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Businesses struggling to cope amid dramatic freight cost increase in and out of NZ

Businesses are struggling to cope with dramatic increases to freight costs in and out of the country, with even more disruption expected this year.

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Shipping some products now costs triple what it did this time last year. Source: 1 NEWS

By Corazon Miller

Delays at ports all across the world are forecast to continue for months, with costs building up for importers and exporters.

Kiwi start-up Arepa had big visions for 2020, but Covid-19 lockdowns and the rising costs of sending its health drinks all around the world has made it rejig its priorities.

CEO Angus Brown said as congestion built up at ports, the company was faced with few choices; paying more to get it shipped in time, paying less but facing lengthy delays - or sending it via air.

"Post-Covid, our costs have changed by about 300 per cent in order for us to deliver our products in the same amount of time as we would have pre-Covid," Brown said.

"We have to weigh up whether we can afford to ship the products with another two weeks delay or if we fast track that."

All costly options that have cast a shadow over the future.

"Essentially, because we are a growing start-up, we need all the money and return for growing our company," he said.

"But that margin is being chewed away because of extra freight costs."

It’s a story echoed across New Zealand; within the fishing industry, horticulture, fruit growers and retail.

Covid-19, transport delays, higher rates and additional congestion charges are pushing prices sky high.

One fishing company told 1 NEWS its rates from New Zealand to Africa have risen by $208 per container.

Another business saw its rates to China rise by more than $7000.

Richard Palmer, from Summerfruit New Zealand, transported his goods via air. He said here too, routes were congested and more costly.

"The price of airfreight has doubled. Where we might have been paying $2.50 a kilo, we are paying $5 to $6.50 at least," Palmer said.

"That just comes off our bottom line. No one is paying more for fruit - for the most part, that comes off the grower margin."

Export New Zealand executive director Catherine Beard said it was a really challenging climate for anyone importing or exporting.

"It’s not just a New Zealand problem, it is an international problem that we are part of. That’s meant for importers and retailers it has been really tough times," she said.

"These kinds of challenges are always harder for smaller to medium businesses."

Its high cost will likely hit New Zealand’s economy.

Latest figures from Statistics New Zealand show that from January to November 2020, importing costs had risen from 4.6 per cent in 2019 to 5.1 per cent.

The figures do not cover the peak congestion period around Christmas when many exporters and importers reported freight prices mounting significantly.

The total import values are also dropping, having gone down 12 per cent in the year ending November 2020 compared to the previous year.

However, a Stats NZ spokesman said it was impossible to know how much this was due to the cost of importing or the logistical challenges of getting goods on shore.

ASB senior economist Jane Turner said the higher costs were a negative for New Zealand.

“It results in high costs and lower incomes for many exporters, as many will be unable to pass on those costs in the markets they are working in,” she said.

However, Turner said it was too soon to tell what impact it had on the economy.

"We do expect inflation could be fairly modest as a result of the Covid shock on the economy," she said. "But we could also see a spike in certain retail goods."

So while it may just be the start of turbulent economic times, Arepa CEO Angust Brown is refusing to give in.

He said Covid-19 has brought mixed blessings, having seen an increased demand for his health products despite the logistical challenges of being able to deliver.

"We have struggled to meet that demand because of our inability to source the product and our packing materials in time, and also deliver our finished goods," he said.

Brown's next step is to enter markets across the Tasman.

But with the window for him getting his goods through to Australia getting smaller, he’s working against the clock.

"The key account that we have landed in Australia essentially has one small window each year for products to go into their supermarkets - that window is closing very quickly."