Stevedore defends terminal hikes for trucks after NSW Ports says rent cost fell
National stevedore Patrick refuses to be budged from its new charges regime, despite NSW Ports stating that Port Botany rents have fallen.
That information feeds into the ongoing stoush over stevedores’ passing of port privatisation costs on to container trucking firms, with which they do not have a commercial relationship, rather than container shipping lines, with which they do.
It allowed Road Freight NSW (RFNSW) to open a new line of attack, saying NSW Ports’ “rejection of claims by Patrick that rents at Port Botany have increased means that the stevedore must now put the brakes on its proposed new tax on carriers”.
NSW Ports was reacting to mainstream media commentary on the costs controversy, mostly but not entirely focused on the Port of Melbourne and the likelihood of more hikes there – and the source of much of the heat in the issue.
It points out that stevedore rental arrangements for Port Botany were negotiated between the stevedores and the state government before privatisation and that it has implemented the leases in accordance with the agreed arrangements.
“The stevedoring leases at Port Botany are termed ‘performance leases’ as they provide rent incentives for productivity improvement. Where there is good performance as against a baseline, performance rent paid reduces.
“This was designed by the government to incentivise continued efficiencies and performance.
“The leases do not provide for market reviews as the land rent is determined by a fixed formula agreed at the time of signing the lease.
“Specifically in respect of recent comments made by Patrick regarding rent increases, we note that in 2014 Patrick leased additional land area at Port Botany.
“Patrick’s rent payments also vary depending on performance.
“In actual terms, Patrick’s total rent per square metre of occupied land area has dropped slightly between FY2017 and FY2013 (pre-privatisation).
“Land tax and council rates, which are government charges, and electricity charges are not in NSW Ports’ control.”
RFNSW general manager Simon O’Hara demanded the Patrick halt the introduction of the proposed new port tax given that its justification for the charge has been proven to be false.
“It’s astonishing that NSW Ports has felt it necessary to come out and set the record straight on these blatant mistruths regarding the justification for the new port charge. Patrick’s rents haven’t increased, as NSW Ports confirms, their rents have in fact, fallen,” O’Hara says.
“Patrick has been caught out. What’s now clear is it’s been playing the blame game, using pretty poor spin to try to justify their new round of cost shifting and they’ve used their market power to target hardworking truckies rather than go after international shipping operators.
“Patrick must now come clean and explain why it wants to pass on costs down the supply chain to carriers who have already been unfairly burdened by DP World Australia’s port surcharge.
“Patrick must act in good faith and put a halt to the new tax given the clarification on port rents and RFNSW is calling on the State Government and the ACCC to urgently investigate on behalf of our members.”
Patrick argues there are a range of factors behind the hikes that come several months after rival DP World announced its own.
“The infrastructure charges announced earlier month are a consequence of the combined effects of business-wide cost increases which had not previously been passed on,” a Patrick spokesperson tells ATN.
“These included increased costs such as underlying land rent increases over several years, government charges, rates, power price rises of more than 50 per cent since January and the cost of ongoing investments at Port Botany.
“These are costs which Patrick can no longer absorb.”
With commentary in the Australian Financial Review noting that Port of Melbourne hikes, similar to that faced by DP World could extend in increments to 2023, it is understood talks there are yet to be finalised.
Observers there suggest rises of more than 200 per cent, perhaps backdated to July 1, 2015, may be the outcome.
Widening concern
For transport and logistics, the issue has raised hackles in other states as well, with the Western Australian Road Transport Association (WARTA) pointing to the impact in that state.
“This means that for every struggling WA retailer and manufacturer your cost of doing business just got that little bit higher,” WARTA executive officer Cam Dumesny states.
“And for every business exporting and those looking to export to help diversify WA’s economy, well it just got a bit harder.
“WARTA is extremely concerned for many small fleet transport operators at the port who may face serious cash flow issues as a result of the surcharge.
“At a time when there is a tremendous spirit of co-operation within the WA business community to pull together for the common good, it is extremely disappointing to have company thumb its nose at WA.
“WA Road Transport Association will be holding discussions with major business and agricultural groups, government and unions to determine a comprehensive plan of action.
“In the event we are unsuccessful, WARTA will be advising members to pass on the charge to customers specifically naming the surcharge on every invoice.”
Down the chain
Elsewhere amongst those resisting, the mechanism of cost-recovery is raising ire.
Container Transport Alliance Australia (CTAA) director Gerard Langes, for example, points out that shipping lines already have recourse to the ‘terminal handling charge’ – currently around $500 a container – to reflect higher stevedoring operation costs.
“It doesn’t make sense,” Langes says of the stevedores’ arguments that their customers already bear enough costs.
“If you’re going to say you’ll put it on the freight rate, then shipping lines will get very nervous.
“But if you say to the shipping lines that you want to put it on the terminal charges and you can put it on the terminal handling charge, I wouldn’t have thought they would have screamed blue murder about it.”
On a more positive note, Langes reports that Patrick has agreed to a 30-day invoicing regime and CTAA was awaiting response on the same from DP World instead of its “onerous” 14-day system.
But the association was waiting on an Australian Competition and Consumer Commission (ACCC) response to the CTAA’s ‘unfair contract terms’ complaint.
CTAA also hopes for a more focused ACCC approach to the impact of foreign interests in port-side logistics costs and hopes that it broadens the scope of its Container stevedoring monitoring report to reflect the injection of extra costs from port privatisation into the whole of the container chain.
“The government should be looking at the health of the whole of the supply chain,” Langes says.
“We’re of the opinion that the supply chain’s broken.”