Josh Tan: Export NZ executive director on Red Sea tensions driving up costs for Kiwi exporters

The costs of sending Kiwi exports overseas has risen significantly amid escalating 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 - but they remain below the peak reached during the Covid pandemic.

Export NZ executive director Josh Tan says this is an 'external shock' that runs the risk of impacting inflation. 

"We're impacted by what is happening around the world - so this certainly qualifies."

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Episode Transcript

Speaker 1 (00:00):
Okay, now here's I won't call it doom and gloom,
but it is certainly a concern. Shipping costs are going
up again just as we just as we start turning
the corner and the fight against inflation, one of those
supply costs starts going up again. According to m FAT,
global shipping rates have nearly doubled since April. Hootie attacks

(00:22):
in the Red Sea are cited as a major problem.
Shipping traffic in the Suez Canal is down fifty percent,
and there's been what a drought in the Panama Canal
as well. Awesome. Joshua tan As, executive director for Export
New Zealand and joins me. Now, hello, Joshua, Hey Andrew.
Is this bad for our exporters like it was last time? Yeah?

Speaker 2 (00:43):
Look, I think it's not as bad as last time. Obviously,
As you said, shipping rates have doubled nearly the bood
since April, and contenta costs are incredibly censive at the moment,
you know, and reacting to events around the in real time.
But what we've seen is that it's possibly, it's probably
unlikely that costs increase to the same level that we
saw during the pandemic, but it's not impossible.

Speaker 1 (01:06):
Is it bad for importers and is it bad for
domestic inflation?

Speaker 2 (01:11):
Certainly? You know, in terms of domestic inflation, importers face
the same issues as exporters do when it comes to shipping.
You know, it's things like shipping delays, cost at a
sorry time, delays at different ports, and also things like
in insurance as well, which really drive up those those
costs for importance and exporters.

Speaker 1 (01:31):
Whenever people talk about inflation getting better and better, they say,
you know that is as long as there were no
external shocks. Would this qualify as an external shock?

Speaker 2 (01:41):
Absolutely? Look, you know we're impacted by what is happening
around the world, so certainly qualify us.

Speaker 1 (01:47):
So how much longer could the shot go on and
or more importantly, could it get worse?

Speaker 2 (01:53):
Look, it's it's really hard to tell at this point obviously,
you know, as I said before, it's impacted by what
is happening in a major shipping route, and it really
depends on how long those issues can potentially last.

Speaker 1 (02:10):
For it's amazing how dependent the world is on a
couple of canals. We've got the Suez and then between
North America and South America. We've got the Panama and
the Panama is having problems as well. Are they free
of problems right now?

Speaker 2 (02:22):
Yeah? Look, some finding some good news. So an updated
on the Panama Canal is that the drought has ease
there and that there are increased traffic was compared to
earlier this year. So what we understand is that route
is actually back to normal.

Speaker 1 (02:35):
Are there any other alternatives when these routes, particularly the
Sieuez which is in a hotspot, Do we have any
other alternatives that we can explore? Could there be other
ways of doing this because we are being held hostage
by by some hooties.

Speaker 2 (02:53):
Look, that's a really good question. At the moment, there
is a workaround to this issue. Set of ships going
through the red seat in the Sewerz Canal. They're instead
re routing cargo ships around the Cape of Good Hope
in South Africa. Now this ads typiclear around ten to
twelve days to poet Singapore in Europe. But look, at
least you're getting ships visiting different ports.

Speaker 1 (03:16):
All right, Josh Chan, I think you for your time today,
Export New Zealand executive director. How is this affecting business?
I'll tell you Sarah mcormick is the chief executive of
a fresh fruit exported by the name of Tomato Exports,
and she says getting apples to Europe is very difficult.
They have to ship around Africa to get it there.
It's a very long transit time for apples and more
expensive as well. It's been a bit challenging. We've got

(03:37):
Sirma Karapeva from the Meat Industry Association saying that shipping
costs we're hitting meat companies in the pocket. It's the
geopolitical uncertainty the Panama now the Suez Canal. It's just
additional complexity and cost. He says, it's not anything we
can control directly, but it's certainly something that the companies
are very mindful of. It's taking the bite off the

(03:57):
profit line. It's making imports and exports more expensive.

Speaker 2 (04:01):
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Speaker 1 (04:03):
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