Stuff Digital Edition

Get used to shortages as the freight links strain

Janine Starks

‘‘You’ll never guess what’s missing from Waitrose today,’’ spluttered my neighbour as she passed the garage door. ‘‘Bottled water, gone, shelves are empty.’’

‘‘Thank goodness it’s still coming out of the tap’’ was my reply, followed by ‘‘what else?’’ (in case there was something that really did annoy me).

Without wanting to sound too nerdy, global supply chain resilience is standard neighbourhood chat in Britain. New Zealand has certainly felt the pressure with construction materials, but brace yourself for worse to come.

The problem was highlighted in the media by Professor David Rob of the University of Auckland recently when he talked about supplies of imported goods, baking ingredients, plastic packaging and even toilet paper coming under pressure in the run-up to the Kiwi festive season.

And this is why Christmas has come before Halloween in the United Kingdom. Supermarket shelves have big gaps every week with large signs apologising for the supply issues.

Supermarkets are issuing warnings of growing food shortages and suggesting it would be wise to stock up early for Christmas.

It’s September, and we haven’t seen the ghosts and pumpkin branding of Halloween yet, so it feels quite disconcerting.

Supermarket shortages are no lie. I see them every day. In the last couple of weeks there has been no clingfilm or rubbish bags for days. A global shortage of raw materials in the plastics industry is to blame, resin in particular.

Try to book a blood test in the UK and you get offered a slot in about seven to 10 days. Why? Because the plastic vials they collect blood in are running low and GPs have been told to prioritise cases.

Problems with the British food supply chain are due to a dire shortage of truck drivers (estimated at 100,000 people). Salary offers of £70,000 (about NZ$140,000) are now being reported, along with signon bonuses.

In addition, there are estimates that the entire chain from farm-tofork is 500,000 workers short.

Drivers disappeared back to Europe during the pandemic and took jobs at home, paid by the mile. Brexit causes border queues for truckies and extra paperwork, leading to unpaid delays. The sheer hassle of driving British goods, plus tax rules and currency movements have caused drivers to stay in Europe.

Every nation is facing its own combination of the perfect storm. New Zealand has shortages of workers due to closed borders and a huge reliance on shipping and airline freight to a remote location. Truck shortages in Dover or container shortages in Auckland are all in the same vein.

Right now our economy pivots on the corner of a container.Our perfect storm is our lack of labour and the lack of freight. Freight scarcity on our imported food and other essential goods puts us at risk on one side of the balance sheet, and it’s a double whammy with exports.

We could be growing our economy and increasing export production, but lack of freight could scupper it all. It’s no wonder the Australian government has just launched an ‘‘Office of Supply Chain Resilience’’.

Given our exposure to this risk, it’s probably time we carved out something similar. While some work has been done greasing the supply chain across the APEC region, it’s not enough.

In the UK the cost of a 40-foot container has risen by 600 per cent, with some reports quoting anything from 500 to 800 per cent. Small importers in Ireland have spoken of 20-foot container prices going from $1740 to over $15,000. It does make you wonder if the oil crisis of the 1970s is about to become the shipping crisis of the 2020s.

Where have all the containers gone, you might ask? Asia recovered from the pandemic and resumed exporting ahead of the rest of the world. Containers left China, but didn’t come back quickly due to lockdowns.

Out of every 100 containers arriving in North America, only 40 were being re-exported. There have been large backlogs with containers in the wrong places. Worker shortages have caused delays when containers go inland to be unloaded and some shipping companies no longer allow this. The Bejing to Chicago route now takes 70 days when it used to be 30 days.

Consumer demand is the other big factor. In lockdown and beyond, global consumers switched from buying services (travel and events) to real goods.

Stay-at-home demand has filled up more containers all over the globe. Then we had the Suez Canal jam adding to woes. In the meantime, the world relies fairly heavily on China for the production on new containers and prices have risen along with leasing prices.

Two lessons come out of this. As a small Pacific country, we need to pay critical attention to our supply chains and identify how we can hedge our risks in the freight industry.

Trade agreements, international relations and how we align ourselves politically will be crucial in helping both importers and exporters become freight efficient.

– Janine Starks is the author of www.moneytips.nz and can be contacted at moneytips.nz@gmail. com. She is a financial commentator with expertise in banking, personal finance and funds management. Opinions are a personal view and general in nature. They are not a recommendation for any individual to buy or sell a financial product. Readers should always seek specific independent financial advice appropriate to their own circumstances.

We could be growing our economy and increasing export production, but lack of freight could scupper it all.

Business

en-nz

2021-09-25T07:00:00.0000000Z

2021-09-25T07:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/282273848512087

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