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: Good day, welcome to another episode of Importers Connect. I'm Vernon Sinden.

Francois: And I'm Francois Herman.

Vernon: So getting straight into it, there's a lot of things happening in the market at the moment, Francois, we spoke about it earlier, the ports, which we're going to unpack a little bit there and how that's improving.

But I think firstly, from an import perspective, there's a lot of things that are compounding that's influencing your transit times. And we've mentioned a few times on the podcast, but I think just to highlight on it again very quickly, the berthing delays in China, what we're seeing is about 7 to 9 days from origin, and the berthing delays from a local perspective is between 10 to 15 days.

So we've mentioned a few times,  you really have to look at building in your buffer there of around about 2 to 3 weeks, even 4 weeks if you're looking at transhipping. But I think more so, we're wanting to talk about on the podcast about solutioning, what we can do to help you, and also looking at the feeder vessels in China, and the main ports in Shanghai, Ningbo which are the biggest ports ex-China, and this is where we're feeling the biggest influence.

Then we've been looking at West Africa and India. Most of the cargo for out of India is going to West Africa because they're paying the higher freight rate. About 60% of the cargo coming out of India is going to West Africa.

It was $4,500 per container. Now it's over $8,000 per container, just to paint a picture there. So the remaining balance of that cargo is destined for South Africa if you have cargo coming to South Africa. So the space there is still quite limited, and we're forecasting that probably to have no or limited space until the end of September.

Speaking to the shipping lines, we're seeing that there's going to be GRIs and peak season surcharges implemented from the 1st of September, which is going to be about three to $400 per container. So there's still significant backlogs. But again, just to paint a picture that this is not foreign to us. We see this every year.

I think it's compounding just because there's a lot happening at once. And I mean, we don't want to give it a negative connotation, but the reality is, is that we're sitting with typhoons, 3 to 4 typhoons that hit us at once from origin, but you will unpack a little bit more on that. And then, we're still sailing around the Cape of Good Hope because of the Red Sea and what's happening in the Middle East.

Yes, the rand has strengthened a little bit, which should help us or help importers at least pay less for the imports. But I'll speak a bit about that later as we unpack it a bit more in terms of working capital.

Francios: Vernon like you mentioned, this isn't foreign to us.

Every single year we have the weather disruptions. I think what makes this year stand out is that China faced three different typhoons that made landfall in a space of two months. So generally, you'll have typhoons hit land, but there'll be a longer time between them actually making landfall. So obviously, when they make landfall, there's a backlog that builds up, and unfortunately, this year, the next typhoon hit land before the backlog could actually get cleared up.

So that's why we're seeing the delays at origin. I don't think it's the worst thing that can happen. Disruptions do happen. I think it's a very good thing, almost a silver lining where it is happening to China. Obviously, we know the amounts of investment that China puts into their terminals, the way they look after the infrastructure, and they work 24/7 around the clock when they can, if people aren't being evacuated and asked to stay away from work because of the dangers of the rainfall, looking at that.

But I think another positive spin on this, looking at the weather, is actually Germany. We touched on it a few weeks ago on the podcast, the levels of the Rhine River. Germany's seen some substantial rainfall last week and over the course of the weekend, which has actually raised the water levels a bit.

So the cargo capacity on the barges have increased from about 30% up to about 60%. So the freight rates on the river is actually reduced. It's a give and take. You'll always have disruptions, but it's not all doom and gloom.

Vernon: And I think to also paint a picture when we were speaking about the rate levels earlier, speaking about the local DGT ports, capacity was over 90%, and that's why they were struggling to get these containers out -evacuate the containers.

There's a lot on the go, but now we've seen that reduce quite significantly. So now it's under 70%. We're talking between 69 to 65% at the moment. So that is normal operational capacity. That has improved significantly in terms of evacuating your containers. But we see this every year as well in Durban where, and in Cape Town in particular, where it goes wind bound, and then the port closes for a day or two, and then that backlog builds up, and then we have vessels queuing.

I mean, that we experience every year, so that's normal operating. But the thing is also with the Nava System, transporters are trying to get the containers out in time. So there has been a significant improvement there, wouldn't you say?

Francios: I think it's quite amazing to see that there's been a lot of improvement in a very short space of time.

I think to your point it was roughly 2 or 3 days. From the 25th of August, I think the occupancy was at 90%, give or take, and on the 28th, which was Friday, it was already down to 69. So we're waiting for South to publish their latest daily movement report and I think it will probably be closer to 65, and like you mentioned, then that's normal levels.

They can then start actually clearing up the backlog a lot quicker and actually focus a bit more on the water side of things and not just the land side. I think that, again, looking at China, you have a lot of container capacity stuck there, but they'll also start clearing that up, and we'll probably see a return to a normal type of environment during the course of the month.

Vernon: And I think also to paint a picture positively, we're looking at the rate levels last year versus this year. I think it's quite good for you if you can unpack that a bit.

Francios: Last year there was a few things that happened. There was a lot of disruption as well. If we look at a 40-foot container from Shanghai to Durban, and like you mentioned, Shanghai is the biggest port in the world, you looked at a $4,450 average rate level across the carriers. But the rate of exchange last year this time was R17,70. So obviously the rand has strengthened a lot, but not just the rand, the freight rates are about $800 lower. If you take that into consideration and you look at it from a rand level, that's about 20,000 rand less per container just on the freight.

Vernon: I think that's important for the listeners just to understand that's quite a significant reduction in terms of freight rates last year versus this year.

Vernon: With everything that's going on, with the typhoons, the backlogs and and the Nava System and the ports, everything's compounding.

And I think also when we look at the Red Sea and the Middle East, we're seeing that its opening up to shipping lines. Maersk and CMA are sailing through, and we hear now that MEC are also starting to sail through on selected services. So there is significant improvements overall.

Yes, we're going to see the shipping lines still sail by the Cape of Good Hope. Yes, we're still going to see that there's going to be delays at port. I mean, we know this every single year. And then from a container perspective, it all depends on what happens at origin with the typhoons.

I think the the most important thing, again, is just to build a buffer and to be aware of the delays that we're experiencing. But in closing, when we talk about all these delays and everything that we're experiencing in the market at the moment, I think from an import solutioning perspective, we can help you, there is a silver lining. If your cargo is stuck on the water between 3 to 4 months, it's a lot of money, we're talking millions that's stuck on the water.

So from a working capital perspective, that can really affect your business. It can make or break you. Reach out to us, reach out to the specialists to see how we can support you there. We can look at your working cap solution, I mean with us, you would only pay or your term would only kick in after we deliver to you.

Francios: 100%.

Vernon: So it all depends on the scope, the vole, what kind of client, what you're importing, there’s variables, but the thing is with our import solution from a trade and import finance perspective, is that the term only kicks in after we deliver.

If your cargo is stuck on the water for 3 months, 4 months, 6months as an example, that can really significantly help you because your cash is tied up there, and obviously your VAT and duty outlays and everything like that would be part of it.  

Francios: I think there's never one size fits all.

I think that what we really want to achieve is to provide solutions specifically to the needs of the client. We can look at warehousing solutions, we can look at different services into South Africa, different carrier options, different transporters being used, at the end of the day, it's finding the best solution for the client's business needs and actually just executing that for them to help them grow.

Vernon: In closing, just to mention your demurrage and detention, that's something that you need to consider.

Francios: I think that's probably going to be the biggest knock on effect. We're waiting for Transnet just to come out probably with a blanket statement of extending some of the storage charges.

Reach out to your specialist because they do have to log disputes with the shipping lines for every single container.

Vernon: It's case by case, right?

Francios: Case by case. So it is a bit admin intensive, but it is very necessary to do.

Vernon: Unfortunately, there's no blanket instruction at the moment from the shipping line, so we're going to have to dispute every single one at the moment until one blanket instruction does get published.

Francios: 100%.

Vernon: Thanks for listening to another episode of Importers Connect. It's not all doom and gloom. There are solutions. Reach out to us.

Francios: Until next time, trade confidently.

Disclaimer: The views and opinions expressed in this podcast are for informational purposes only, and should not be considered financial, investment or other professional advice, guidance, or recommendations.

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