File photo. Photo: RNZ / Nate McKinnon
Tensions in the Red Sea are causing problems for exporters working to get key commodities into Europe.
The cost of freight has jumped as some shipping companies are diverting vessels away from the Suez Canal to avoid attacks by Houthi militants and the escalating military action against them in the Red Sea.
Earlier this month, New Zealand joined 11 other countries calling for an immediate end for the attacks on container ships in the Red Sea.
Rabobank researcher Stefan Vogel said more ships were going around Africa to reach Europe, which added a week or two to the journey.
"Globally, for containerised and bulk goods, the shipping industry has to make tough decisions at the moment - either to navigate the Suez Canal and risk severe attacks by Iran-backed Houthi rebels, or to take a nine- to 15-day detour around Africa's Cape of Good Hope.
"Every vessel that's longer at sea is slower to load their next cargo - and that's limiting the available shipping capacity and driving freight costs up."
He said although it would cost more to ship milk powder, red meat and logs to Europe there was a positive in the situation.
"Our competitors in Europe will struggle to get product down to Asia, so key markets there could turn to New Zealand for more product."
Vogel said the freight disruptions would force up the price of imported goods - especially fertiliser, agricultural chemicals and machinery parts.
"Initial attacks by the Houthi on cargo ships caused bulk freight rates for vessels used to transport fertilisers to spike in December, though these have now settled back, closer to 2023 average prices."
Vogel said the impact of the Suez/Red Sea crisis on agricultural fertiliser and other farm input imports was likely to be mixed.
"Fertilisers used on farm in New Zealand are largely imported or rely on imported raw materials. And, at least for nitrogen and compound fertiliser supplies, they should not be impacted much as they mostly derive from Asia and the Middle East and don't pass through the Suez Canal.
"Phosphate rock, however, stems [significantly] from Morocco. And potash largely comes to New Zealand from North America and Europe. Some of those shipments could be impacted by the attacks and re-routing of vessels."
Vogel said another concern was the availability of containers.
"During the 2021 freight crisis, New Zealand struggled sometimes to find sufficient containers for exports as shipping companies gave preference to their major global routes and somewhat neglected Oceania, or they tried to quickly take empty containers back from New Zealand to China rather than adding in shipping time to export New Zealand goods.
"A similar struggle for containers could materialise again if the Red Sea issues tighten global container freight capacity further."
The good news was that container freight rates were still three to four times below the massively Covid-inflated levels of 2021, Vogel said.
"Imported goods into New Zealand will have to bear the higher freight costs, but container freight is unlikely to get as expensive as in 2021."
