Pressure on Horne to act in domestic interest; wider truck charges impacts highlighted
The Victorian government and, by extension, those of other states, are warned they risk cementing a “new normal” of unconstrained supply chain costs if they fail to regulate container access charges.
The point was made at a port industry round-table yesterday the state government and Port of Melbourne hosted to discuss the Deloitte-authored draft Port Pricing and Access Review report and other port-related matters.
The round-table heard that entities such as stevedores and empty container parks will continue to collect significant revenue from the road and rail transport sectors rather than negotiating pricing with their contracted shipping line clients.
Paul Zalai, director of Freight & Trade Alliance/Australian Peak Shippers’ Association (FTA/APSA), which is part of an alliance that includes Container Transport Alliance Australia (CTAA) reports the gathering was told that “as correctly identified in the review, these costs cascade down the supply chain with the addition of administrative fees, resulting in further inflated costs ultimately paid by export and import cargo owners”.
The report and state transport minister Melissa Horne’s foreword backed transparency and monitoring initiatives but FTA/APSA argues that, while market forces are best placed to determine a commercial outcome, “this could only be achieved with regulation to prevent the practice of stevedores collecting revenue via infrastructure surcharges” while allowing stevedores “sufficient lead times to re-negotiate appropriate contracts with container shipping lines”.
It believes this is a better mechanism for container lines to recoup their own costs directly with cargo interests, even if it means higher freight rates – that is “a preferred outcome in that it allowed cargo owners to negotiate price rather than being subject to an unregulated regime administered by stevedores with no available avenue to negotiate price”.
Horne states any move has to await the Australian Competition and Consumer Commission’s (ACCC’s) review of legal exemptions for container lines under the relevant Act but access charge opponents fail to see that as an impediment to action.
“The Victorian government is to be commended for taking the brave lead in commissioning the review with other state and national regulators watching with keen interest,” Zalai says.
“The spotlight is now clearly on Minister Horne to take the next step to truly champion the cause for cargo owners and to establish an environment to facilitate fair commercial practices.”
Whatever solution is found will likely need to address increases in the stevedores own costs.
The Deloitte report says analysis of stevedore revenue and cost trends shows:
- while infrastructure charge revenue has increased, there was also a relatively large increase in cost items such as fixed port rents, equipment costs, labour and other items
- there appears to be evidence to support the claim that historical infrastructure charge increases are to cover costs
- there is some public evidence of past and/or future investments in quayside and landside terminal facilities
- there is clear evidence of declining quayside prices and returns – increases in landside charges such as the infrastructure charge suggest a rebalance of revenues from quayside to landside as stevedores continue to compete for contracts.
Read about the Deloitte port access report’s recommendations, here
Meanwhile, the Australian Trucking Association (ATA), which has backed member groups in opposing access charges, has put the issue in a wider context in response to the review recommendations.
An ATA spokesperson directs ATN to the ATA’s submission to the federal Productivity Commission’s (PC’s) review of heavy vehicle reforms as it relates to access for trucks generally, while mentioning stevedore charges in particular and urging PC involvement in current state inquiries into them.
“Heavy vehicle tolls have a significant impact on trucking operators. Independent evidence to the Australian Senate reported that smaller trucking operators are less able to use their fleets (or single vehicle) to convert travel time savings to direct benefits for their companies. Smaller operators are also very sensitive to costs and road pricing,” the ATA states.
“Toll Group has assessed the value for money proposition of some of these toll roads. An analysis of a Victorian based customer found that toll charges have doubled, increasing by half a million dollars since 2017.
“Despite this significant increase, travel time savings were either minimal to non-existent. Additionally, an assessment of 12 routes showed that fees had increased by 100 per cent and failed to delivered travel time savings, which actually increased by 1.3 per cent.
“Higher tolls cannot always be passed on to customers. A regional operator reports that it is difficult enough to get rate rises from customers to offset increasing wages and that they’re unable to pass on toll road costs.
“Even larger operators cannot always pass these significant costs on. Toll Group advise that toll road charges cost them an annual $15 million to $20 million and due to the competitive nature of the industry that increases often have to be absorbed.
“Industry does support investment in new road infrastructure, provided the charging regime is fair. As an example, the Queensland Trucking Association successfully advocated for the pricing of the new Toowoomba second range crossing to be based on a fair toll.
“On landside port charges, ACCC Chair Rod Sims has commented that infrastructure fees imposed by stevedores on transport companies have gone up a lot more than costs have gone up, and that apart from increasing profits it is unclear what rationale there is for the increased charges.
“The increasing impacts of port access charges has contributed to both the Victorian and NSW Governments announcing inquiries into these issues. The Productivity Commission should liaise with both inquiries.”
THe move has been noticed in NSW.
“The NSW Government has referred the matter of rapid price increases to the NSW Productivity Commissioner to investigate the impact on the supply chain,.” a spokesperson for state transport minister Andrew Constance says.