AUSTRALIA’S meat and wool exporters have joined a shippers coalition seeking reform of the stevedoring sector as a container shortage and shipping delays drive export costs higher.
The Australian Competition and Consumer this week released its annual Container Stevedoring Monitoring Report 2020-21, that found 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 ACCC said.
The ACCC report outlined several areas needing attention. These include addressing industrial relations and restrictive work practices issues across the supply chain, ensuring that privatised ports don’t levy excessive rents and charges and repealing Part X of the Competition and Consumer Act 2010.
The report has also highlighted the importance of investing in infrastructure 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.
The report said freight rates on key global trade routes are currently about seven times higher than they were just over a year ago, but shipping lines cannot guarantee on-time delivery.
The ACCC found that Australia risks becoming a less attractive destination for shipping lines unless productivity, workplace relations, and supply chain inefficiencies are addressed.
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.
ACCC chair Rod Sims said international shipping line movements normally run lean and just-in-time, but a surge in demand and COVID-19 outbreaks that have forced numerous port operations to temporarily shut down have caused congestion and delays with a cascading effect across the globe.
Wool and meat exporters are part of freight/shippers coalition
The Australian Meat Industry Council and the Australian Council of Wool Exporters and Processors are members of the Australian Peak Shippers Association which has been advocating for reform in the stevedoring sector.
AMIC chief executive officer Patrick Hutchinson said ACCC the report and associated media coverage provided important validation of AMIC’s advocacy for an independent Federal Government-led review through the coalition of 30 industry bodies.
“The report sheds a strong light on the key areas of concern and outlines that reform in these key areas is critical for driving Australia’s economic recovery.
“They key areas highlighted in the report are waterfront industrial action, competition reform, appropriate notification windows for shipping lines to their customers, and terminal access charges,” he said.
“While they do not necessarily provide a quick fix for the situation, I think they appropriately address the issues at hand.”
Mr Hutchinson is hopeful the ACCC report will ultimately trigger a Federal Government-led review into Australia’s shipping settings.
ACWEP executive director Peter Morgan said the shortage of containers and shippers has presented wool exporters with situations of poor and unreliable container availability.
Mr Morgan said there are ships that are bypassing ports or being rerouted to more profitable routes and because of costly congestion in some ports. He said changes in shipping arrangements can come at short notice, leading to delays and cost increases.
“In the case of an exporter, these are additional costs that he has to wear.”
The shipping issues and delays were affecting exporters’ margins after wool is bought at auction, with exporters not being paid until wool is delivered, and potentially limiting an exporter’s future potential purchasing power.
“The other major problem is delays with trans-shipment in Singapore or Taiwan.”
Industry is seeking a Federal Government-led review
Paul Zalai, director and co-founder of the Freight & Trade Alliance, the secretariat of the Australian Peak Shippers Association, said the ACCC Container Stevedoring Monitoring Report 2020-21 and associated media coverage is an important validation of its advocacy for an independent Federal Government-led review.
He said the FTA/APSA is seeking intervention to ensure port operations are treated as an essential service with permanent change to industrial relation law to ensure trade gateways remain unimpeded.
Mr Zalai said the FTA/APSA does not see a role in the regulation of pricing to ensure foreign-owned international shipping lines continue servicing Australia and to avoid the risk of vessel re-deployment to more lucrative markets. But the coalition appreciates the need for ongoing vessel sharing arrangements as larger vessels are deployed to provide economies of scale and potential cost efficiencies.
The FTA/APSA also saw merit in the ACCC’s approach to introduce a narrower ‘class exemption’ as a first step to its repeal of Part X the Competition and Consumer Act 2010, Mr Zalai said.
“In very simple terms, FTA/APSA is of the view shipping lines should compete in line with normal competition law faced by others in Australian commerce.
“If the government determines a need for special ongoing protections to shipping lines, it is recommended this be overseen by a federal maritime regulator with a mandate to ensure minimum shipping services are provided ensuring essential export access to market,” he said.
The FTA/APSA has also recommended shipping lines be forced to provide a minimum 30-day notice period on any freight or surcharge variation.
In the case of terminal access charges, Mr Zalai said stevedores and empty container parks should be forced to either absorb operating costs or pass these on to their commercial client (shipping lines).
“Shipping lines then have the choice to absorb costs or pass these onto shippers (exporters, importers and freight forwarders) through negotiated freight rates and associated charges.
“Instead, stevedores and empty container parks are reducing fees to shipping lines and holding transport companies at ransom to pay Terminal Access Charges with no option to pay or are denied access to container collection/dispatch facilities,” he said.
Mr Zalai said 2019 data revealed in excess of $300 million per annum was paid in stevedore-imposed Terminal Access Charges.
“Taking into account substantial increases in these charges since this time, and the similar model adopted by empty container parks, shippers are conservatively paying in excess of $500 million per annum,” he said.
Mr Zalai said the FTA/APSA sees a need for a revised scope of the National Transport Commission review into landside stevedore guidelines to consider some form of regulation to force stevedores and empty container parks to negotiate rates direct with their commercial client (shipping lines).
“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.”