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Continuity
through Change New Zealand's fruit, dairy and meat businesses provide a substantial cargo flow for both container and conventional reefer shipping companies. Apple and pear exporter ENZA, for example, shipped around 17.6 million boxes of apples in 1999, up from 13.9 million in 1998. Within the trades to Europe, Asia and the Middle East around 284,000 pallets were shipped conventionally for ENZA and 81,000 will be containerised this year. The container shipping lines, led by Maersk and P&O Nedlloyd, have made big inroads into New Zealand's apples trade, and the container share is much higher now than it was just a few years ago. In the New Zealand to North America trade, the vast majority of ENZA's business is carried by conventional operators. The small containerised element is currently being carried entirely by P&O Nedlloyd following successful negotiations for the 2000 season. A natural balance between container and breakbulk shipping modes in New Zealand's apple trades may well have been reached. It is likely that there will be no further significant increase in the market share of the container lines. Kiwifruit movements were similar in volume in 1999 to 1998, at around 58-60 million trays. Overall, approximately 180,000 pallets of kiwifruit are shipped conventionally, and 55,000 pallets in 40 foot high cube containers. On the New Zealand to Europe route, conventional reefer carriers dominate mainly because it is largely a port-to-port operation, between Tauranga and Zeebrugge. Conventional shipping costs are lower on a purely port-to-port basis, and as Zespri's season runs through the global reefer off-season, from late March to December, conventional reefer shipping companies can offer attractive rates. On the New Zealand to Europe routes, dairy and meat are subject to EU quotas, and so are stable at these levels. Current quotas are just over 220,000 tonnes a year for lamb, almost 90,000 tones for butter and cheese, plus a small beef quota of about 10,000 tonnes. This traffic is almost all containerised, with P&O Nedlloyd the dominant player. Outside the EU, New Zealand also supplies Eastern Europe, although this market crashed as a result of Russia's economic troubles. At one point, around 100,000 tonnes of New Zealand butter was being moved into Russia alone, and this is now down to around 40,000 tonnes. Conventional carriers transport most of this cargo, but it will progressively move into containers. Other markets for New Zealand dairy produce have been developed in recent years, in particular North Africa. These can be volatile trades however, and were again mainly carried by conventional operators, until recently. Dairy production in New Zealand is being expanded at a rate of about 4% a year, as additional farm land is brought into production. Following a flat 1998-99 year because of an exceptionally dry summer in New Zealand, it could be that output will grow by as much as 8% in the 1999-2000 period, generating potentially significant, additional cargo flows for shipoperators. On the downside, New Zealand's lamb trade to America was hit by a recent duty imposed by the US government, which will restrict exports to 16,000 tonnes a year. However, the main volume of meat is beef of which 40% of the volume is containerised. For the container lines in the trade generally, and P&O Nedlloyd in particular, there are a number of issues that have had to be addressed with regard to the New Zealand reefer trades. Whether to serve the market directly or via transshipment over Singapore is one. P&O Nedlloyd is a firm believer in the benefits, and economic advantages, of making direct calls compared with transshipment, for trades such as Europe and North America where the line has sufficiently large support to justify the service. Other operators, principally more recent entrants to the New Zealand market such as Maersk, have to take the transshipment approach. To this end P&O Nedlloyd recently announced an order for seven new 4,100 TEU ships with 1,300 reefer plugs and a maximum speed of 25 knots to be delivered during 2002. Its partner Contship followed this up with an announcement of a further three similar ships, with all 10 to run on an eastabout round-the-world routing. P&O Nedlloyd's Resolution Bay class of ships with the large porthole capacity built in the mid-1970s will life-expire from mid-2002, and be successively replaced by the new ships, with the new service being fully in place from the start of 2003. The decision also affects the New Zealand/Australia to North America trades as the former Blue Star Line porthole reefer ships deployed by P&O Nedlloyd on this trade will also be replaced by the newbuildings. Currently, a significant proportion of the New Zealand perishables trade, especially meat and dairy produce, is carried in blown-air, porthole containers, as opposed to integral reefers. Studies carried out by P&O Nedlloyd have shown that even with the volumes carried in this trade, blown air refrigeration systems are not now significantly more economic than integral container systems, given the reduction in container build costs. Furthermore, there is a gain in flexibility with the integral system, and crucially they can be used on any trade route. It is no longer realistic to invest in ship-systems that are specific to one trade. Important changes could soon take place in the dairy and fruit exporting sectors, and these will inevitably have repercussions for shipping companies. As things stand, though, the impact should be relatively small-scale compared with, say, the changes that have followed deregulation in South Africa. The recently proposed 'mega-merger' between Kiwi Dairies and NZ Dairy Group has come to a halt. Both sides are currently taking stock of their relative positions and looking at ways to enhance shareholder returns. Discussions concerning a merger could start up again in the future but parliamentary assets as well as farmer backing would be required up front to enable any merger. As of this, the 2000 season, Enza has been required to give out trading licences to independent apple and pear growers so that they may sell independent to overseas markets. Enza have been required to allot at least a minimum of 10% of the volume to be covered by independently licensed shipments. The remainder of volume will fall under the continued control of the central Enza export authority Similarly, the kiwifruit business is being restructured. A Bill is before the New Zealand parliament which corporatises the New Zealand Kiwifruit Marketing Board, forming a company that will be called Zespri Group. A new entity called Kiwifruit International has been formed, which will provide the funding to allow Zespri International, a subsidiary of the Zespri Group, to source and market non-New Zealand kiwifruit, so that it can supply kiwifruit year round to customers worldwide. Again, despite the changes, single desk export status for New Zealand kiwifruit is expected to be maintained, and so there will be a continuation of the single point of control for shipping this produce. John Williams is general manager, Europe-Australia/New Zealand Trade at P&O Nedlloyd |