WOOL exporters in Western Australia have complained to Australia's peak shipper body about inconsistent shipping schedules and base freight rates that have quadrupled in the past five months.
But there is no immediate relief on the horizon and local wool traders are concerned shipping problems - which some say are getting worse, not better - have the potential to "crash the market" if they continue indefinitely.
Traders believe delays in being able to get greasy wool onto ships has trimmed 15-20 per cent off potential prices in a good market at the Western Wool Centre (WWC) so far this year because of buyers' concerns about their cash-flow.
One trader said his company, because of unavoidable shipping problems, was sometimes forced to conduct daily accounts reconciliations to ensure it could continue buying wool at auction at the WWC until payments delayed by late delivery of wool, replenished cash reserves.
The traders do not want to be named, suspecting they could slide to the bottom of shipping company priority lists for limited container space available out of Fremantle - only five WA wool traders organise shipping through Fremantle port so they fear they could be vulnerable.
But they believe the fortnight after Easter will be a big test of the impact of shipping problems on WA's wool industry.
The WWC is not scheduled to trade the week after Easter, so traders who have part-filled orders or been unable to get completed orders onto ships before Easter, will have to carry the cost of the wool they have bought for at least an extra week, plus whatever delays in shipping they then encounter.
Delays in getting wool on ships - highlighted in Farm Weekly last week - is forcing traders to carry the cost of wool they buy for clients for timeframes longer than is covered by an irrevocable letter of credit (ILC) - a financial instrument used to facilitate international trade by protecting traders, as seller, should their clients, as buyer, default on the deal.
Extending the period covered by an ILC is complex, with both parties and the bank having to agree to new dates, but other terms cannot be renegotiated.
As a brokered market, wool trading is essentially a cash market, traders explained.
They have to pay for wool they buy before it can be taken out of store and they use ILCs to guarantee they will get paid when it is delivered to their client.
Usually, once containerised wool is loaded on a ship, the trader gets a bill of loading which they use to generate an invoice to the client destined to receive the wool.
Any delay in getting wool on a ship extends the time before an invoice is sent, in turn stretching the time before payment is received.
Apart from potential cash-flow problems, traders holding wool because they can't quickly get it on a ship, face a second financial problem.
If the wool market weakens and prices tumble, the market value of wool they are holding is no longer what they paid for it and, depending on the contract they have, their client may be inclined to pay the lesser market value.
Traders have been unable to get satisfactory explanations from shipping companies why sailing schedules are changed at the last minute and why costs keep rising.
One trader said he was quoted US$4000 base rate without insurance for a "20 foot box" (six metre shipping container) on the China to Italy route in November.
Prior to then the same size container on the same route had cost $2200, the trader said.
Since then, further quotes on the cost of a container from China to Italy have increased in roughly $2000 increments to $13,000, without any certainty the container will be loaded on a ship and depart by a certain date or arrive by a certain date, he said.
"We've heard reports of it now costing up to $18,000," the trader said.
The China to Europe route is particularly important for the WA wool industry because all of WA's wool goes to China for early-stage processing before some then goes on as wool top to later stage processors and manufacturers in Europe.
Early stage processing involves scouring or washing the wool to remove dust and dirt, carbonising to remove grass seeds and top making to create a continuous sliver of aligned wool fibres.
Top making is the final step before spinning to create yarn.
The route from Fremantle to a port in China goes via either Singapore or Port Klang in Malaysia.
According to traders, a $200 surcharge is also being added by shipping companies for the Singapore or Port Klang to China routes simply because they are busy routes with increasing demand for container space.
Uncertainty caused by changing shipping schedules is also causing problems with delivery.
"We booked wool on a ship that was due to call at Fremantle and then go to China, but before it got here, for some reason it went to Sydney first and spent two weeks there and the shipping company can't tell us why," one trader said.
John Bradbury, Fremantle Wool Trading director, last week described the shipping situation as "the worst it has ever been".
"We are trying to book containers two months ahead because of the difficulty in getting them and then getting them onto a ship," Mr Bradbury said.
Last week in Farm Weekly, Peter Morris, head of PJ Morris Wools, WA's largest wool trader, described the shipping situation as "a nightmare" and Paul Foley, managing director of Swan Wool Processors, described it as "diabolical".
Peter Morgan, executive director of the Australian Council for Wool Exporters and Processors (ACWEP) confirmed last week WA wool traders had complained to him about the problems they encountered trying to ship greasy wool from Australia to China and Australian wool top from China to clients in other parts of the world.
Dr Morgan is also ACWEP's representative on the Australian Peak Shippers Association (APSA) committee of management, the designated peak shipper body.
APSA combines with the Freight & Trade Alliance, a peak body representing the international trade and logistics sector, as an advocacy group on supply chain issues.
He said he had raised wool traders' concerns about shipping with APSA.
"Unfortunately there does not appear to be a lot that can be done to improve the situation any time soon," Dr Morgan said,
"The major delays are more on the China to Europe routes then on the Australia to China routes," he said.
"There is some suggestion the situation might improve towards the middle of the year."
Wool traders point out they are only one local export industry being hampered by shipping delays and there have been reports of WA products being trucked to Melbourne for packaging and export consignment because of a greater chance of getting them on a ship there.
