Report points to Hutchison and VICT struggling and notes truck turnarounds and rail are failing to perform
The Australian Competition and Consumer Commission (ACCC) has released a stevedoring report positive in tone but somewhat concerning in outlook.
While clear on performance gains since its inception in 1998, the ACCC’s Container stevedoring monitoring report 2015-16 also points to areas where they have plateaued or eased in the last few years, often for reasons beyond the stevedores’ control, such as for rail.
It also give a sneak peek at that the forthcoming Bureau of Infrastructure, Transport and Regional Economics (BITRE) Waterline report, which shows a Port Botany surpassing the Port of Melbourne as hosting the largest number of trucks.
“In 2015-16 the average truck turnaround time on a five-port average basis decreased by 1.5 minutes to 34.0 minutes,” the ACCC report says.
“Average truck turnaround times improved in Sydney (39.4 to 32.3 minutes), Fremantle (30.7 to 28.4 minutes) and Brisbane (38.1 to 37.9 minutes). However, truck turnaround times deteriorated in Melbourne (33.5 to 36.6 minutes) and Adelaide (28.5 to 29.0 minutes).
“Over the ten year period to 2015-16, truck turnaround times have improved across the five ports (based on a five-port average) by around 3.5 minutes. However, this measure has not changed significantly since 2009-10.”
On the positive side from its point of view if not the stevedores’, stevedore unit revenues fell 1 per cent in 2015-16, and there has been substantial asset expansion, which should put further pressure on prices down the track.
However, much of the asset expansion is driven by new entrants Hutchison in Brisbane and Sydney and Victoria International Container Terminal (VICT) in Melbourne.
Both face common challenges including:
- the need to obtain sufficient economies of scale in order to get unit costs down, with the expectation that the new entrant will run at a loss as it establishes itself
- new contracts with shipping lines only becoming available every three to five years when the existing contract with the existing stevedore expires
- the likely response from incumbent stevedores through the use of rate reductions in order to secure long term contracts
- a preference of some lines for a national stevedoring service.
VICT also is paying much more in rent than DP World and Patrick, and while its fully automated operation can potentially service larger container ships with a capacity of up to 8,000 20-foot equivalent units (TEU) due to its location at Webb Dock, it still needs port authority approval for them.
Also, its location means it will not access road productivity gains – the proposed Western Distributor road project will enable DP World and Patrick to be served by 110 tonne Super B-doubles – nor have a rail interface that the Swanson Dock incumbents have.
For its part, Hutchison has been operational since 2013 but is yet to win many contracts from its key competitors.
Neither is the financial position likely to help.
“While returns on assets have declined in recent years due to a growing asset base, the drop in return on assets in 2015-16 was driven primarily by falling margins,” the report says.
“It is expected that the expansion of the asset base associated with VICT’s commencement in Melbourne in 2016-17 will see the industry rate of return on assets fall further.”
Meanwhile, though labour productivity, as measured by the elapsed labour rate, rose from 45.3 to 47 containers per hour, close to record levels, productivity remained largely unchanged, with capital productivity, measured by the net crane rate, decreasing from 30.6 in 2014-15 to 29.7 containers per hour.
On the down side but not in stevedore control is rail.
The ACCC notes that “investment in freight rail is relatively costly and to date there has only been a limited transition from road freight to rail.
“Indeed, the proportion of containers transported to and from a port by rail has actually been declining slightly since 2012-13, by around 1 per cent.
“This suggests that ambitious government targets for rail transport may not be met in the short term.”
It is pinning hopes for improvement on projects including Moorebank and Enfield in Sydney and a possible port shuttles in Melbourne.
But there is little analysis on the path to realisation.
While Infrastructure Australia is backing a number of rail projects nationwide, it is unclear how long these would take to come to fruition.
And the figures remain sobering:
containers transported to and from a port by rail nationally has declined since 2012-13 by around 1 per cent
in Sydney it has declined from around 20 per cent in 2012-13 to around 13 per cent at the end of 2015-16
Brisbane’s has fallen from 15 per cent to 5 per cent in 10 years
there are no freight-only rail lines in Melbourne
Perth container rail has to be subsidised
though Perth and Adelaide perform well on a national level, they will have to improve much further to handle future demand.
The full report can be found here.