The shipping industry is going through unprecedented times as the pandemic has affected global supply chains.
According to the Swire Shipping Regional manager for the Pacific Islands Alex Pattison while presenting at the Fiji Chamber of Commerce and Industry Business session on Thursday, during the pandemic trade went down, capacity was reduced and demand decreased as well.
He said from February 2020 through to about August 2020 there was over 560 ships laying idle.
“However, the demand service with online shopping and other pandemic driven demand such as PPE gear, digital equipment.
“This has created a perfect storm and market for rapid rate rises.
“While the global trade has returned to low levels of growth, there are still pockets driven, driving major distortions in particularly North America inputs.”
Mr Pattison explained that charter costs for ships that come to Fiji had increased.
“If you take our S Class vessels that come to Fiji and they were a new class of vessels for us.
“So they handle the 2000, 20 foot containers equivalent that apply to Pacific Island trades.
“Pre-COVID these charter rates were about US $11,000 per day, now you can get $60,000 per day and that’s for a long term of charter from 34 to 36 months.
“If you want to put them in a short term market, with the three to six months on the Trans Pacific trade, you can get up upwards to $180k per day.”
He said there was no playbook for this as it never happened before.
“Shipping was always cyclical, everybody could read it actually.”
Shipping and banking were almost in sync, this is not happening anymore due to the demands of these smaller carriers.
At the current market levels with the charter rates Mr Pattison said even if you could find suitable tonnage, the freight levels to the Pacific Islands would not cover the investment.
“So Swire Shipping we already have the best direct network servicing Fiji.
“We are under severe crisis with supply of space and equipment and they have removed some options to ship into the PI because of congestion at transit ports as well as with the length of time equipment was taken out of system when shipping into the islands.
“That is just it’s an immature supply chain, container sits here a long time.
“So they really don’t want to be servicing that.”
He said Swire Shipping was still committed to supplying to Fiji.
“However, we can only do so much as a direct carrier, there is less than 1 per cent of the global idle fleet at the moment that is waiting and most of is rather waiting for dry docks or repairs.
“So you just can’t get tonnage unless you’re going to pay a lot of money and Fiji can’t.
“Fiji is struggling with these rate increases, let alone having the northern hemisphere increases.
“We’ve got to improve the inventory management and turn around the equipment faster.
“I don’t expect it to do that overnight, but it’s something we need to look at it more,” he said.
