Importers' Connect

In importing, timing matters, delays matter, currency moves matter. This is Importers' Connect, your weekly briefing on the logistics, freight and forex trends shaping South African trade. From port congestion and customs updates to shipping costs and market movements, we bring you the insight behind the headlines so your business can plan with greater certainty.

Vernon: Welcome to another episode of Importers Connect. I'm Vernon Sinden.

Francios: And I'm Francois Hermann.

Vernon: So, jumping straight into it, I think let's look at the snapshots and a couple of highlighted points of last week. On the last episode, we talked about congestion and we talked about freight rates increasing, but I think we just need to put a number to it and what we're seeing on averages in the market.

Out of China, Shenzhen to Durban market average is, from what we're seeing at the moment, for 20-foot is around about US$3100 and for 40-foot US$3,400. Out of Ningbo to Durban, it’s US$2,800 for a 20-foot and then for a 40-foot it’s US$3,600. Lastly, most importantly, Shanghai to Durban we're seeing US$2,650 for 20-foot and then US$3,400 for a 40-foot.

So, these are the rates that we're keeping a very close eye on and we're seeing what's relevant. As we're going into peak the rates do seem to be increasing but they are a little bit softer now because of the supply and the demand at least.

Just to touch on some highlighted points of what we're seeing out of the port performance, which is quite important. Over 62,000 TUs moved last week in comparison to the prior week, which is a 2% increase. So, we do see a little bit of an increase there, which is quite encouraging. But I think also important is the air cargo into O.R. Tambo International Airport. We're seeing 7,709 tons which is a 27% increase in comparison to the following week.

Again, on the back of last week's episode, we were talking about where we're seeing a major shift in terms of how cargo is being moved, where we're seeing from ocean freight over to air freight. What that tells us is that there's not a lot of confidence in the ocean freight or the performance in terms of schedule reliability and we're seeing the shift in mode of transport.

The performance in the port has increased. It is looking a lot better if we're looking at the terminals, for example, Cape Town, Port Elizabeth, Durban, and Pier 1, the waiting times there on average is between zero to three days. Not really material. So, there is an improvement there.  

We'll keep a close eye on that as and when the volumes increase quite substantially, then we'll have a true reflection of what that really looks like.

Vernon: Going through to the next topic, as we're going into peak, what are the surcharges we can expect? And we're hearing from a lot of our clients – “what should we be looking out for?”. I am going to pose this question now to Francois. What surcharges should we be looking out for coming into peak, and what can we do to mitigate those risks of surcharges?

Francios: We’ve heard a lot in the news with the public-private partnership, the concession at Durban's Pier 2 Container Terminal. There's a lot of positive news around Transnet and a lot of positive things happening at the ports. I think you just touched on it that volumes are increasing and it's a good sign for the future. But are our ports necessarily ready from a local land side point of view and land side operations in terms of the booking systems?

What we've heard from a lot of our clients in the last three weeks, almost a month now, is that the local transporters in South Africa are struggling tremendously. They're struggling to log on to Navis to get booking slots. Navis is Transnet TPT's actual booking platform. Just to paint a picture of how it works in theory and in practical terms. A vessel will come into the terminal and then they will start discharging the containers off the vessel.

Once that container is discharged, your first day of free time gets calculated. It starts as soon as that container touches the ground. That container then first needs to get moved into a stack. So, Transnet will put all the containers together in certain areas in the terminal, and then only once that has been done, a transporter can log onto their system to get a booking slot to go and collect the containers.

We've heard from our transporters. Some of them struggle to get a booking slot, up to two days of logging in and logging out. There's a lot of technical issues.

Vernon: There's purely a system issue at the moment, right?

Francios: Purely a system issue. They have changed their service providers. Transnet is aware of it. There have been letters sent through to Transnet and even up to the Minister of Transport. So, they are working on it and hopefully there can be a quick solution.

As you mentioned, we're going into peak season and there's not a lot of waiting time for vessels outside of the port. It's basically a double-edged sword if your vessels only wait for one or two days to discharge but then your containers are stuck in terminal for a long time because the transporters can't get bookings to actually go and collect them.

Francios: The thing about demurrage, it can be very costly.

Vernon: Just to elaborate on that a little bit more, when you say three free days that's still free storage days that you have for free right?

Francios: 100%. There are detention and demurrage. Detention refers to the container inside the terminal. There are free days that you can get the container out of the terminal. What demurrage refers to, and that's more looking at the transporters, is that you have a certain amount of free time to return the empty container after you've offloaded your cargo out of the container back into the empty container depot.

It can differ on how many free days you have. If you only have three free days and they go and collect your container on let’s, say on free day number two, because the transporters are struggling to get a booking, that container must still come up all the way to Joburg, or it must go to the Northern Cape or wherever the end destination is for delivery.

That container then needs to get unpacked, which can take a long time, depending on the commodity inside.

Vernon: And the volume of course.

Francios: And the volume. Then that container needs to go back all the way to Durban to the empty container depot. So that can take a two-day lead time on the roads to just bring it up and take it down again to the coast. And then your free time, if that expires, the shipping line will start billing you per day and it can become very excessive.

Vernon: What are the averages there, if I had to put you on the spot, in terms of a number?

Francios: There's various averages. I think the difficult thing being in South Africa is that the demurrage gets charged in US dollar. So obviously with the rand not being as strong as we would like it to be, that can add up quite substantially. As we know, the rand and dollar exchange rate's quite volatile.

Depending also on the size of the container, if it's a 40 foot. If I have to give you an average across the seven shipping lines, you can look at days one to five after your free time has expired, they usually charge you about US $100 a day per container. So, if you have 10 containers on a shipment that need to move up to Johannesburg, needs to get unpacked and need to be returned to the empty container depot and it’s only two days late, that's US$200 per container. If you have 20 containers, you're looking at US$4,000.

What we advise clients is to reach out to their transporters, reach out to their suppliers, and the shipping lines themselves.

Vernon: Negotiate longer term contracts.

Francios: 100%. Going into peak season, you can't import anything into South Africa at the current state with only one, two, or three free days on your contract. It's going to result in you having to pay excessive amounts to the shipping lines and nobody's at fault.

The transporters aren't at fault for not getting a booking. As we mentioned earlier, it's purely a system issue. But at the moment, the system issues are persisting. It's not looking like it's going to get fixed next week. So, where you can, try and negotiate for a longer free time.

What we generally work on with our clients is a minimum of 14 days. Fourteen days free, it's going to help you sleep a lot better at night knowing that your total landed cost is almost fixed. It will never entirely be fixed, but you don't want to get an invoice after the fact of a few thousand dollars because you're late.

Vernon: I think two weeks is more than enough time to get your container, unpack and return it. And obviously, if anything does happen on the roads, what you were saying in terms of transport with the transporters trucking, you got a bit of a buffer in there, right?

I think as we're heading into December, that's the next question, where we are going to see an influx of volumes coming in. A lot of the importers or consignees are going to close earlier. What can they do to mitigate the risk of that demurrage and detention?

Francios: In South Africa the general rule of thumb is that majority of companies close down for the festive season, usually between the 20th of December until the 2nd of January. We have a lot of public holidays there. It's Christmas period and festive season.

Your free time with regards to that - you will have to extend it, otherwise you're going to pay either demurrage. What we found is that if you can't extend your free time per se, is to work with your transporter or your local warehousing partner. Ask them can they provide you a set amount of free storage days if possible. It won't always be possible. I think specifically going into festive season, there’s a lot of demand for warehousing space.

Vernon: Or a discounted rate at least.

Francios: 100%. Anything's possible. You must just ask and negotiate for it. No, and it sounds a lot easier than it is, but you'll never know if you don't ask. That’s the biggest lesson that we've learnt doing this for many years is rather reach out proactively, talk to the relevant parties and stakeholders. Find out what you can do to help each other. Remember, a transporter also does not want to get into a dispute because of an invoice where the consignee or the importer's saying, "No, it's the transporter that should have had the booking earlier," and the transporter's saying, "But we did everything we could. It's a system issue."

So rather reach out proactively. Find out if you can get a free period of storage days or a discounted rate. That will just help you in the long run. You don't want to add on cost onto your selling price because you have to add in an additional R10,000 a container for storage fees and demurrage fees.

Vernon: That's a very bitter pill to swallow, especially when it comes to storage charges if you haven't planned proactively. And I think, just in closing, when we're heading into peak now at the moment, those are the questions our clients are asking us - "How can we save money? What are the surcharges that we can expect to be coming as we head into peak?"

But again, this is not foreign to us. We see it every single year. It's very much volume, client and contract dependent depending on the shipping line that you use and obviously depending on Incoterm that you're using.

Of course, if it's a C-term, you have you have very little control from a local perspective. And as an F-term, you are procuring the rates and procuring the space directly with the shipping lines. Keep your eye close on what's happening in the market and what's happening with the volumes that are coming into the country to mitigate that risk.

Negotiate with your transporter and with your supply chain specialist within your company and to try and get something longer term contracted so there is no risk with that.

Vernon: Thanks for listening to another episode of Importers Connect. If you have any questions, please don't hesitate to reach out to us. Trade confidently.

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