High freight costs hit food market

- Last updated on GMT

Related tags: Containerization, Us

A squeezed supply of refrigerated shipping containers in the US has
caused shipping rates to rise 10 per cent to 25 per cent since last
spring, helping to push up prices for frozen and chilled food.

The refrigerated boxes, called Reefers, are in tight supply partly as a result of the mad cow disease scare. Nearly 2,000 containers of US beef are quarantined in Asian ports as inspectors look for traces of the disease.

"The supply [of reefers] is tight but we're still able to respond to all of the requests from our customers,"​ Scott Dailey, spokesman for American President Lines, told the Chicago Tribune."With a tight supply, we have to manage our logistics well and manage our fleet carefully."

But this is just the tip of the iceberg. Rates are expected to continue to climb as shipping lines in the US implement federal security regulations aimed at thwarting terrorism. Other costs including insurance, fuel, terminal charges and even container prices are also on the increase.

A report on the container ship market by analyst Howe Robinson suggests that all this is creating a 'tonnage squeeze,' with ships available for charter certain to be in short supply in 2004. Some container lines will be forced to cut non-core services if they become unprofitable.

According to the US Department of Agriculture, rates from US to Asian ports rose by 12 per cent for refrigerated shipments and 11 per cent for dry shipments for the first nine months of last year. This surge in freight rates has pushed some Asian buyers towards cargoes from Australia, a country that is aggressively pricing its offers and exploiting a shipping cost advantage over US suppliers.

The price of importing wheat provides a good insight into why Asians are beginning to look south. According to a Reuters​ report, the cost of shipping grain in a Panamax-sized cargo from the US gulf to southeast Asia is about $60 (€47) a tonne, compared to less than $40 a year earlier. Freight from Australia is at least $10 a tonne lower.

But even in Australia there are fears that freight costs will have to rise to cover the costs of new counter-terrorism security measures on ships and in ports. The Australian Shipping Association (ASA) said that the industry had no choice because the federal government had refused to meet the cost of the necessary upgrades.

Australia has until 1 July 2004 to bring 70 Australian-controlled ships and as many as 600 ports and port facilities up to new International Maritime Organisation (IMO) security standards.

Australia's biggest waterfront operation is the Port of Melbourne, which handles A$65 billion (€40bn) in trade a year and contributes an estimated A$5.8 billion annually to the Victoria state economy. Melbourne's containerised cargoes account for nearly 70 per cent of total port business, with main commodities including dairy products, fruit and vegetables, cereal grains, meat and beverages.

Related topics: Ingredients

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