Stevedores are charging truckers, shippers

The ACCC is calling on state governments to regulate the stevedoring industry.
A record 5.1 million containers were lifted at the monitored ports last financial year, but profit margins in the container stevedoring industry suffered (on charges collected from lines), according to the ACCC’s 20th annual container stevedoring monitoring report.
In 2017–18 the average prices charged to shipping lines fell further, resulting in a drop in profit margins to a low of 4.5 per cent, while productivity remained largely unchanged. Meanwhile, stevedores increased ‘infrastructure charges’ that likely add costs to the supply chain.
“The stevedoring industry has changed significantly over time, with large increases in productivity and reductions in costs since the ACCC started monitoring the industry 20 years ago, but challenges remain,” ACCC chairman Rod Sims said.
Shipping lines have been able to negotiate cheaper rates because of growing competition between stevedores and consolidation in the shipping line industry, resulting in an 8.5 per cent fall in quayside revenue per lift for stevedores.
Stevedores continued to rapidly increase ‘infrastructure charges’ applied to truck and rail companies delivering or collecting containers at port, which has led to strong criticism from transport operators and cargo owners.
Stevedores have justified these charges with increases in operating costs and the need to invest in infrastructure to handle the increasingly large ships visiting Australian ports.
It is not unreasonable for stevedores to recover some costs for investment in container terminal facilities. However, transport operators and cargo owners are limited in being able to respond to higher stevedore charges by taking their business elsewhere, unlike shipping lines.
“The use of infrastructure charges means that stevedores can earn a greater proportion of their revenues in a market in which their market power is stronger relative to the more competitive market in which they provide services to shipping lines,” Mr Sims said.
“We are concerned about the potential impact of these charges. If stevedores do not face a competitive constraint on their prices, it will leave consumers paying higher charges for goods and make exporters less competitive,” Mr Sims said
The ACCC does not have the power to determine stevedoring charges as they are not a regulated asset.
“State governments, which regulate stevedores and ports, may need to conduct further detailed examination and, if warranted, use their regulatory powers,” Mr Sims said.
“We do not have sufficient information about the broader supply chain to conclusively determine if regulation would be appropriate. We note that the profitability of stevedores has continued to fall despite the increases in infrastructure charges.”
Two stevedores, DP World and Flinders Adelaide, commenced extensive capital expenditure in 2017–18, with very little investment from other stevedores.
In 2017–18, productivity performance remained mixed; while labour and multifactor productivity improved slightly, capital productivity fell slightly. Truck turnaround times continued to improve in Melbourne, but deteriorated slightly in Sydney.
The ACCC’s report is available here.
The ACCC has monitored the container stevedoring industry since 1998-99 under a direction from the Australian Government. Container stevedoring involves lifting containers on and off ships. The ACCC currently monitors the prices, costs and profits of container stevedores at five Australian container ports.
Patrick and DP World operate at the four largest ports—Brisbane, Fremantle, Melbourne and Sydney. Hutchison operates in Brisbane and Sydney, while VICT commenced operations in Melbourne in early 2017. Flinders Adelaide is the sole terminal operator at the Port of Adelaide.

The hidden cost in trade: empty container management

The commercial practices of shipping lines and the performance of some empty container parks (ECP) in Sydney are causing significant cost increases in empty container management, according to transport advocacy group Container Transport Alliance Australia (CTAA).
CTAA director Neil Chambers has warned: “These additional costs are causing major difficulties for container transport operators in Sydney, and need to be remedied soon.”
Empty container park (ECP) capacity
A focus of immediate attention are delays and a lack of operational capacity at DP World Logistics Australia Parks 1 & 2 in Botany Road, Port Botany. Large volumes of empty container returns are being directed to this facility by shipping lines, including to meet rail demand for empty export containers.
“We are aware that DPW Logistics is recruiting, inducting and training more forklift and operational staff, but this will take several weeks to occur, Mr Chambers said. “A facility of its size should be achieving at least 30 container moves per half-hour truck arrival window. However, their current operational capacity constraints mean that they are only achieving around 10 to 15 moves regularly.”
Transport operators are having to stage more and more empty containers via their yards prior to being able to gain suitable slots for de-hire. This adds significant costs to the transport task through:

  • Added truck travel to/from yards, then separate later trips to/from the ECP.
  • Container lift off/on costs.
  • Added administration in managing time delays, fleet allocation, de-hire notification processing, and container detention avoidance management.

Mr Chambers observed: “Transport operators have become ‘satellite’ container logistics staging facilities, even for empties. Without this, the container logistics chain in Sydney would be dysfunctional. But, this comes at a cost with commercial consequences.”
Empty re-directions and limited alternatives
Building on the pressures applied by intense competition for available truck arrival slots are the number of empty container ‘redirections’ made by shipping lines and a lack of alternative return options.
Sydney is the ‘redirection capital’ of Australia, with an average of 85 redirection notices per month – double the number in Melbourne.
“This occurs because shipping lines want empties returned to specific places, including to railhead facilities for export use and direct return to the wharf. This saves the shipping lines their own costs of handling empties through traditional empty container parks and being responsible for the cost of repositioning the boxes themselves,” Mr Chambers said.
“The difficulties for transport operators arise because little notice of these redirections occurs, meaning that transport operational planning has become a lot harder, and futile truck trips can occur when containers are rejected from their original return location if the redirection notice is missed or is sent at the last minute.”
Some shipping lines also don’t allow any alternative returning options, which can restrict truck utilisation efficiencies, add to truck kilometres travelled, and contribute to facility congestion and truck queuing.
Lack of EDI flow of data
An increase in the flow of electronic data between shipping lines, their ECP service providers and technology platforms such as Containerchain would greatly assist with information visibility in the container logistics chain, and would help to reduce landside costs.
Unfortunately, only 61% of the empty container movements in Sydney have corresponding EDI data loaded into the technology platforms. This compares with over 90% in Fremantle and 80% in Melbourne, for example.
When EDI data is lacking, allocators must process container return electronic information manually, truck drivers must be supplied with paper or electronic versions of the delivery order (DO), and ECP gate staff must process trucks and drivers manually. All of these issues lead to delays and added costs.
“There are two major shipping lines that simply don’t provide any electronic information about empty containers – OOCL and Evergreen. Several others provide the information less than 40% of the time – COSCO (Five Star Shipping), Ocean Network Express (ONE), and Hyundai Merchant Marine.
“We’d like to see a commitment from these shipping lines, and the others, to try to increase the EDI exchange of data on empty container return instructions in Sydney towards 100%.”
Container detention liability
The current delays and inefficiencies in Sydney mean that there is more risk of the import container detention policies of the shipping lines being breached.
“Transport operators need to reinforce their business rules with customers about adequate notice of containers being ready for empty return (normally two working days), and should not accept any container detention claims caused by delays outside of their direct control.
“Also, importers and forwarders should be proactive in seeking an extension of time from shipping lines for the return of empty containers when delays threaten a breach.
“CTAA Alliance companies are seeking meetings with DPW Logistics, other ECP and with shipping lines through Shipping Australia Limited (SAL) to try to find sustainable solutions,” Mr Chambers said. “We also continue to liaise with NSW Ports and with the NSW Government about the current difficult situation.”

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.

©2019 All Rights Reserved. MHD Magazine is a registered trademark of Prime Creative Media.