Shipping lines tax South African exporters to clear cargo backlog

May 27, 2010, 2:28pm

Shipping lines including AP Moller- Maersk A/S are charging South African exporters extra to handle containers as they start clearing a backlog from a two-week transport strike.

Maersk, the world’s largest container-shipping line, is charging its customers an extra $75 per 20-foot container to partially offset losses incurred through the strike at state- owned ports and rail operator Transnet Ltd., Corporate Affairs Director Fred Jacobs said.

“Talk about kicking someone when they’re down,” said Justin Chadwick, chief executive officer of the Citrus Growers’ Association of South Africa. The exporters will refuse to pay because the industry has already lost 250 million rand ($25.1 million) from the labor action, he said.

The strike has held up metal, fruit and wine exports and cost Africa’s biggest economy billions of rand, according to the South African Chamber of Commerce and Industry. Exxaro Resources Ltd., ArcelorMittal South Africa Ltd., Xstrata Plc, Samancor Ltd. and Ruukki Group declared force majeure due to the labor action, enabling them to miss contracted metals deliveries.

The strike has cost South Africa’s fruit industry about 1 billion rand, while losses sustained by other farmers are still being calculated, according to Agriculture Minister Tina Joemat- Pettersson.

The congestion surcharge “is standard procedure,” Jacobs said in a phone interview Thursday. “If you look at our contractual arrangements, there is provision for us to make those charges.”

A backlog of containers will be cleared in the next month after one of two striking unions returned to work, Transnet’s head of human resources Pradeep Maharaj said Wednesday.

The United Transport and Allied Trade Union accepted an offer of an 11 percent pay increase and returned to work this week. Workers in the South African Transport and Allied Workers Union are still on strike in support of demands for a 13 percent pay increase.

The damage to the fruit industry’s reputation is its greatest cost, Chadwick said. “The most important issue is reputational damage,” he said. “We’ve always been known as a reliable supplier in terms of timing and quality. That’s all going to be under question now. The concern is they’ll switch to competitors.”

Port-related companies including Richards Bay Coal Terminal, Grindrod Ltd. and Maersk were Wednesday issued with solidarity strike notices, allowing employees to go on strike on June 1 if the dispute is not resolved, Satawu said Wednesday.

Road haulers and aviation companies including South African Airways may also receive strike notices as Satawu seeks to increase pressure on Transnet, the union said.

While losses from the strike are not quantifiable, it is “exceedingly difficult” for shippers, said Grindrod’s executive director for freight services, Dave Rennie. “The more protracted it is, the longer the recovery will be. The supply chain has been breached, so it has to be repaired,” he said in an interview from Durban. (Bloomberg)