption is change in cold chain transit requirements,
opportunities for Australian beef exports.
expected to prolong the issue, as well as indicates maturing logistics capabilities and
significantly reduce freight availability to ship expanding export opportunities.1
Australian red meat exports to markets in • However, exporters must monitor the risk for
southern China. delays due to transhipment congestion.
Insight Australian red meat exports are not expected The red meat sector continues to make COVID-19 poses threats to otherwise lucrative
to experience consistent certainty in freight targeted efforts to decrease vulnerability to global red meat trade as exporters race to
capacity before the end of 2021. COVID-19 trade disruptions. plug Argentina’s supply gap.
1 Money on the table for red meat exporters | David Littleproud Media Releases
2 Shipping and container shortages create major headaches for meat exporters | Beef Central
3 Rabobank Beef Quarterly Q3 2021 | Rabobank 14
4 Burger King parent sees labor crunch driving up beef costs | BloombergDemand from Northern African and Middle Eastern countries
for red meat exports is slowly increasing
Key insights
• The global reefer crisis is expected to continue to stagnate Australia’s red meat export diversification efforts.
• However, expectations of continuing high global red meat prices have the potential to alleviate increased shipping costs for Australian exporters.
• Red meat exporters are also advised to maintain regular communications with shipping lines to ensure real-time supply chain planning is as
responsive as possible to abrupt pandemic or weather-related logistics changes.
Flow-on impacts
Ongoing impacts on the supply chain pivots to Middle Eastern markets
• The expansion of red meat export opportunities to key customers in the Middle East is hindered by the region’s comparatively large reefer shortage.
• As of late July 2021, containers of red meat exports to the Middle East were reported to take 40-50 days to unload due to extensive schedule changes,
unloading time and customs clearance time.1
• Chilled red meat products are the worst impacted by the reefer shortage; however frozen products are also experiencing supply chain challenges.
• With recent changes by some Middle Eastern countries now enabling receipt of Australian red meat products with a 120-day shelf life, many shelf-life
limits remain as low as 80-90 days, which places major pressure on logistics services to distribute products within unaccommodating lead times.1
Red meat exporters have been impacted by the Western Australian Government’s introduction of new health and security measures, which are
deterring cargo ships from travelling to ports deemed high risk for COVID-19.
• Western Australian red meat farmers fear that key Indonesian export customers may turn to beef suppliers in South America or source buffalo from
India if strict measures imposed on vessels continue.2
Minimising disruption
• Industry is favourably positioned to continue to take advantage of improved market access to alternative markets such as Vietnam, Thailand and Saudi
Arabia, and foster new export relationships as logistics capabilities mature.
• However, given these freight routes often rely on transhipment through Singapore or Hong Kong, which are still experiencing congestion, delays in the
delivery of red meat exports to these markets can be anticipated.
1 Shipping and container shortages create major headaches for meat exporters | Beef Central
2 WA livestock industry warns a ban on cargo ships from Indonesia could have disastrous consequences | ABC News
15Grains: Industry snapshot
COVID-19 restrictions on domestic and global freight
movements are impacting Australian grains exports
Update New standards for vessels calling to Western High global prices and ongoing drought
COVID-19 restrictions are disrupting grains
Australia from high-risk COVID-19 nations are continue to create opportunities as well as
trade across state borders.
being monitored closely by industry. complexity for Australian grains exporters.
Context • The turning away of a vessel destined for • Grains movement between states is being • A drought-depleted wheat crop in Canada, the
Geraldton, WA due to a crew member’s impacted by tight border restrictions, including United States and Russia continues to create
positive COVID-19 test has the Western documentation checks. These can cause supply gaps for Australian wheat and barley
Australian farming community wary about the delays or even result in sole distributors being exports. Hurricane Ida in late August 2021 may
impact of the Government’s imposition of new turned away due to non-compliance. Industry add to supply gaps if US grains cannot make it
protocols and standards on vessels entering is monitoring the risks to export supply chains to port.
WA’s waters.1 that this situation may create.
• The situation is promising for Australian
• The ship had been sent from Indonesia to • Logistics costs are said to be adding up to growers, who are on track for another big crop,
collect 50,000 tonnes of wheat. But the $5/tonne on grains brought from NSW into with expectations of excess supply. Increasing
decision has disrupted scheduled exports to Queensland, as of 27 August 2021.2 canola prices in particular are expected to
the region over the coming months. continue flowing back to Australia.3
• Wait times crossing the NSW-Queensland • Australian exporters may see a supply gap of
• Potential future encounters in loading vessels border are reportedly taking up to one hour.2 wheat into China, given China’s demand for
from Indonesia may pose risks to Australia’s Subsequent delays on NSW-Queensland Canadian wheat in 2021 has been double its
ability to engage in efficient trade with key deliveries means trade execution out of three-year average.4 Other supply gaps may
export customers.1 Queensland is behind schedule. include lentils into India or Saudi Arabia.
• With Australia on high alert for COVID-19 • Container grains exporters are reportedly • However, further difficulties securing freight
sources, there are fears similar policies could avoiding Port of Botany due to longer lead space are causing costs of about $2-5/tonne to
arise at other ports. times, industrial action, and shipping delays. be passed back to the seller, buyer, or both.2
Insight Western Australian exporters are Domestic supply chain complexity is Grains supply gaps into Asia look positive for
experiencing increased COVID-19-induced increasing in line with state lockdown Australian exports, pending ability to mitigate
pressure on trade relationships due to restrictions, increasing delays in cross-border delays and increasing shipping prices due to
state-based changes. shipments. ongoing port congestion.
1 WA livestock industry warns a ban on cargo ships from Indonesia could have disastrous consequences | ABC News
2 Feedgrain Focus: Northern barley prices ease, firm in south | Beef Central
3 US and Canada heatwave hammers crops, forcing up global grain prices | ABC News 17
4 Column: Canadian crop debacle may force a reroute of wheat, canola trade | ReutersAustralian grains and livestock industries will continue to feel
the impact of record-level demand and high prices
Key insights
• Grains export logistics continue to be impacted by an ongoing shift in focus to servicing global demand for feed grains, particularly wheat and feed
barley into China. Ongoing delays at key Chinese ports due to snap lockdowns and extreme weather pose significant risks to this situation.
• Exporters are encouraged to consistently monitor port closures and maintain frequent communications with shipping lines to enable swift
response to changes in both Australian and global supply chain circumstances.
• The potential impact of state-based port protocols on exporters’ ability to deliver grains exports due to COVID-19 threats is being closely monitored.
• High domestic feed grain prices continue to impact livestock producers throughout herd re-building.
Flow-on impacts
Western Australian shipping protocols
• Western Australia’s new regulation that any vessel will not be allowed to berth in the state if it has taken on crew in Indonesia is said to have significant
potential impacts across the export of WA’s key agricultural exports.
• Western Australian farmers fear that key Indonesian export customers may turn to alternative grain suppliers in the Black Sea if strict measures imposed on
vessels continue.1
Rising feed grain prices
• Feed grain prices continue to increase in line with global demand, with reports of appetite for increased availability of higher-protein wheat domestically at
moderate prices.3
Minimising disruption
• Grains supply chains in the short term will continue to be dictated by exporters’ efforts to clear supply stocks to accommodate for the incoming harvest,
creating a need for constant communication with shipping lines and close monitoring of changes.
• Industry members are warned to monitor any change in WA’s new security measures on ports closely in case of change.
• Price and favourable market circumstances continue to allow Australian feed barley exporters to supply a diversified customer base, including Middle
Eastern customers, as well as expand trade in Southeast Asia with Vietnam or the Philippines. South America and Africa have also been flagged as
export opportunities to diversify export risk, placing emphasis on the planning of new supply chain and logistics capabilities.2
• Some crops, such as sorghum, currently stored on farm are being sold into the Asia-facing containerised and bulk export markets as growers look to
make room for new-crop barley, wheat and chickpeas.3
• Canada’s decreased supply to other major canola trading partners Indonesia and Peru may also create opportunities for Australian exporters.4
1 ‘Metro Mark’ McGowan risks exports, farmers say | Australian Financial Review
2 Australian malting barley ceiling falls, feed floor lifts | Grain Central 18
3 Feedgrain Focus: Northern barley prices ease, firm in south | Beef Central
4 Column: Canadian crop debacle may force a reroute of wheat, canola trade | ReutersCitrus: Industry snapshot
China and the United States are favourable destinations for
citrus exports, however volatile shipments remain a challenge
Update Australian citrus exporters welcome expanded The destinations of citrus exports continues to Wavering ability to secure freight space on
access into the United States market, creating be influenced by volatile global COVID-19 fewer shipping lines travelling to Australia is
a new focus for supply chains. outbreaks. challenging supply chain planning.
Context • The US Department of Agriculture announced • Snap lockdowns in key markets across China • Some citrus stocks are being stored in cool
in mid-August 2021 that it will revise and Southeast Asia are expected to continue to rooms ready to be shipped, however are held
requirements for imports of Australian citrus. dictate demand for Australian citrus. Demand up due to a lack of vessels with the capacity to
from Japan has remained strong. take them, part of a larger ongoing trend of
• An operational workplan to support expanded shipping lines calling less often through
access is currently in development, which is the • Wholesale markets, serviced by container Australia.
major determinant of the industry’s ability to exports to key fruit and vegetable importers,
leverage new market access arrangements. have been most impacted by an export season • For example, boxes of oranges and mandarins
of fluctuating supply, however this is expected to have been piling up in cool rooms at a key
• Once finalised, exports of citrus produced in be alleviated as the export season progresses intermodal logistics hub in Merbein, in Victoria's
inland Queensland, Western Australia, and into late navels. north-west.6
Bourke and Narromine in New South Wales to
the United States, can begin.1 • While demand from China has remained • Not only does this increase costs and risks to
relatively stable, the country’s ‘zero-COVID’ product quality, delays may also force growers
• New export opportunities will hinge on the policy and snap lockdowns increase risks for to slow down harvests, increasing the difficulty
ability ports in key production regions Australian citrus shipments. of managing export programs.4
Queensland and Western Australia (where
about 20% of citrus is produced)2, as well as • The Australian citrus harvest is expected to last • Overall, a quality Australian season has been
NSW, to efficiently service container vessels slightly longer than usual due to labour supply impacted by higher citrus prices due to labour
and enable sufficient freight opportunities for shortages and global shipping delays.3 shortages and a fluctuating exchange rate.
citrus exports. These high prices are expected to continue until
the end of the season.5
Insight The continued diversification of citrus export Wavering security in freight routes has Delays are occurring on all ends of the supply
markets suggests shifted investment in the increased prioritisation of cold-chain storage chain, particularly between Victoria,
enabling logistics for new supply chains. and transport to ensure product integrity. transshipment in Singapore, and China.6
1 Citrus Australia welcomes greater access to US | America Fruit 5 Slow start to Australian citrus exports to India | Fresh Plaza
2 Greater market access for citrus in US | Mirage 6 Shipping container shortages, delays at ports cause headaches for exporters and importers | ABC News
3 Citrus exports held up by shipping problems but demand from China still strong | ABC News 20
4 Shipping struggles hamper Australian citrus | Asia FruitStock piling due to reducing shipping lines calling through
Australian ports increases the risk for citrus exports
Key insights
• Unpredictable supply chain and logistics planning and high shipping costs for reefers are predicted to remain a reality for citrus exporters until alleviation
of the global pandemic.
• Ongoing reduction in the number of shipping lines calling through Australia continues to be a concern for the citrus industry, with little ability to gain
traction in this space given the international ownership structure of most shipping companies.
Flow-on impacts
• Delays and congestion continue to increase shipping costs. Key Indian citrus exporter, Sabrini Foods, reports that a container that cost $600 pre-
pandemic could now be worth anywhere from $2,000 to $4,000.1
• The impacts of logistics bottlenecks caused at both origin and destination ports are passed back to producers, with the build-up of stock and excess
storage costs causing some growers to commence the slowing down of their harvest. This can pose risks to product quality as well as continuity of
available labour for harvest.
Minimising disruption
• Exporters are finding success by putting constant pressure on shipping lines to identify the whereabouts of empty containers for upcoming shipments,
and demand consistent and timely notification of vessel changes.
• This pressure to secure empty container space improves the efficiency of ongoing supply chain planning, through swift subsequent identification of plug
space on vessels where refrigerated containers can continue cold treatment right through to market.
• Even once the pandemic is no longer a substantial threat to supply chains, Australian citrus exporters predict they will continue to face the challenge of
fewer shipping lines calling through Australia. It has been reported that work must be undertaken to ensure shipping lines view Australia as a critical
destination in global trade in order to ensure the long-term viability of Australian citrus exports and agricultural trade more broadly.1
1 Shipping container shortages, delays at ports cause headaches for exporters and importers | ABC News
21Takeaways
A summary of the August 2021 key logistics disruption
insights with the potential to impact producers
August 2021 logistics disruption insights may be used to guide industry participants in their supply chain strategic decision making over
the short and medium term.
Expert views that the global shipping crisis will experience some relief following the 2021 Christmas period have again been re-shaped by the
COVID-19 Delta variant’s impact on the global shipping industry. Snap lockdowns at many key ports under ‘zero tolerance’ policies, particularly
in China, pose a constant challenge to the efficient clearing of cargo. These disruptions continue to increase shipping prices; maritime consultant
Drewry estimates that the price of a 40-foot container from China to the US has hit record levels, rising to above US$10,000.1
Disruptions continue to be more lucrative for international shipping companies as they leverage limited vessel numbers to ship full containers
across key freight routes rather than returning empty ones to countries like Australia. This creates an imbalance that contributes to container
stockpiles in major global ports. This pattern is expected to increase in line with consumption levels in the lead up to Christmas.
Extreme weather events are also causing sudden port closures with little warning, disrupting already stretched supply chains. A large number of
typhoons are forecast to form in the Northwest Pacific and South China Sea regions from August to December 2021, the impacts of which will
lead to further increases in lead times for Australian exporters.
To offset higher transportation costs, many of the major global food and beverage conglomerates have passed on price increases to customers.
Many organisations fear that large shipping companies will make decisions to omit port calls through Australia in the coming months to fulfill
demand associated with more lucrative freight routes. This will threaten the efficient and competitive export of key Australian products, putting
pressure on bottom lines as well as trade partnerships.
Announcements about the extension of the International Freight Assistance Mechanism (IFAM) until mid-2022 will continue to provide relief for
Australian exporters reliant on air freight. However, global air freight capacity has seen little change in recent months and is not anticipated to
provide a competitive export pathway until global passenger air travel resumes.
While Australian port activity has not been impacted by recent lockdown restrictions across Victoria or NSW, select stevedores at the Port of
Botany have introduced mandatory vaccination protocols, which may impact labour availability. New Western Australian protocols on global
shipping from high-risk COVID-19 nations may also threaten key agricultural imports and exports.
1 China Typhoons Pose Latest Supply-Chain Threat as Ports Shut | Bloomberg
23References
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23.
create-latest-supply-chain-threat-as-ports-shut.
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