‘Broken’ container freight system shortcomings detailed

By: Rob McKay


Much hinges nationally on state and federal port logistics probes

‘Broken’ container freight system shortcomings detailed
CTAA’s Neil Chambers, Senator Glen Sterle, Senator Alex Gallacher, FTA’s Travis Brooks-Garrett and Senator Barry O’Sullivan

 

Freight Victoria’s port-related surcharges probe has seen its terms of reference being prepared this month as the search continues for the relevant "expertise" to take it forward.

The fledgling section of the state’s Department of Transport was tasked with holding a review into infrastructure charges, pricing and access to and from the Port of Melbourne last year and state freight minister Melissa Horne, in a presentation earlier this month confirmed it would be held this year as planned.

At that time, port customer body the Freight & Trade Alliance (FTA) argued to senators that disfunction within the container logistics system, of which stevedores’ infrastructure surcharges are part, is harming exporters and importers and their service providers.

The update on Freight Victoria’s progress came at the Container Transport Alliance Australia (CTAA) Container Logistics Issues Update Seminar in Melbourne yesterday from its CEO, Garry Button, who described it as a "key initiative" that was taking a little longer than expected to build momentum.

In an earlier message on the probe, Button tells industry players: "Industry and primary producers have expressed concern regarding increases in stevedore infrastructure charges and access conditions and flow-on costs to their businesses.

"While Port tenants now determine their own pricing, the review provides an opportunity to look more broadly at supply chain charges and access.

"The review is currently being progressed and is expected to conclude mid-2019. 

"Freight Victoria is preparing the Terms of Reference for approval, following which we will soon appoint an expert consultant to conduct the review."

It is understood other states, particularly New South Wales, are waiting on the Victorian inquiry to report before considering their own responses.


Read Melissa Horne’s message to freight interests on the charging probe, here


Meanwhile, the Senate Committee on Rural and Regional Affairs and Transport is conducting its Inquiry into the Policy, Regulatory, Taxation, Administrative and Funding Priorities for Australian Shipping, with FTA and the Australian Peak Shippers Association (APSA), along with the CTAA, have been arguing for container-chain reform before committee members.

The trade group’s submission contends that the introduction of new competition to counteract the stevedoring duopoly of DP World Australia and Patrick has occurred just as their international container line customers have consolidated considerably.

The result has been reduced quayside revenue and return on average tangible assets.

While the idea, pushed by competition authorities, has been to make container throughput cheaper, it has been the consolidated container lines who have gained at the expense of shippers and their domestic trading partners.

As FTA director Travis Brooks-Garrett points out to ATN, shipping lines have been beneficiaries of lower stevedoring rates due to consolidation and yet are passing on higher Terminal Handling Charges to shippers "even though shippers are now also paying a terminal infrastructure fee".

"Competition has resulted in stevedores reducing the prices they charge shipping lines to attract or retain business," the submission states.

"That lost revenue has then been recovered via landside charges, or ‘infrastructure charges’, an unregulated charge for access to international container terminals.

"The result has been a disaster for Australian exporters, who have, in some cases, such as Melbourne, experienced price increases of over 2,000%, in only a few short years.

"To make matters worse, while the international shipping lines are receiving more competitive quayside rates, they are not passing on those savings to their shippers.

"In fact, in many cases, shipping lines have increased the Terminal Handling Charges that they are charging shippers, at a time when Australian shippers are now also paying the stevedores for the same in-terminal services via landside ‘infrastructure charges’.

"Shippers are paying twice for the same services, and both of those prices are increasing.

"It is unsustainable, it is without international parallel, and it requires the urgent intervention of the Australian Government."

Without naming the companies involved, three examples of costs due to charges were used:

  • a manufacturer of flour, starch, gluten and stockfeed expecting to lose $1,595,000 due to the latest Patrick increase after last year’s loss of $833,571
  • a paper and recyclables exporter to lose $3,062,400 this year after $1,585,893.30 last year
  • a grain and meat exporter to lose $893,200 at a time of drought after $678,302 last year.

At the same time, container detention and demurrage charges, meant to cover shipping lines’ costs when containers fail to be returned on time, were being charged despite reasons being outside trader and transporter control.

The charges were levied despite events such as union disputes with stevedores, limited stevedore opening hours at Christmas, Australian Border Force intervention and the increase in shipping lines’ own redirection of containers at short notice to empty container parks ill-equipped to deal with them.

The submission puts forward three main recommendations:

  • strengthened minimum levels of service and minimum notification period requirements for all international shipping line services in Australia and make them enforceable. This should include a non-negotiable minimum notification period for the introduction of new rates and charges, or changes to existing rates and charges. This is equivalent to the protections that already exist in the US for their shippers.
  • urgent action taken to address unregulated and spiralling infrastructure charges.. "While shipping lines have been the beneficiaries of increased competition in stevedoring, Australian shippers have not seen any of those benefits and now are paying twice for container terminal services. It is an unsustainable situation, it is damaging to our economy, and it will only worsen if there is no intervention."
  • state and federal governments take a more proactive role to develop standard industry practices in relation to detention and demurrage, empty container management and other sea freight supply chain activities. "Our economy, and the ability of our exporters to compete in international markets, depends on it."

  

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