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Important Shipping Update

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Chinese Lockdown Impacts on Supply Chain

The lockdowns in Shanghai began on April 2, and the Guangzhou lockdowns began on April 11. According to a report in Reuters, at least 373 million people – who contribute 40% of China’s GDP – have been affected.

This is roughly the equivalent of removing the combined economies of Japan and Mexico from the global economy.

There will be a surge of containers from China when it restarts its economy, but no one knows when this will happen, how long it will take, and how backed up the domestic supply chains are. For now, we know the freight market is slowing and the Chinese COVID zero approach appears to only be increasing the challenges for international supply chains.

According to SONAR, container volumes out of Chinese ports began to drop on April 6th and as of April 15th, have declined by more than 31%. The longer China stays offline, the greater the impact to Australian supply chains. 

In addition to throttling Chinese production, lockdowns may harm Australian domestic production and distribution. Inventories are at record highs, but they could burn off quickly, just as they did in 2020.

There are also a large number of empty containers bound for Chinese factories that are waiting for Chinese truckers to move them inland. Without the flow of empties, Chinese upstream factories can’t ship products to downstream manufacturers or for export.

Even as some factory production restarted in Shanghai this week, new data has shown a “near-doubling” of port congestion across China since the latest lockdowns began. According to predictive intelligence company Windward, there were 506 container vessels waiting outside Chinese ports on 12-13 April, compared with 470 in March and 260 in February, before the first major lockdown began in Shenzhen.

The company said: “Lockdowns in China are heavily impacting the congestion outside the country’s ports, as the number of container vessels waiting outside Chinese ports today is 195% what it was in February.”. Windward noted, the 506 vessels outside Chinese ports this month, represented 27.7% of all vessels waiting at ports around the world, compared with 14.8% in February.

Fuel Excise Reduction Announced in the Federal Budget 2022

Whilst the Fuel Excise rate reduction announced in the Federal Budget last week is a welcome relief for motorists, the cut of 22.1c/litre, unfortunately does not extend to the Heavy Vehicle industry. This reduction has only a small bearing on the cost of diesel fuel to container road transport operators due to international pricing factors and the way in which heavy vehicles are taxed for their use on public roads in Australia.

Heavy Vehicles are charged for on-road use of fuel via a Road User Charge (RUC) currently at 26.4c/litre. They are then entitled to claim Fuel Tax Credits (FTC) calculated on the difference between the RUC and the Fuel Excise rate at the normal rate of 44.2c/litre FTC was 17.8c/litre. At the revised temporary rate of 22.1c/l, FTC cannot be claimed. 

Since the Budget announcement in the past week, average retail prices for petrol have reduced by 13.3c/litre whereas diesel fuel prices have reduced by only 6.1c/litre at the retail pumps. Irrespective of the Fuel Excise reduction by Government, Australian fuel prices are closely linked to international prices which are influenced by many global factors.

Container transport operators will continue to liaise with their customers about the level of Fuel levy surcharges to recover fluctuating diesel prices in the marketplace.

Khapra Beetle Measures – New Phase Begins 28th April

The Department of Agriculture has announced that the next phase of its Khapra Beetle control program will apply to all exports departing from the 28th April 2022.

All Seeds, Nuts, Green Coffee Beans, Dried Fruit, Vegetables, Herbs and Spices, from all countries by air or sea freight must be:

Importers may elect to fumigate other-risk plant products when they are being imported with high-risk plant products from a Khapra Beetle target risk country. To assist in streamlining treatment and certification requirements, the department will also publish import conditions for the voluntary methyl bromide fumigation of some other-risk plant products.

All imports of risk plant products and seed for sowing will also require a Phytosanitary Certificate with the additional declaration “Representative samples were inspected and found free from evidence of any species of Trogoderma (whether live, dead or exuviae) in Australia’s list of Trogoderma species of biosecurity concern”.

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