Higher prices for consumers: New shipping surcharge likely to drive Christmas inflation

The first of the large shipping lines has announced a “peak season surcharge” on containers arriving in New Zealand from China: an ominous and inflationary sign of Christmas.

ANL Singapore will levy a fee of $600 per 40-foot container and $300 per 20-foot container on all importers, starting on September 19.

Chris Edwards, president of the Customs Brokers and Freight Forwarders of New Zealand, called the charge “egregious” on a route where freight rates have already soared, but he expects other shipping lines to follow suit.

The new fee follows a slew of extra charges levied by shipping companies in the last year – including ongoing congestion charges at the Ports of Auckland – in addition to freight rates that have ballooned globally more than five-fold.

The cost of container shipping from China to New Zealand has risen especially steeply: “several years ago it cost about US$1000 to bring in a 40-foot container from China, it’s up to about US$12,000 now [without surcharges],” Edwards said.

The China route is especially important for Christmas imports. And the new levy is unusually punishing because it applies to those receiving the goods in New Zealand, whether or not they’ve borne the broader cost of shipping.

Jarrod Kerr, chief economist at Kiwibank called the news a further signal that Kiwis can expect higher prices this Christmas.

“Shipping costs are becoming more and more expensive and the cost of shipping is a huge impediment to importers and to the extent that they can pass that on it’s showing up in the inflation numbers … and I’d say we’re going to see more of that for sure.”

Figures for the June quarter showed inflation running at its hottest annual pace in a decade: the Consumer Price Index rose 3.3 per cent over the previous year.

Kerr said the current lockdown will fan further price rises, especially since it adds delay to the supply chain which is costly (Auckland remains in level 4 while the rest of the country eases to a strengthened level 2 this week).

He said that significant delays and disruptions in the supply chain don’t appear to have abated since last year, and there is a growing likelihood that the coming holiday season will be marked, as last year, by empty shelves and many deliveries that fail to arrive until the new year.

Last year, the Covid-19 pandemic caused a kind of shocking whiplash in global logistics.

In the first half of 2020 shipping lines reduced sailings in response to a sudden drop in demand, while in the second half of the year they struggled to meet the boom driven by surging e-commerce even as shutdowns and precautionary measures across transport networks lowered productivity.

The problems were broadly expected to abate in 2021 but that hasn’t happened.

Last month, John Mangan, professor of logistics at Newcastle University in the UK, told the Herald that the optimism of early this year that global supply chain problems would resolve quickly have faded fast.

“They’re as bad as they’ve ever been, maybe worse, and now we’re back into the seasonal surge,” he said.

Mangan and many other observers now think that a better match of supply and demand will not come any earlier than 2022.

Meanwhile, shippers, forced to swallow massive freight cost increases, have become increasingly concerned about the market power wielded by the global shipping lines, organised into just three powerful alliances.

ANL’s surcharge does not apply to shippers who have fixed contracts. But that’s likely to be cold comfort to the majority of New Zealand businesses, most of which are small and medium-sized, and which overwhelmingly import at the spot rate.

The company notified customers of the change last week.

“ANL Singapore advises that as a result of ongoing strong demand for shipping line services from China to Australia East Coast and New Zealand, plus operational pressure on vessel space, container supply and other factors, effective from 19th September 2021, ANL will apply a peak season surcharge … across all cargoes from China to Australia East Coast and New Zealand ports of discharge … ” the emailed notice said.

ANL is owned by French shipping giant CMA CGM, which in turn is allied with Cosco-OOCL and Evergreen (together they form the Ocean Alliance and co-operate in their operations).

CMA CGM’s New Zealand-based staff did not respond to a request for comment.

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