The disruption to the container supply chains has left Australian businesses vulnerable, according to the Australian Competition and Consumer Commission (ACCC). The ACCC released its annual container stevedore monitoring report which looks at the impact of the current global logistics crisis on Australia’s container trade, as well as the prices, costs, and profits of stevedores at Australia’s international container ports. This report showed that delayed shipments and rapidly rising freight rates were putting “intense pressure” on importers and exporters.
The commission said: “A number of Australian exporters are struggling to meet their contractual obligations, and some large retailers are so concerned that their cargo will not arrive before Christmas that they are buying their own shipping containers and chartering their own vessels.”
The ACCC noted that one stevedore saw just 10% of vessels arriving in their designated berth windows during the financial year 2020-21, the lowest rate on record.
Furthermore, ACCC said, freight rates on key global trade routes were currently around seven times higher than a year ago.
ACCC chair Rod Sims said: “The margins of Australian importers and exporters are being squeezed, as they are all around the world, and the current situation is very challenging for businesses that rely on container freight.”
The ACCC is particularly concerned with port productivity, and the report highlights how, even before the pandemic disruption, Australian container ports were “relatively inefficient and well below international best practice”.
Using UNCTAD data for 2019, it said: “The median in-port time for containerships visiting Australia was three times longer than in Japan, twice as long as China and 50% longer than Singapore or New Zealand.”
The ACCC also noted the impact industrial action by the Maritime Union of Australia has had on port productivity, with average idle hours at Port Botany increasing from 11.9 hours pre-pandemic to 21.2 hours in 2020-21.
Mr Sims added: “Industrial action on top of pre-existing congestion has unfortunately put enormous strain on our international container ports at a time when they can least cope with it. And, in the case of Port Botany, some shipping lines have decided the delays made using the port commercially unviable.”
Growing Unrest from Landside Operators
As well as the problems on the waterfront, there has been growing unrest from landside operators over escalating terminal access fees levied by stevedores to recoup infrastructure investments. The ACCC noted that stevedores had been earning less from shipping lines and relying more on revenue from charges levied on transport operators.
Paul Zalai, director of the Freight & Trade Alliance, said: “Stevedores and empty container parks are reducing fees to shipping lines and holding transport companies to ransom to pay terminal access charges.”
He called for “some form of regulation” to force stevedores and empty container parks to negotiate rates direct with shipping lines, adding: “No further regulation on pricing would be required, as shipping lines could recover this cost in commercial dealings with contracted importers, exporters and freight forwarders.”
Significant Points to Note
The 81 page report provides extensive detail and a forward looking agenda, significant points to note are:
- The report finds that a surge in demand for containerised cargo and extreme congestion across the global supply chain have caused major disruptions and delays. A number of Australian exporters are struggling to meet their contractual obligations, and some large retailers are so concerned that their cargo will not arrive before Christmas that they are buying their own shipping containers and chartering their own vessels.
- The report shows that freight rates on key global trade routes are currently about seven times higher than they were just over a year ago. However, even at these rates, shipping lines cannot guarantee on-time delivery.
- The ACCC considers that the operation of the global supply chain will be restored, and freight rates will fall once the shocks caused by the pandemic stop. However, Australia risks becoming a less attractive destination for shipping lines unless productivity, workplace relations, and supply chain inefficiencies are addressed.
- The report also looks at how systemic industrial relations issues and restrictive work practices have further disrupted the supply chain and exacerbated congestion and delays. Data obtained by the ACCC shows average idle hours, which is the length of time a ship spends in berth, at Port Botany increased from 11.9 hours pre-pandemic to 21.2 hours in 2020-21. Congestion at Port Botany has become so bad that some shipping lines are skipping the port entirely.
- The report identifies a number of other longer-term trends that have transformed Australia’s container industry over the past decade. For example, the entry of Hutchison and VICT has changed competitive dynamics between stevedores and, as a result, stevedores are now earning less and investing more. They have also had to rely more on revenue from charges levied on landside transport operators than they have in the past.
- The report recommends that governments, industry and unions address industrial relations and restrictive work practices, limit privatised ports’ ability to impose excessive rents and charges, and repeal Part X of the Competition and Consumer Act 2010 to facilitate greater competition between shipping lines on Australian trade routes.
- The report also recommends that public and private infrastructure investments are made to fix inefficiencies in the supply chain caused by larger ships, lack of rail access to Australian container ports and shortage of space in empty container parks.