Red Sea tension: New Zealand exporters struggling with doubled shipping costs

Global shipping rates have nearly doubled since late April. Photo / 123RF

By RNZ

The cost of sending our goods overseas has risen again due to ongoing tensions in the Red Sea.

A report from the Ministry of Foreign Affairs and Trade said global shipping rates have nearly doubled since late April, however, they remain far below the peak reached during the Covid pandemic.

“The main reason is the current disruption in the Red Sea, which has stretched global shipping capacity, with more shipping needed to service European and Asian routes,” the report said.

“Since December, there has been a 50% fall in shipping traffic navigating the Suez Canal, offset by a 70% jump in sailings around the less direct Cape of Good Hope.”

Houthi rebels began attacking ships in the Red Sea in October last year after the start of the Israel-Hamas war.

Export NZ executive director Joshua Tan said the cost increase created a lot of uncertainty for exporters, as not all costs could be passed on.

“They’ve got to make that tough decision themselves whether they are able to pass on their cost, but at the same time, we’re conscious that there is weakened demand.

“Households are tightening their budgets as well.

“They’re facing the same issues as exporters are in terms of high interest rates, increased costs, so businesses do have to think again before passing on those inflated shipping costs.”

Tan said exporters were concerned because it was not clear how long the issues in the Red Sea would continue for.

“There’s a sense of nervousness, but exporters became a lot more resilient during Covid because they had to find workarounds, so I’m sure they’ll be using that resilience for the issues facing them at the moment.”

NZ primary industry exporters impacted

Meanwhile, New Zealand primary industry exporters were being affected.

Sarah McCormack, chief executive of fresh fruit exporter Te Mata Exports, said getting apples to Europe had been difficult due to the extended travel time.

“We’ve had to ship around Africa to get to Europe, which means it’s a very long transit time for apples and more expensive as well, so it’s been a little bit challenging.”

Meat Industry Association chief executive Sirma Karapeeva said increased shipping costs were hitting meat companies in the pocket.

“I think the geopolitical uncertainty in some of the shipping lanes, uncertainty and disruption that we’ve seen through the Suez Canal, the Panama Canal and the likes have just added additional complexity and cost to getting our product to market.

“So it’s not something that we can control directly, but it’s certainly something that the companies are very mindful of and it is taking a bite off the profit line.”

- RNZ