THE IMPORTANT STUFF
APRIL 2021

THE TRUTH ABOUT FREIGHT

When it comes to freight, there are a couple of unanswered questions that require an explanation and today is as good a day as any to do it.

In late February I was fortunate enough to be invited to a presentation by one of the majors in the logistics industry. That presentation covered off on our current situation. Now when I say our, I mean the world, because what is happening in the world is affecting everyone in Australia, and not just the hose and fittings industry. If you walk into Bunnings on any given day you may be lucky enough to find bulging shelves or on another day an abundance of holes in the range. Kmart’s the same, in fact, name any retailer and you are likely to experience an identical situation.

So, what’s the story?

Prior to Covid, the majority of shipping companies struggled to break even, in fact, just before Covid about 100 of the older less viable ships were scrapped. Covid struck and for the first couple of months demand plummeted and the shipping company’s decision was spot on.

The trouble was, countries like China took an extremely aggressive approach to gaining control over the outbreak. They then pumped a heap of cash into their economy to promote stability, no one could travel so there was no money bleeding into foreign countries and a surplus of cash was created. Cut a long story short in Australia, China, America etc demand has increased by between 20 to 30%.

The shipping companies now had more cargo than they could carry especially with a hundred less ships available. To do their best to meet deadlines, ships have been shortening their stay in ports to a point where they only have time to unload and not reload with empty containers. The situation at the time of writing, is some five hundred thousand containers are stranded in America alone with no way to get home. In fact, Taipan’s last hose tail shipment was almost placed in a fridge container because of the lack of containers in the right locations.

To top off the chaos, during this entire ordeal the Australian wharves are experiencing ongoing industrial action that is seeing initiatives such as no overtime.

The one good thing out of all this is the shipping companies are now making very good margins and are back in the black for the first time in a long time. What’s not so good is they are not very motivated to change that.

To sum up, less ships carrying more cargo, creating fewer containers in which to place product with shippers in a state of comfort, plus industrial unrest.

Not the greatest mix.

There is a glimmer of hope, during the whole Covid saga, Governments have been clogging up the air freight with PPE gear. The majority of this has now been transferred to ships and air cargo is beginning to return to a form of normality. Everything that is, except the price.

With America about to release it’s $1.9 trillion dollar stimulus package, the situation is not looking like easing any time soon.