This week the Iran conflict has made its presence felt on our shores, significantly impacting road freight and the broader supply chain in our country, and coming at a particularly difficult time for transport operators, many of whom had just started to see a return to growth after two years of decline.

The Government is closely monitoring fuel prices and supply conditions as events unfold, with Cabinet activating key oversight groups.

Given the significance of these developments, this week’s Justin’s Transport Minute is longer than usual and sets out the key information road freight and supply chain operators should know.

Fuel supply

The Ministry of Business, Immigration and Employment (MBIE) advised last week that New Zealand has “healthy stock levels”. The Ministry’s fuel stockholding reporting showed that at midnight Sunday 8 March New Zealand had just under 50 days stock available (27.6 days in country, with a further 22.3 days on water).

MBIE updates this reporting weekly on Wednesdays.

Fuel importers in New Zealand are required to have a minimum stock holding of 21 days of diesel “in country” which means either onshore, or inside our Exclusive Economic Zone (EEZ).

New Zealand is also one of 32 members of the International Energy Agency (IEA) required to hold 90 days of oil stocks. This contribution to strategic reserves is met in part through contracts to purchase, known as tickets.

The IEA this week announced it would release 400 million barrels oil in of strategic reserve, its largest release in history. The release roughly equates to 16 days of supply from the Gulf, or four days of global supply. Total IEA strategic reserves are approximately 1.8 billion barrels.

As an IEA member New Zealand must contribute to that release. According to the Beehive “New Zealand’s contribution is equivalent to about six days’ fuel supply here. It can make that contribution through measures such as terminating its tickets to make the oil available to the market.”

Fuel companies in New Zealand have advised that at this stage there is no impact on their ability to source fuel.

Diesel costs

Diesel prices jumped 27% in a single day, similar in magnitude to the increases seen during the pandemic and the global financial crisis in 2008. Fuel makes up on average 25% of transport operator costs. Transport operators will not be able to absorb cost increases of this magnitude. National Road Carriers is supporting members by providing management tools to assist operators in their conversations with customers, along with competitive fuel discounts – see below.

Supply chain impacts felt in New Zealand

While the Persian Gulf represents only approximately 4% of international containerised trade, cargo owners are already seeing choke points globally as containers are re-routed.

Shipping companies and cargo owners are reporting system-level supply chain disruptions. Even containers travelling nowhere near the Middle East are impacted, as ships are re-routed unexpectedly to ports.

Exporters are reporting “emergency conflict” surcharges being applied out of Australia of up to US$4000 per refrigerated container, and US$2000 per 20ft reefer. Shipping companies fuel surcharges of 20% are also being reported, reflecting the global average price for heavy bunker fuel nearly doubling.

Transport operators can expect to see delays for containers getting to destinations, and potential shortfalls of containers arriving onshore if the conflict extends.

Warehousing and storage are also coming under pressure as supply chain backlogs occur. Perishable and time-sensitive exports will be affected as the availability of appropriate storage for product that can’t get on the water is being reported as an emerging issue. KiwiRail has advised it has some storage available.

Government response

The Government has taken rapid steps to convene critical groups in response to the crisis:

The Ministerial Economic Security and Supply Chains Group, a Ministerial Oversight Group chaired by Minister Nicola Willis and attended by senior ministers met for the first time on Wednesday evening to discuss New Zealand’s situation and potential next steps on fuel security.

The Freight Advisory Council, chaired by the Ministry of Transport and attended by industry and government leaders for maritime, land and aviation supply chain met on Wednesday to provide advice to the Government on industry impacts. I attended this meeting, and it will continue to meet regularly as events evolve. Members are encouraged to send feedback on business and operational impacts to NRC so we can continue to provide the ministerial oversight group with up-to-date industry-intelligence.

The Fuel Sector Co-ordinating Entity has been convened by MBIE under the National Fuel Plan. The entity is a New Zealand government-industry partnership, responsible for co-ordinating the fuel sector’s response to major disruptions. The National Fuel Plan provides for co-ordination between government agencies, civil defence and fuel importers during major fuel supply disruption events.

Member guidance

NRC has a wealth of resources and services available to help members:

Stay informed – National Road Carriers works closely with the Government and fuel suppliers, and will continue to provide sector-specific updates to transport operator members.

Fuel discounts – NRC provides members with highly-competitive fuel discounts from our service partners Z Energy and Mobil. Discounted fuel prices are updated every Friday. Contact NRC for more details.

Fuel adjustment factor tool – is available for members to use. This tool provides a mechanism for transport operators to manage short-term fuel price changes during longer-term contract periods with customers.

Transport cost-model tool – calculates accurate modelling on distance or weight-based total transport costs for your business, to help operators keep ahead of the cost curve.

Infometrics Customisable Transport Cost-index – a powerful tool for helping members to develop a deeper understanding of how changes in underlying costs impact their business.

Commercial Transport Specialists – our team of road freight and supply chain experts are available to members to help with any situation impacting your business. Just call us on 0800 686 777

Justin Tighe-Umbers, Chief Executive, National Road Carriers Assn