SUNBIZ

‘Fiji’s Low Freight Rates Offers Exporters An Opportunity’

Greg Wilson said that it was cheaper to ship a container from Fiji, to Brisbane, than it is to move a container from Brisbane to Melbourne.
27 Jun 2022 17:10
‘Fiji’s Low Freight Rates Offers Exporters An Opportunity’
Third from left: President Ratu Wiliame Katonivere, president of the Fiji New Zealand Business Council, Renu Chand with participants during the Fiji New Zealand Business Council and the New Zealand Fiji Business Council conference on June 24, 2022. Photo: DEPTFO News

Fiji has significant lower freight costs against the rest of the world, a shipping company has said.

And its balanced trade is a bonus, said Neptune Pacific Direct Line.

Company President, Greg Wilson, made the remarks at the 2022 joint conference of the Fiji New Zealand Business Council and the New Zealand Fiji Business Council, held at Sofitel Fiji Resort and Spa, Nadi.

He said the low freight costs allowed exporters in Fiji to capitalise on the opportunity of earning $8000 a ship a day.

 

“The industry’s big guys worldwide were prepared to pay any price for ships at market prices of up to $40,000 a day, or more, for smaller ships, and as much as $60,000 a day, for the bigger ships,” he said.

“If you do the maths, as of March last year, we were operating nine container ships.”

“Four chartered ships, that’s a total of $32,000 a day.”

“That’s the real economic impact for a regional carrier today.”

 

How Is It That Fiji Has A Lower Freight Costs Than Other Countries Around The World?

Fiji has a more balanced trade, Mr Wilson said.

Fiji exporters mitigated costs to get empty containers out of the country, he said.

From a carrier’s perspective, it saved money.

“That is what’s reflected in Fiji’s freight costs,” Mr Wilson said.

 

“Because of the export that we have through our sister company, for each importer, we are also able to support a higher frequency service.

“And that high frequency service is a great asset for other exporters in Fiji to grow and develop other markets.”

Mr Wilson said it was cheaper to ship a container from Fiji, to Brisbane, than it is to move a container from Brisbane to Melbourne.

“If you’re in the export game, or if you’re in the import replacement business, think about that,” he said.

“You have a market that you can access, and you have an advantage over another Aussie supplier.”

 

The Future

Neptune Pacific Direct Line is excited about its commitment to reduce its carbon footprint, Mr Wilson said.

“We have to take 40 per cent of emissions out of our shipping system between January 1, 2023, and December, 2029,” he said.

“We have seven years to find a way to reduce our carbon emissions on ships by 40 per cent.”

 

The company has one of two options.

“One is a mechanical process where we put scrubbers onboard vessels,” Mr Wilson said.

The second option is a behavioural process where it slows down the engines, he said.

“Our sea lengths are not long enough to sustain investments through scrubbers on the ships,” Mr Wilson said.

 

The New Zealand Fiji routes are covered in three and a half days to four days one way, he said.

“The only option we have going forward is to slow down ships, just like your car, you slow down and burn less fuel,” Mr Wilson said.

“We will reach our carbon emission reduction programme by slowing down.”

“But that’s got a very big economic cost that we’re starting to get our head around.”

 

The hefty economic costs come in the form of being held up in port, or in the cyclone season, Mr Wilson said.

In the event of unfavourable weather, ships have to hang around somewhere else, he said.

“We’ve got to make a calculation around what is the impact on our annualised capacity by slowing down,” Mr Wilson said.

Neptune Pacific Direct Line may have to find a solution such as additional shipping – a matter the company is working on.

 

High Prices

Mr Wilson praised on the unsung heroes of the transportation space, including ports, airlines, and truck drivers, who kept the supply chain open in Fiji over the past two years.

He said the explosion in supply chain costs, and disruption like never before, compelled importers and exporters to pay a high price for “such a lousy service”.

“That’s where we are,” he said.

 

But Neptune Pacific Direct Line is putting its money where its mouth is in Fiji.

The company is reinvesting, Mr Wilson said.

He said the Reserve Bank of Fiji’s three-year growth projection was exciting, but could be elevated.

“We need to be ready; we need to put the assets and the infrastructure in place, to end our bottlenecks in the supply chain in Fiji and New Zealand, so that we can capture this growth as we go forward,” Mr Wilson said.

 

Neptune Pacific Direct Line was founded in Fiji in 1997.

Ownership of the business was transferred in 2007, to California- based owners of Fiji Water.

The change in ownership meant the company had access to capital, and to people who believe in the future of Fiji.

“We’re prepared to invest and grow our businesses and our activities here in Fiji,” Mr Wilson said.

 

“In March 2020, we acquired Pacific Direct Line, another large regional South Pacific dedicated carrier; we put the two businesses together.

“Today, we own and operate seven vessels.”

Of its 680 employees, 317 were in Fiji.

“We have 240 seafarers on our ships at sea,” Mr Wilson said.

 

With its presence in 16 countries, the shipping line offered:

  • shipping agency work,
  • container depots,
  • trucking,
  • warehousing,
  • fumigation,
  • stevedoring, and
  • freight forwarding.

New Zealand is the shipping company’s main hub, followed by Fiji.

 

“We recently commenced the service to the east coast of North America,” Mr Wilson said.

How do we get to a situation where our world in the supply chain got turned so rapidly upside down?

With a shipping business dating back 10 years, the industry remained incredibly capital intensive, he said.

“Shipowners around the world were not making more than five per cent return on capital, as the banks continued to feed and lend money to ship owners,” Mr Wilson said.

 

“The industry ended up in an excess capacity situation, which was not profitable.”

As a result, a merger in the industry brought the top 22 to eight, he said.

Major consolidation resulted in today’s top three companies today controlling 54 per cent of the global market.

“The industry became concentrated,” Mr Wilson said.

 

In early 2020, COVID-19 arrived in Europe, and global ships de-risked. “They scrapped ships, like the airlines; they mothballed the ships,” Mr Wilson said.

“They stopped ordering new capacity.”

“But demand from the Western world consumers in lockdown included the need for flat TV screens, computers, a new lounge suite, and the likes,” he said.

 

Out of that situation, a classical structural imbalance between demand and supply arose, Mr Wilson said.

“We saw prices go up,” he said.

It catapulted to a huge bottleneck in ports of entry, which resulted in shipping congestion.

“It’s no better today, because 340 ships sitting outside Shanghai, are waiting to get a berth,” Mr Wilson said.

“340 ships that analysts today calculate, at any one time are 20 per cent to 25 per cent of the global shipping capacity for containers, remain stuck at a port.

“But guess what – we’re back to business.”

 

Capacity though still remains under resourced to meet demand, Mr Wilson said.

“The wild card we have right now – and it’s a really difficult call as to which way this is going to go – is the Chinese response to maintain strict lockdown, ‘’ he said.

“They are taking over the super conservative situation, or policy, and they are continuing into lock- down.”

In the first quarter of this year, every ship waited seven days in Auckland to get a berth, Mr Wilson said.

 

“We got hung up in that process, because we can’t get our ships through New Zealand ports,” he said.

In the meantime, the appointment of a new chief executive officer to head at the port of Auckland herald a turn for the better.

Mr Wilson said the new appointment brought with it the decision to scrap the automation programme, which would return 30 per cent capacity to operations.

“We’re already starting to see some improvements through the border in New Zealand,” Mr Wilson said.

Mr Wilson has 30 years’ experience in the shipping industry.

 

Feedback: frederica.elbourne@fijisun.com.fj



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