The latest Covid lockdown has delivered a sharp jab to many NZ businesses, but not what they had been encouraged to think our wellbeing-focused government was planning for them. It has taken the gloss off what might otherwise have been regarded as a strong reporting season for NZX-listed companies.
The spike in coronavirus cases has led to NZ falling 26 places in Bloomberg’s Covid Resilience Rank.
We had been the longest-running first-ranked country on the Bloomberg watch-list, since the inception of the ranking in November 2020. The plunge follows the spread of the Delta variant in Auckland and Wellington, which (when we checked yesterday) has resulted in 347 people testing positive for the virus across Auckland and Wellington.
Prime Minister Jacinda Ardern says lockdown is starting to work and she insists she is acting on the “best advice” in keeping the whole country locked down until Wednesday, when there will be a slight easing with the rest of the country south of Auckland moving to level 3.
NZ is now ranked 29th on the Bloomberg ladder, two places above Australia which announced 1000 new cases on Thursday – Australia’s worst day of cases since the pandemic began.
Australia’s plight is cold comfort to businesses in NZ, where some sectors have been suffering acutely from shortages of materials and shortages of skilled labour.
The question is whether those industries which have shown remarkable resilience in their operations over the last 12 months can do so again, according to their results as reported over the past week or two.
Take, for example, the port companies: they have kept NZ’s trade moving almost without a hiccup (though there was a worrisome episode at the Port of Tauranga when the infected crew of a container ship mingled with local stevedores). And the Port of Auckland has had its own specialised problems.
As NZ’s largest port, Port of Tauranga encapsulated, to a degree, how the NZ economy performed through the pandemic. Reporting net profit 15% up at $102m on 25m tonnes of trade, it said a 14.3% increase in log exports and a 46% increase in subsidiary and associate company earnings were balanced by increased costs and reduced container volumes due to supply chain congestion.
Port of Tauranga Chair David Pilkington says that as the world continues to grapple with the devastating effects of the Covid-19 pandemic, there has been major disruption in international supply chains.
“Constrained capacity in parts of the NZ supply chain, especially at Ports of Auckland, has exacerbated delays and restricted our ability to adapt quickly to the needs of importers and exporters.
“International shipping capacity is in hot demand and costs for shippers have skyrocketed. However, it is not efficient to run a container terminal at more than 100% capacity and our costs, including straddle carrier diesel use and the related carbon emissions, have grown as a result of the congestion we have had to endure. In recent months, we have also experienced the labour shortages felt by many other industries.”
Temporary surcharges for long-stay containers, introduced in January to discourage inefficient cargo flows and relieve yard congestion, helped Port of Tauranga to recover a portion of the additional costs being experienced. Parent company revenue increased 8.9% to $323.5m, while operating costs increased more than 15%.
Port of Tauranga CEO Leonard Sampson says the evolving response to the Covid-19 pandemic has had a significant impact on Port of Tauranga operations.
“We saw 106 fewer container vessel visits between September 2020 and June 2021. However, the average cargo exchange increased 21.7% due to the reduced vessel frequency and shippers maximising available capacity,” he says.
Near-record surges of container volumes in the months of October and December, compounded by constrained rail capacity, caused significant congestion, reduced productivity and weeks-long delays transferring import containers by rail to Auckland.
Additional trains from KiwiRail since May have eased the pressure, but container vessels are still arriving “off window” and are being processed in the order they arrive.
Sampson says congestion is unlikely to be resolved permanently until vessels can return to schedule and Ports of Auckland is back operating at full capacity. This highlights the need for Port of Tauranga to expand its capacity to cater for future demand.
“We have applied for resource consent to extend our container berths to the south of the existing wharves, by converting existing cargo storage land. This $68.5 million project is a vital piece of national infrastructure if we are to meet future cargo demand and have a resilient supply chain,” he says.
“We are also pursuing our plans to automate some of the container storage at the terminal to increase our capacity within the current land footprint. Our capability will be further extended with the opening of the inland port at the Ruakura Superhub near Hamilton in mid-2022.”
The inland port is being developed in a 50/50 partnership with Tainui Group Holdings.
Cargo trends were interesting: total trade rose 3.8% compared with the previous year, although container numbers were 4.1% fewer at 1.2 million TEUs.
Imports increased 4.0% to 9.4m/t, and exports increased 3.6% to 16.3m/t.
Log export volumes bounced back from the 2020 lockdown, increasing 14.3% to 6.3m/t. Sawn timber and wood panel exports decreased 12.4% in volume.
Dairy product exports decreased 1.9% to just over 2.3m/t, reflecting a later-than-usual season and a reduction in tranship volumes.
Kiwifruit exports increased 10.1% in volume.
Oil product imports increased 11.6% in volume, and cement imports increased 42.4% in volume, reflecting the strength in the local economy.
Fertiliser imports decreased 16.9% in volume, grain volumes decreased 8.9% and protein and stock feed imports decreased 10.4%.
Coal imports increased significantly as a result of lower hydro energy production and declining gas production.
So how is the year ahead shaping?
Sampson says it remains uncertain but he is confident Port of Tauranga has resolved land-side congestion issues for now.
“However, the disruption to the international supply chain remains, and the challenges in Auckland are unlikely to be resolved soon.
‘’Covid-19 precautions will continue to impact efficiency and costs as we see a worsening sector-wide labour shortage that could potentially have an impact on operations”.
As Point of Order sees it, the Port of Tauranga and its workers deserves a round of applause from the rest of the country for what it has achieved in the most testing of circumstances