DP World in hefty infrastructure surcharge hike

By: Rob McKay

Rise of more than 50 per cent in some cases for eastern state terminals

DP World in hefty infrastructure surcharge hike
It has become even more expensive to pick up containers from DPWA wharves


Stevedore DP World Australia (DPWA) has raised its controversial infrastructure surcharge more than 50 per cent for two of three eastern state terminals.

At the same time, it will be extending its payment terms, another point of contention amongst critics, for landside operators from 14 days to 28 days at year’s end.

The charges per container see Brisbane’s rise to $38.75 from $32.74 in March, Sydney’s to $37.65 from $21.16 and Melbourne’s $49.20 from $32.50.

"The decision to increase the surcharge was a difficult one," the company says.

"It reflects the tough market we are operating in, and DP World Australia needing to be financially viable in the long term."

RFNSW reaction

Road Freight NSW (RFNSW) described the latest price hike as "outrageous" and a "kick in the guts for truckies".

"Our members are stunned, they’ve effectively been hit with two big price increases at the port in less than a year," RFNSW General Manager Simon O’Hara says.

"Once again, the latest price gouge has been cynically blamed on so-called ‘increased costs’ at the port, but the ACCC has already acknowledged that extra taxes could earn DPWA and Patrick a combined revenue of $70 million, equivalent to a 5 to 6 per cent increase in unit revenues.

"The ACCC also noted that ‘unit costs for both stevedores remain stable’, so from our perspective there is simply no justification for yet another price hike - it’s nothing but a greedy cash grab from DPWA.

"It’s a kick in the guts for our RFNSW members who are still reeling from the first round of unscrupulous surcharges forced on them by the stevedores.

"We’re now concerned that truckies’ operational costs will continue to rise and be passed on through the supply chain and eventually on to consumers.

"What’s worse is the other stevedores will undoubtedly follow DPWA down the slippery slope and impose their increases on port charges. Where will it end?

"We’ve welcomed the ACCC’s statement that the infrastructure taxes raise a number of issues for the port supply chain and we are again urging the ACCC to step-in and stop the stevedores from using their market power to force these ever-increasing charges on to truckies."

Leigh steps in

The DPWA move prompted federal shadow assistant treasurer and shadow minister for competition and productivity Andrew Leigh to back the ACCC’s intention to look more closely at the issue.

"Last week, the Australian Competition and Consumer Commission reported its concern about stevedore price rises," Leigh says in a statement.

"The consumer watchdog also noted that infrastructure charges appeared to be shifting from shipping lines to transport companies as they are less able to respond to higher fees.

"Just after midday today, DPWorld announced price rises for infrastructure charges levied on transport operators of 77.9% in Sydney. Melbourne (51.4%) and Brisbane (18.4%) also saw substantial increases.

"Labor looks forward to the Australian Competition and Consumer Commission undertaking a thorough analysis of the dynamics of this market, the level of infrastructure investment, to determine whether these increases are consistent with our competition laws, and the extent to which ‘revenue from the new charges is likely to more than offset cost increases associated with terminal rents, government taxes and rates’ (p.10).

"This episode is a further reminder of the value of Labor’s proposal to give the consumer watchdog a fully independent market studies function, so it can investigate these concerns immediately."

DPWA explains

The stevedore argues it faces one of the most difficult markets in decades.

It says that, as with other costs, rising occupancy and energy costs, at 9.2 per cent annually nationally over the past 10 years, and forecast to rise well ahead of CPI, "have virtually negated recent efficiency gains".

"The stevedores’ collective investment of more than $2 billion in more efficient cargo handling quayside and landside in the past 15 years, combined with improved work practices and vastly improved truck turnaround times, have all but been negated by punishing increases in occupancy and energy costs at our terminals – electricity costs have increased 183 per cent nationally over 10 years – and sustained pressure on volumes and pricing resulting from the global downturn in shipping," DPWA says.  

It points to the Australian Competition and Consumer Commission’s (ACCC’s) Container Stevedoring Monitoring Report showing unit revenues for stevedores have been falling over recent years to record lows.

"Revenue per TEU, a proxy for price, continued to fall across the industry in 2016-17. This has continued a very consistent trend which now sees unit stevedoring revenue at a level which is about a quarter less than a decade ago in real terms," the ACCC report notes.

DPWA insists there is a limit to what can be absorbed in future "if we are to be able to continue a program of capital expenditure and innovation for a service that is at the heart of the Australian economy.

"Some in our industry will continue to expect us to absorb what are extremely unreasonable cost increases.

"In any industry, businesses refine and rebalance their prices as a normal part of responding to changing market conditions. We do not think it is reasonable for any one company to absorb these costs."

The extra charges will "help underwrite a significant investment in critical infrastructure investment across Brisbane, Sydney and Melbourne over the next 10 years, to ensure we can meet the ever-rising service expectation from our customers with the inevitable larger vessels and the changes in arrival patterns that will bring".

The stevedores have taken flack for failing to add charges to their container shipping line customers but DPWA says it has happened previously.

"Our rates with shipping lines are negotiated as contract terms expire, and take into account market conditions, occupancy and maintenance costs, and ongoing investment commitments," a spokesperson says.

"Shipping lines have been funding the vast majority of infrastructure-related costs – landside and wharfside – for time immemorial." 


You can also follow our updates by joining our LinkedIn group or liking us on Facebook