“We traditionally ship just over 450,000 mt at this time of the year, but we’ve had a lot more product to move, and this has meant some creative planning across the wider supply chain to manage and store the additional volumes,” says Gary Romano, Fonterra’s managing director of New Zealand Milk Products.
Such was the volume that for the first time since Fonterra was formed, a break-bulk vessel was chartered to take 7500t of milk powder to the Middle East.
Romano says while demand is usually up ahead of Ramadan, this year’s spike was more than anyone expected and there wasn’t enough container capacity available.
The cargo, like all Fonterra’s exports, was handled by Kotahi, the Fonterra/Silver Fern Farms joint venture formed just over a year ago to try to safeguard the efficiency of shipping services to New Zealand.
“It was formed in the recognition we need the shippers’ ocean freight services far more than they need us,” chief executive Chris Greenough told Dairy News.
Greenough says the break-bulk cargo was loaded at Auckland and Timaru, with 6500t of palletised 25kg bags of milk powder going in the hold, and 1000t of containerised product on deck.
“It could definitely be repeated. The operation worked very well. I wouldn’t say it will become a mainstay but for particular constrained markets, or to deliver particularly large cargoes in a tight timeframe, then there’s a niche.”
Despite containers, not ships, being container-shipping companies’ biggest capital asset, break-bulk shipping isn’t necessarily much – if at all – cheaper, says Greenough. “If you’re exporting a lot the costs are probably similar, or slightly cheaper, but if you’re shipping a little, it’s more expensive. It really comes down to the cost of running the vessel.”
In the short-term Kotahi, which now includes New Zealand Wool Services International and a pharmaceutical lactose exporter, has probably averted the threat of New Zealand losing direct-to-market container services, says Greenough.
However, trans-shipment via Australia, with consequently higher costs and longer delivery times, remains a threat if the drive for efficiencies in New Zealand’s export infrastructure wanes, he warns.
“New Zealand has 10 container terminals (including soon-to-close Timaru); Australia effectively has five, and it’s a significantly bigger country.”
Fragmentation of our exports remains a problem, with shipping lines expected to call at lots of ports with limited size vessels. With our containerised exports being just 0.2% of the world trade, and our location on a limb from main shipping routes, that’s a big ask.
Meanwhile European exporters of goods to Asia enjoy much lower freight rates, as their goods are effectively backloads for the shippers, he notes. “The box has to get back to China anyway.”
Greenough reckons Kotahi has cut the number of containers in New Zealand at any one time – a major cost to the shipper – by 20-30%, and similarly slashed the time the containers are dockside.
“We’re achieving significantly higher slot utilisation with the carriers we’re using too.
“Slot utilisation [for the carrier to profit] needs to be over 90%. We’d be within that for all the vessels we’re using…. If you go back four or five years it was probably about 70%, so it’s a big change.”
Partnering with different exporters smooths the lumpiness of export volumes, and Greenough envisages more companies joining the initiative which already handles about a third of New Zealand’s container exports.
