ACCC calls on container shipping to rescue third stevedore

By: Rob McKay


Plea for creativity to get new entrants past impediment of being blocked on national coverage

ACCC calls on container shipping to rescue third stevedore
The latest stevedoring performance report.

 

The Australian Competition and Consumer Commission (ACCC) wants container shipping lines to save Australia’s unofficial and uncoordinated stevedoring strategy.

The ACCC has oversight of what has been a stevedoring duopoly, with a view to fostering competition to boost efficiency and drive down costs, which continues.

Part of this has been championing new entrants but its latest review, Container stevedoring monitoring report no.17, shows new technology is being put in place and prices have fallen but new entrant Hutchison Ports Australia has failed to gain many customers at all.

"If there are particular obstacles to shipping lines switching to new stevedores, it is important these are overcome," ACCC chairman Rod Sims says.

"Increased competition will promote the likelihood of improvements in stevedoring continuing into the future."

The long-held traditional view has been that a lack of national coverage is a disincentive for container lines as deals for calls at partner terminals around the country are unavailable.

Hutchison made a start, picking up third-stevedore positions in Brisbane and Sydney, but was thwarted at the biggest container port, Melbourne, due to the Victorian government accepting a bid that has been criticised as unsustainable from a firm that lacks assets in other ports.

In an indication that the ACCC accepts this as a reality is a section in the report addressing the issue for the first time.

"Entering a well-established, capital intensive industry like container stevedoring inevitably comes with challenges. It requires large and lumpy upfront capital investment," the report states.

"Coupled with this, opportunities to tender for business may be relatively infrequent as shipping lines can be contracted to rival stevedores for up to five years.

"Exacerbating these challenges may be specific arrangements or characteristics unique to Australian stevedoring.

"For example, some shipping lines are understood to prefer a national stevedoring service, which a new entrant operating in just one or two ports may not be able to provide, at least until a third terminal is available in Melbourne.

"If there are obstacles to shipping lines switching to new stevedores, the ACCC considers that the shipping industry — which for so long called for improved stevedoring performance in Australia — may have a role in overcoming these.  

"For example, if shipping lines are impeded or dissuaded from switching due to existing arrangements with stevedores or service preferences (for example, for a national stevedoring service), the shipping industry may be able to work with new stevedores to develop innovative and flexible commercial arrangements.

"It is critical that any obstacles to switching are overcome if improvements recently observed are to continue into the future.

"New entrants, for their part, need to carefully assess and plan for market characteristics that may be unique to the local market in order to optimise their investments."

That aside, the report is positive about certain trends.

 "We are continuing to see benefits of increased competition in the stevedoring industry, with lower average prices, continued investment and reports of improved customer service," Sims says.

He notes that industry assets have doubled over the past three years as a result of investment by the stevedores and that Hutchison has been developing terminals in Sydney and Brisbane, while the incumbent stevedores have been investing in automation, cranes and other equipment.

"These investments are expected to drive performance improvements in future years," Sims says.

"However, we recognise that this environment presents challenges for new entrants seeking to attract customers."

The report notes Hutchison has been operational since 2013 but is yet to attract adequate market share. Some factors contributing to the challenges faced by new entrants may be within a stevedore’s control, while others relate to specific characteristics of the industry.

The report also highlights the importance of reforms across the wider container supply chain, which chimes in with recent criticism of port lease sales by the states.

"The benefit of improved stevedoring performance should be reduced costs for Australian consumers and exporters," Sims says.

"This may be lost if port operators are not adequately regulated or if the supply chain is let down by poor transport connections."

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