VTA, RFNSW advise operators on infrastructure surcharge hike

Stevedore Patrick recently advised road and rail freight operators of plans to increase infrastructure surcharges at its terminals from 12 March.
The new rates are as follow:
Melbourne: $47.50 per box
Sydney: $41.10 per box
Brisbane: $38.25 per box
Fremantle: $7.50 per box
The increases will apply to both road and rail transport operators for full import and export container movements at the terminals, and will be “subject to an annual review,” with any price change to apply from 1 July 2018.
Road operators will continue to be invoiced electronically via 1-Stop.
The Victorian Transport Association (VTA) has written to members to urge them to pass on infrastructure surcharge increases, saying ultimately consumers must bear the brunt of supply-chain cost increases.
“Operators continue to face unprecedented increases to infrastructure and road-user charges in and around the Port of Melbourne,” said VTA CEO, Peter Anderson.
“It is vital these and other cost-of-business increases are absorbed through the supply chain for freight businesses to remain sustainable and viable in a competitive trading environment,” he said.
“The VTA has long argued that consumers need to understand that price increases brought about by higher business and transactional costs will ultimately have to be passed on to them because businesses already operating to tight margins will go out of business if they try and absorb the costs,” said Anderson. “Consumers are the ultimate benefactors from receiving goods delivered by the transport industry, and therefore they need to be subjected to the same price increases operators and other participants in the supply chain are required to take on.”
Road Freight New South Wales CEO Simon O’Hara has responded to the fee hikes, calling for oversight, accountability and transparency to guide the actions of stevedores.
“Patrick’s infrastructure surcharge has gone from zero to $25.45 to $41.10 in less than a year,” he said. “That’s a massive increase with little justification.”

Shippers, importers slugged yet again

Patrick Terminals has advised its landside customers that the company will raised its infrastructure surcharges effective 12 March 2018.
Until recently, terminal operators Patrick and DP World collected their revenues from shipping lines, who had the (limited) opportunity to negotiate and take their business across the port to the other provider. Exporters and importers, however, must pick up their containers from the terminal where they are offloaded from the ship, effectively being held to ransom by the stevedores.
Patrick says it has completed a review of its Terminal Infrastructure Surcharges, which are said to be designed to recover a portion of the costs that relate to:

  • The capital investments already made on dedicated infrastructure that services our landside interface operations.
  • Excess charges over CPI that relate to our property and property related costs (including rent, land tax and council rates). These costs continue to increase considerably across Patrick’s terminals.
  • Maintenance and operational costs associated with providing our landside interface operations.

“The surcharges recover a portion of the full costs associated with providing these essential landside operations, to continue to provide our customers with superior and efficient landside service levels,” Patrick’s advice states.
From 12 March 2018 the following infrastructure surcharges on full containers that enter and leave the terminals will apply:

  • Sydney $41.10 per full container.
  • Fremantle $7.50 per full container.
  • Fisherman Islands $38.25 per full container.
  • East Swanson Dock $47.50 per full container.

The infrastructure surcharge will be applied to both road and rail transport operators for all full container movements, both import and export, made at the terminals. Road operators will be invoiced electronically via 1-Stop, while rail operators will have the surcharge separately itemised on their rail invoice.
Patrick took the opportunity to “remind customers that ongoing access to the terminals is conditional upon prompt payment in accordance with Patrick’s standard terms and conditions” – i.e. no containers will be accepted or allowed to leave without payment. Patrick also advised other ancillary charges will be subject to an annual review with any price change to apply from 1 July 2018.
The shippers’ response
Director of the Freight & Trade Alliance (FTA) Paul Zalai said: “Effective 12 March, Patrick will increase its ‘Infrastructure Surcharge’ adding enormous costs to Australia’s international trade sector. If this is not bad enough, of much greater concern is that there appears to be no commercial mechanism or desire from any regulator to control pricing administered by our stevedores.
“Following the 2017 introduction of the Infrastructure Surcharge and a second increase by DP World earlier this year, it comes as no surprise that Patrick has again replicated the approach of its main competitor. While there is no suggestion of collusion between the stevedores, it appears to be another case of ‘follow the leader’ and an easy way to attract a significant quantum of income without affecting contracted shipping line customers.
“What a wonderful world to live in to be able to turn on the money tap whenever required.
“The Australian Peak Shippers Association (APSA) and Freight & Trade Alliance (FTA) have led the case to the Australian Competition and Consumer Commission (ACCC) requesting a formal investigation of the DP World and Patrick charging regime. We will now supply further evidence of our concerns and remain hopeful that our engagement next week with the ACCC chairman, Rod Sims, will give us clarity on a way forward to protect our sector from a spate of uncontrolled surcharges and unregulated price increases.”
The Container Transport Alliance (CTAA) is equally unimpressed:
“CTAA reiterates that the real reason for these increases is the stevedore ‘rates war’, and the ability of the stevedores in an unregulated market to shift their cost recovery to the landside stakeholders.
“The foreign shipping lines are laughing all the way to the bank because there has been no corresponding reduction in the charges they levy on shippers (importers / exporters / freight forwarders) for terminal handling.
“Foreign-owned shipping lines are financially benefiting from lower stevedoring rates charged by the stevedores, while maintaining high Terminal Handling Charges (THC), at the expense of Australia’s containerised supply chain competitiveness.
The CTAA has written to Commonwealth and state ministers expressing this concern and calling on them to investigate the relationship between:

  1. Stevedore and terminal rates to shipping lines.
  2. Terminal Handling Charges (THCs) applied by shipping lines to shippers.
  3. The implementation and quantum of the infrastructure surcharges levied by the stevedores on transport operators, which are consequently passed onto shippers.

“Meanwhile, CTAA believes that shippers (importers / exporters) need to take up the commercial fight to the shipping lines and seek reductions in THCs to account for the cost shifting that is occurring,” the CTAA statement said.
We will keep you posted.
 

Industry welcomes ACCC involvement in stevedoring

Industry groups CTAA and RFNSW have welcomed the ACCC’s Container Stevedoring Monitoring Report 2016-2017 on the stevedoring industry.
CTAA
The ACCC is required by the Federal Government to monitor prices, costs and profits of the container stevedores at all Australian container ports.
The ACCC Report provides information about the operating performance of the container stevedores, as well as the level of competition, investment and productivity in the industry.
It also explores issues affecting the broader supply chain, including road and rail connections to container terminals.
Notable observations:

  • On average across the stevedores, total revenue per TEU fell by 2%, due to increased stevedoring competition on the east coast; the increasing use of 40′ containers rather than 20′ containers; and greater bargaining power of consolidated shipping lines.
  • However, the combined operating profit margin (EBITA/revenue) of the stevedores rose 4% in 2016-17 to 17.1% (with the profitability of DP World, Patrick and Flinders Adelaide being significantly higher than Hutchison).
  • Unit stevedoring revenue fell by 4.5% to $138.8 per TEU. This decline was offset by a 2% increase in non-stevedoring revenue which now accounts for some 18% of overall revenue.
  • Non-stevedoring revenue has become an increasingly important source of income for the stevedores – increasing by 14.9% per TEU in the past ten years, in contrast to a 25.2% decline in unit stevedoring revenue over the same period.
  • VBS revenue increased by 12.2% in 2016-17 / Storage revenue rose 16.9% in 2016-17.
  • Revenue from non-stevedoring activities is likely to rise dramatically with the implementation of new and increased Infrastructure Charges by DP World and Patrick in Melbourne, Sydney, Brisbane & Fremantle.
  • It is estimated that the new Infrastructure Charges will gross DP World and Patrick some $70 million per annum, which is equivalent to a 5% to 6% increase in unit revenues.
  • Whilst a justification by the stevedores for the implementation / increase in Infrastructure Charges was increasing costs, the ACCC has noted that overall unit costs for DP World and Patrick are stable. The ACCC has noted however that the stevedores have faced, or are anticipated to face, higher property prices, government taxes and rates.
  • The ACCC has noted that it would appear that the stevedores are restructuring their revenues away from the shipping lines and towards to transport sector.
  • The ACCC has expressed concern that transport operators are “limited in being able to switch stevedores in response to higher prices.”
  • Shipping lines may now be receiving subsidised stevedoring services as a result of the Infrastructure Charges, with the ACCC noting that “it is possible that the revenues being collected from the transport operators are simply replacing revenues that used to be collected from shipping lines.”
  • The ACCC has indicated that it will fully examine the impact of the Infrastructure Charges in future monitoring Reports, and will be interested to see whether the stevedores will be able to demonstrate clear infrastructure improvements for transport operators above and beyond business-as-usual capital works.
  • The lion’s share of identified future terminal investment by DP World and Patrick in 2017-18 are for quay cranes, which will benefit the waterside, rather than landside operations.

Comments:
The ACCC report notes that CTAA, together with Freight & Trade Alliance (FTA), the Australian Peak Shippers Association (APSA) and other organisations, opposed the implementation of the new and increased Infrastructure Charges by Patrick and DP World (page 9).
The CTAA disagrees with the ACCC conclusion that “most of the concerns (expressed) were that the price increases were excessive.”
A main thrust of CTAA’s concerns was that the stevedores were forcing payment of the Infrastructure Charges by transport operators via “take it or leave it” contracts governing terminal access.
Transport operators have no say in the payment of the infrastructure charges, no say in the quantum of the charges, and no say in the expenditure of the revenue.  If they were to refuse to pay the Charges, their access to terminals may be denied.
In layman’s terms, CTAA maintains that this constitutes ‘unfair contract terms’.
Despite claims to the contrary, transport operators have experienced difficulty in passing on the infrastructure charges to customers (freight forwarders, and/or importers & exporters) in full or in part.
Additionally, despite Patrick listening to the views of transport operators regarding the cash-flow implications of the charges impost and extending their payment terms to 30 days, DP World has flatly refused to do so.
If the ACCC estimates are accurate, the transport industry will be ‘underwriting’ the collection of $70 million per annum, and suffering the cost of cash involved in the payment of the charges ahead of being able to recoup the revenue from customers.
Transport operators rarely enjoy a profit margin above 17%, and aren’t in a position to impose a general market price rise that increases revenue by 5% to 6% in one go.  The landside container logistics market is vastly more competitive than the stevedoring market.
CTAA alliance companies welcome the ACCC intention to closely monitor the collection and expenditure of the stevedore infrastructure charges.
CTAA also continues to call on the Federal Government, through the National Freight Strategy, and individual state governments through their own freight improvement planning processes, to implement independent monitoring of key stevedore performance indicators, including:

  • Accurate and independent Truck Turnaround Time (TTT) and Container Turn Time (CTT) measurement in all ports;
  • VBS slot capacities per time zone;
  • Truck utilisation rates, and stevedore practices that limit ‘two-way running’ opportunities;
  • Stevedore infrastructure expenditure that improves landside logistics interface performance.

RFNSW welcomes ACCC examination of new port taxes
Road Freight NSW (RFNSW) has welcomed the ACCC’s acknowledgment that infrastructure taxes imposed by DP World and Patrick “raise a number of issues for the port supply chain”, leaving transport carriers with higher operating charges and the inability to switch to other stevedores.
Releasing its 2016-17 Container Stevedore Monitoring Report yesterday, the ACCC said the taxes “could earn DP World and Patrick a combined $70 million in revenues, which would be equivalent to a 5 to 6 per cent increase in unit revenues.”
According to the report: “It is concerning that truck and rail operators face these higher charges but are limited in their ability to take their business elsewhere.”
The stevedores announced the new taxes earlier this year without consulting RFNSW or other industry groups. The stevedores tried to justify the charges by claiming increases in rent, land tax and rates were a “cost burden” they could not absorb and that the new surcharges would be used to fund new infrastructure.
But the ACCC noted: “However, overall unit costs for both stevedores remain stable. The ACCC will be interested to see whether these infrastructure charges are used to improve landside facilities beyond business as usual levels.”
After reviewing the report, RFNSW general manager Simon O’Hara said he welcomed the ACCC’s acknowledgment that the port taxes were any issue for hard-working transport carriers.
“We are pleased that the ACCC has listened to concerns raised by RFNSW about the effect port taxes are having on our RFNSW members,” Mr O’Hara said.
“It’s encouraging that the ACCC has acknowledged the taxes are an issue for the port supply chain and that it will fully examine the impact of the charges in its 2017-18 stevedore report.”
 

ACCC to keep an eye on stevedores’ spending

The ACCC’s annual Container Stevedoring Monitoring Report has found that while stevedoring operating profits per TEU have risen by over 25 per cent in 2016-17, competition levels are set to increase as there are now three stevedores competing at the nation’s three largest container ports.
“Competition has significantly increased in recent years with the introduction of a third stevedore in Sydney and Brisbane, and now we can add Melbourne to that list. As such, we expect to see greater levels of price competition as new entrants and incumbents compete for market share,” ACCC Chairman Rod Sims said.
“Stevedores will need to work harder to win or retain their customers, with benefits flowing through to shipping lines, importers, and exporters.”
“However, this remains a critical period for competition. For sustainable competition to develop, these new entrants will need to win a commercially viable share of the market,” Mr Sims said.
Charges under scrutiny
Both DP World and Patrick recently either introduced or substantially increased ‘infrastructure charges’ at a number of ports for transport companies collecting or dropping off containers. The stevedores claim that the higher charges are necessary because of rising property costs and the need to fund new investment. While there is merit to the stevedores’ claims about higher property costs, their overall costs remain stable.
“Whilst it is true that the stevedores are facing higher property costs, the ACCC will be interested to see whether these infrastructure charges are used to improve landside facilities beyond business as usual levels,” Mr Sims said.
“It is concerning that truck and rail operators face these higher charges but are limited in their ability to take their business elsewhere.”
Some organisations approached the ACCC with allegations that the new infrastructure charges may have been in contravention of provisions of the Competition and Consumer Act 2010. Most of the concerns were that the price increases were excessive, but there are no provisions in the Act to deal with excessive pricing.
Shipping lines benefitted from lower prices as the stevedores reported falling unit revenues in 2016-17. Stevedoring revenue fell 4.5 per cent to $138.8 per TEU. This has continued a very consistent trend as unit stevedoring revenue is about a quarter less than a decade ago in real terms.
The number of containers passing through Australia’s ports is the highest ever recorded. In 2016-17 Australian stevedores handled 7.2 million TEU, an increase of 3.7 per cent.
The report also found that quayside productivity remains close to record levels. However, both capital and labour productivity fell slightly.
“The stevedoring industry is not reporting the same level of productivity improvements that we have seen in previous years. With the new stevedores now in place along the east coast ports, we will be looking for this productivity growth to return in future,” Mr Sims said.
The ACCC’s Container stevedoring monitoring report 2016-17 report is available here.

ATA calls for ACCC to regulate road, port charges

Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC), should take over regulating toll road and landside port charges, Ben Maguire CEO of the Australian Truck Association said on 28 July.
The Australian Government is considering setting up an independent regulator to control truck and bus registration charges and road user charges that truck and bus operators pay on fuel.
Maguire commented that the independent regulator – ultimately the ACCC – should be responsible for toll road and landside port charges as well.
“Toll road charges for trucks are growing rapidly,” he added. “Small trucking businesses simply cannot afford them. Although these charges are set by state governments, the arrangements for setting them are not transparent and do not take into account costs across the supply chain.
“The ATA and its members have similar concerns about landside port charges.
“Earlier in 2017, DP World unilaterally increased the infrastructure surcharge at its Melbourne terminal and imposed a new surcharge of $21.16 per container at its Port Botany terminal. ATA member association Road Freight NSW pointed out that the Port Botany surcharge could cost carriers up to $150,000 per year.
“Separately, Patrick increased its existing surcharges this month, and introduced a $4.76 surcharge per container at its Fremantle terminal and a $25.45 surcharge per container at its Port Botany terminal.
“These charge increases cannot be avoided by trucking operators – they have not been subject to detailed regulatory scrutiny, they simply build additional costs into Australia’s supply chains.
“To fix these problems, heavy-vehicle tolls and landside port charges should be set by the road-price regulator, which should ultimately be the ACCC or a dedicated body established under its Act.”
Maguire said governments must start the reform process by fixing the overcharging of truck and bus operators.
“Truck and bus operators will be overcharged by $264.8 million in 2017–18. The meter is ticking up by more than $725,000 per day,” he noted.
“It’s time for governments to take action and stop overcharging the hard-working small businesses that make up the vast majority of operators in our industry.”
 

Port of Melbourne container truck queue

Container transporters are being ruined by stevedores

Peak body Road Freight NSW (RFNSW) has expressed concerns that truck operators were only given two days to review and renew an agreement allowing them to access the DP World Australia terminal at Port Botany. Meanwhile, Container Transport Alliance Australia (CTAA) is warning that many container transport operators are facing cashflow problems, owing to the new and increased ‘infrastructure surcharges’ DP World and Patrick have implemented / are about to implement.
Take it or leave it
RFNSW says DP World Australia sent carriers a copy of the National Carrier Access Agreement on Wednesday 28 June – just two days before the commencement date of 1 July.
RFNSW general manager Simon O’Hara said: “Previously, our members have had 30 days or even 14 days to renew their agreement, but this year it’s a matter of only days.
“Frankly, this timeframe is unreasonable and unfair to our members, who spend most of their time on the road.
“This is a legal agreement that our members need to carefully consider and if necessary, seek appropriate legal advice on, to ensure their ongoing access to the terminal is commercially fair and balanced and not disadvantaging them in any way.
“This simply cannot be done in a matter of days which is what our members are being asked to do.
“You wouldn’t expect people to sign a mortgage document, or a business contract or stevedores to sign with shipping lines on matters that could impact their livelihood, in just a few days. It shouldn’t be any different for our members being asked to sign their National Carrier Access Agreement,” Mr O’Hara said.
In a message to carriers, DP World Australia said “it is critical that the renewal is completed as soon as possible to ensure continued access to slot-booking facilities” at its terminals.
Mr O’Hara added: “The real question is, what happens to carriers if they cannot return a signed agreement in the timeframe. Will they be stopped from operating? What effect will this have on the NSW economy?”
That plus the money: truckers are at their limits
Container transport operators have long been concerned with the ‘take it or leave it’ nature of this agreement, with the stevedore having the power to suspend an operator’s account if they don’t agree to the non-negotiable terms.
In light of the DP World Infrastructure Surcharges, and the higher VBS-related fees contained in the new agreement, CTAA wrote to DPWA seeking a change to their payment terms to 30 days.  CTAA also encouraged container transport operators Australia-wide to do likewise individually.
DPWA has apologised for the short lead-time in issuing the Carrier Access Agreement, and has extended the period of time for container transport operators to accept the terms in writing to 14 July.
Disappointingly however, DPWA has issued a blanket rejection via email of the respectful request from CTAA and numerous individual companies seeking an extension of payment terms to 30 days.
CTAA, with shipper and freight forwarder groups, continues to oppose the implementation of the infrastructure surcharges imposed on landside operators by Patrick and DP World.
Along with APSA / FTA and other organisations, CTAA has briefed Ministers’ offices in various states, government officials, the ACCC, and the Small Business Ombudsman, on the impact of the surcharges.
The DP World Surcharges are already causing financial stress for container transport operators due to the cashflow implications.  This stress will be compounded by the implementation of the Patrick Surcharges from Monday, 10 July.

New leadership for Qube

Logistics and infrastructure company Qube has announced the resignation of Chris Corrigan as Chairman and Director of Qube Holdings.
Corrigan advised shareholders at the Annual Meeting in November 2016 that he would not stand for re-election and would be retiring from Qube during the 2017 financial year. He resigned from the board in late June, having worked closely with Allan Davies, now appointed company Chairman, over the past six months to ensure a smooth handover of board and strategic responsibilities.
Corrigan will remain as a director of Patrick Stevedores which is 50 per cent owned by Qube and 50 per cent by Brookfield Infrastructure.

Stevedores warned of duopoly

The Port of Melbourne.

The Port of Melbourne…warned.

The Australian Competition and Consumer Commission (ACCC) has warned a lack of competition in the stevedoring sector would get in the way of future growth.

According to the ACCC’s latest annual monitoring report of container stevedoring, throughput volumes recorded an increase of 10.7 per cent in 2007-08, with productivity levels jumping almost 47 per cent over the last decade.

ACCC chairman Graeme Samuel said the report showed decade-old waterfront reforms have significantly boosted the stevedoring sector, but a lack of competition in the industry was worrying. 

“During this time, demand for stevedoring services has doubled. The cost of using stevedoring services has fallen in real terms.

“In turn, the stevedoring businesses have become more productive and profitable, even during a period when significant expenditure on assets was made,” Mr Samuel said.

“However, as the ACCC has noted in previous reports, questions remain about the extent to which the stevedores actually compete to win each other’s business. This is important when we look forward ten years and consider the high rates of demand that are forecast to continue.”

Mr Samuel said while the ports of Sydney and Brisbane were well progressed in testing the market for new competitors, the Port of Melbourne was lagging behind with a third container terminal not set to open until 2017.

He said the delayed development at Australia’s largest port would make its two incumbents, Patrick and DP World, settle for the convenience of the current duopoly.

“Any unnecessary delays in establishing additional container terminal facilities could result in lost opportunities for greater competition.

“More intense levels of competition can not only improve efficiency but may also result in a greater share of the benefits being passed on to users and the wider community that reply on the movement of goods into and out of Australian ports,” he said.

Blame game over Port Botany congestion

Stevedore Patrick and Sydney Ports Corporation have both distanced themselves from the severe congestion at the Port Botany terminal that caused angst among truck operators.

Questions over their incompetency to manage traffic were prompted by a massive truck queue that stretched for more than four kilometres at the terminal Tuesday morning.

The Australian Trucking Association (ATA) argued Patrick failed to provide operators with timely notice to mitigate confusion, causing hours of delay in processing times.

Faced with intense complaints, Sydney Ports said the congestion was caused by Patrick’s failure to abide by the mutually agreed communication protocols.

In a statement Sydney Ports said it “has developed existing action plans agreed with both stevedores on a communication procedure to notify industry on extensive delays at the port terminals.

“The procedure specifies that communication to industry will take place by the stevedores in the event of delays exceeding two hours.”

Despite cancelling around 50 slots, Patrick reportedly defended its action, saying it had improved its responsiveness to congestion compare to previous years.

Also brought up was the effectiveness of the port road taskforce, as part of the NSW Government’s supply chain reform initiative.

Led by Sydney Ports, the first phase of the reform is the industry-led improvement in port efficiency with the next phase involving government intervention to tackle issues not resolved by industry.

While devising long-term solutions is important, the industry argues, there should be an immediate short-term solution to avoid further traffic jam during the critical Christmas season.

Five shortlisted for the third terminal at Port Botany

Port Botany.

Five stevedoring groups have entered a bidding war over the third container terminal at Port Botany.

Sydney Ports Corporation has announced that five stevedoring companies have been invited to tender to operate the third container terminal at Port Botany.

The company’s CEO Grant Gilfillan said the invitation was the second part of a two-stage process for choosing the terminal operator for the Port Botany expansion project.

A total of 13 groups expressed interest in operating the terminal, responding to the call for expressions of interest due on September 1.

“The healthy response indicates there is strong industry confidence in the long-term commercial viability of Sydney’s container port,” Mr Gilfillan said.

The company asked the applicants to provide information concerning their financial and resource capacity, container terminal expertise and experience, as well as capacity to resource and manage the new terminal.

Ports Minister Joe Tripodi said bids would entail fixed and variable rental elements, and a level of investment and intended work volumes.

Mr Gilfillan said the shortlisted groups included domestic and international operators, without revealing their names.

“We regard the process as commercially confidential and will not be announcing the names of those who have been invited to tender.

“We expect the stevedore to be chosen by mid-2009, with the first berths available for trade from 2012,” he said.

It is speculated among the contenders were Patrick, DP World, Hong Kong-based Hutchison Port Holdings and the Singapore Ports Authority. Former Patrick chief Chris Corrigan was also reported to have expressed interest.

It is expected the selected operator will inject around $350 million into new facilities, with initial expenditure on gantries of about $150 million.

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