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Addressing shipping container challenges

Chris Hudson, Senior Associate at Prological.

Australia has some unique challenges when it comes to managing shipping containers for import and export freight. Chris Hudson, Senior Associate at Prological provides an update on the local container scene and unveils some potential logistical solutions to current issues faced in the supply chain.

When it comes to containerised freight in Australia, there’s an imbalance between what comes in, and what goes out. 

Essentially, most shipping containers coming into Australia are full, yet a significant portion are exiting the country empty. 

Exact figures can be seen in the latest Waterline report of the BITRE – demand for full imports exceeds demand for full exports by a ratio of about 1.5 to 1. 

DEALING WITH CONTAINER SHORTAGES

Significantly, the majority of imported goods to Australia come in forty-foot equivalent units (FEU), whereas most of our exports are containerised in twenty-foot equivalent units (TEU).  

Estimates in the ACCC Container Stevedoring Monitoring Report in 2021 show that the average tonnage of an import FEU is 11 tonnes, compared with the Australian export TEU average of 19 tonnes. 

This is because much of what is imported is consumable items that have low density, which makes sense for the larger size. Whereas exports are primarily agricultural goods and raw materials which have a higher density and therefore better suited to TEU. 

These disparities in the import/export (IMEX) container requirements pose substantial challenges for our ports and our container parks. 

On a fundamental level, unless Australia becomes a significant manufacturer of goods again, to add to the abundance of raw materials, agricultural and food product we currently export, this discrepancy in container sizes will likely remain problematic for years to come.

More recently, this problem was exacerbated to the extreme by shipping freight supply chain disruptions brought on by the pandemic. This created a shortage of shipping containers – not because there was enough actual containers – but because containers weren’t in the right locations and were often the wrong type for export.

When restrictions started happening, cargo ships that had already departed Asia dropped off their containers full of goods but couldn’t reload these, leading to containers piling up in ports and empty container parks (ECPs) across Australia and around the world. 

NEEDING MORE TEUs

Container Transport Alliance Australia (CTAA) director Neil Chambers echoed this message in the Australian Financial Review: “an FEU full of soft fluffy toys from China is useless for heavy cargoes usually assigned to TEUs.”

This, unsurprisingly, created a huge demand for export ready TEUs, whilst simultaneously heightening the challenge regarding empties. 

With ECPs at capacity, the dehire period got reduced from typically 14 to 21 days to just seven days. 

Prior to the pandemic, there was a general assumption that someone in the chain would try to fill a container before sending it back to the ship and back into Asia – but with the hiring costs escalating, and the dehire timeframe shortened, it became more lucrative to send these empty containers back into markets such as Asia where the container could earn revenue for the shipping line.  

Despite the costs of shipping containers having dropped in 2023, this shipping out of empty containers has become more challenging – as the velocity of turning containers around has gone from 21 days to seven – resulting in more and more time pressures for all involved. 

For large importers, shorter windows to avoid detention charges results in less flexibility; a requirement to smooth the flow of containers through a distribution centre. 

Similarly for exporters to obtain, load, and transport an export ready container port-side within a week can be challenging.  

This challenge is especially true for exporters in regional areas who, due to the distance empty containers must travel, often don’t get access to a container until well into the hire period.  

A Transport for NSW report revealed that ECP capacity needs to increase by 12,000 TEUs to meet 2031 demand (a total of 59,000 TEUs). 

It projected that with current issues in regard to ECP capacity, the costs associated with empty container inefficiencies will increase to $100 million per year. 

UTILISING RAIL FREIGHT

And that’s New South Wales alone. A government-commissioned review of the Victorian container supply chain suggests that by 2031 empty containers will by the state’s largest export.

Another noteworthy point to make is that while we are a large island nation, we are highly urbanised. 

This means that most international containers don’t travel far outside of our metropolitan centres – instead they are de-stuffed usually within 50 kilometres of a port, and as a result we have very few import containers heading to regional Australia. 

Further complexity is that our domestic freight channels are also decoupled from the IMEX market, adding touch points and handling costs for rural containerised exporters.

In context of these challenges, we need to ask, how can we move these freight containers more efficiently and economically? 

While rail might seem a plausible solution, it traditionally has not been a cost competitive one. 

As most imported containers are delivered within that 50km radius from port, the cost benefit of rail is not realised because the distances travelled are not long enough to offset the additional handling costs.

In numerous Australian metropolitan areas, freight trains getting to the port compete with passenger service pathways on our urban rail networks. 

This creates risks for reliability and timing of shared infrastructure freight services. Numerous studies continue to confirm when dealing with tight timeframes, road is still the more reliable and cost-effective option, despite a lot of intention. 

However, for IMEX terminals to have maximum utility, there is a requirement for freight generators to migrate closer to them. 

MANAGING INCREASING FREIGHT

For Queensland and Victoria to leverage the freight corridors provided by inland rail, there must be improved connectivity. 

For example, if you consider the Moorebank precinct in Sydney, the strategy there is that a domestic freight rail terminal adjacent the IMEX terminal with precinct infrastructure creates efficient links. 

Whilst in its infancy, this model – if standardised across Australia – could become an important ingredient towards a solution to some of our containerised freight issues. 

In the meantime, there have been some emerging trends in how we better manage export containers. 

While a lot of logistics is spent running empty containers to the source of freight in Australia, there has been a movement among some of the meat packers to centralise their containerised freight. 

Rather than running containers out to the regional areas, they’re running frozen product in by road freight and loading the export containers close to port instead. 

Overall, it’s important that industry and state transport authorities continue to work together in coming up with innovative solutions to managing containerised freight, especially considering the forecast for growth. 

According to the Productivity Commission’s report ‘Lifting productivity at Australia’s container ports: between water, wharf and warehouse’, the containerised freight task is forecast to increase by more than triple at the Port of Brisbane, nearly triple at the Port of Melbourne and two and a half times at Port Botany in Sydney by 2050.

Chris Hudson, Senior Associate at Prological

For more information on Prological, click here

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