Wood industry concerned Red Sea conflict could drive up shipping costs

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The New Zealand wood industry is closely watching the conflict in the Red Sea.
Photo: Unsplash / Oliver Paaske

The New Zealand wood industry is closely watching the conflict in the Red Sea, as global shipping costs rise as a result of the disrupted supply chain.

The United States is advancing on the area after a string of attacks on commercial cargo ships by Iran-backed Yemen Houthi militants in recent months.

Rabobank said cargo vessels were avoiding the risk of more attacks at the Suez Canal by taking a detour around Africa’s Cape of Good Hope, adding weeks to the voyage.

Researcher Stefan Vogel said it would cost more to ship products like milk powder, red meat and logs from New Zealand to Europe.

“Every vessel that’s longer at sea is slower to load their next cargo, and that’s limiting the available shipping capacity and driving freight costs up.”

Vogel said another concern was the availability of containers, as seen during the global supply chain disruptions from 2021 during the Covid-19 pandemic.

“A similar struggle for containers could materialise again if the Red Sea issues tighten global container freight capacity further.”

Forestry consultant Allan Laurie said higher freight costs and low availability of vessels, as a result of the conflict, were flowing down the chain to New Zealand forest owners.

“We saw a pretty immediate impact. In fact, within three days shipping companies were wanting a $3 lift [per cubic metre].”

He said the handymax bulk carrier vessels, which typically picked up New Zealand logs, tended to get entwined in the mix when the vessel availability was depleted.

“The focus has been on containers and the Suez Canal, but handis are in that mix availability and longer time voyages.”

Forest Owners Association chief executive Elizabeth Heeg said the impact on log exports was marginal to date, as most logs were sent to Asia, not Europe.

“Some New Zealand log exporters have been reporting a $2 increase in shipping cost per cubic metre so far, and that is probably going to also have an impact on forest owners having diminished wharf gate returns and increased import costs,” she said. “But we’ll see where that goes in the next wee while.”

She said manufacturers of processed wood products like paper, panels and pulp exporting to Europe could be affected by the disruptions.

“Definitely, there’ll be impact for some of our brothers and sisters working in wood processing.”

Heeg said the industry was monitoring geo-political unrest in all markets to anticipate any possible impact on cargo trade.

Earlier this month New Zealand joined 11 other countries calling for an immediate end for the attacks on container ships in the Red Sea.