“Massive increases” in the infrastructure surcharges announced by DP World Australia (DPWA) in Melbourne and Sydney, to take effect from 3 April, are being opposed by road and rail operators.
DPWA has announced an increase of over 900% in its Infrastructure Surcharge levied on full containers received and delivered by road and rail to its Melbourne West Swanson Terminal, and the introduction of a charge of $21.16 per full container at its Port Botany Terminal in Sydney.
“What’s highly disturbing about this is that DP World obviously believes that it can act in such a monopolistic way by announcing this surcharges with little consultation with the landside logistics sector, and with less than a month’s notice,” commented Container Transport Alliance Australia (CTAA) Director, Neil Chambers.
“Phone calls to affected transport companies and others over the weekend prior and on the day of announcement doesn’t constitute consultation.
“These surcharges are rejected by the landside logistics sector, and CTAA Alliance companies want the issue taken up with the Australian Competition and Consumer Commission (ACCC), and the Victorian & NSW Governments.”
In Notices to industry, DPWA has claimed that it has “incurred material increases in the costs of occupancy … including the cost of council rates, land tax, rent and terminal infrastructure maintenance” as justification for passing on these costs to commercial parties who suffer from a weak bargaining and contractual position with the national stevedore.
“The major customers of DPWA are the shipping lines they service contractually. In those contracts, shipping lines pay DPWA to load and discharge vessels and deliver the containers to and from the landside interface,” highlighted Mr Chambers.
“All businesses face operational and infrastructure cost increases. Companies resolve to deal with these cost pressures through efficiency improvements and/or renegotiating prices with their customers. DPWA should be negotiating cost increases with their direct customers, the Shipping Lines, not unilaterally deciding to foist these charges onto the landside sector.”
DPWA also claims the need to implement these surcharges because of investment “in critical infrastructure to keep pace with expected growth, and greater peaks and troughs in cargo arrival patterns.” Surely that is a cost to build into their rates charged to shipping lines to service larger ships adequately?”
“DPWA holds the majority share of shipping lines contracts in Melbourne and Sydney, and a significant contract was won in September last year to stevedore vessels in the A3 Consortium servicing trade routes to and from Asia. It has to be presumed then that DPWA didn’t factor its increased terminal operating costs into its prices that won this tender.”
“Having to contend with greater stevedoring competition with two other international container stevedores in Melbourne and Sydney has meant tighter prices for servicing ships. Cynically, DP World has now set out to make up their shortfall from the landside sector that has no strong, direct contractual relationship with the stevedore.
“Another factor that shows their adversity to raising prices from their direct customers, the shipping lines, is that the infrastructure surcharges are being levied on full containers only and not empty containers. Why? Because shipping lines would end up paying the surcharge for empty containers delivered to and from ships for repositioning.
“This is a clear case of discriminatory behaviour by DPWA. Charge the transport operators and ultimately the beneficial cargo owners … they’ll cop it. We’ll, they won’t,” Mr Chambers said.
Massive cost impost to be carried by road & rail operators
If these massive infrastructure surcharges are allowed to stand, the cost impost and cash flow implications for road & rail operators will be considerable. Logistics providers will be forced to add administrative and other costs onto the surcharge when passed onto freight forwarders, importers and exporters.
“DP World demands payment in 7 days and ongoing access to their terminals is conditional on paying on time. Yet, transport operators will only be able to recoup the costs based on their customers’ terms, 30 days, or in many cases, longer.
“We suspect that this will contribute to some smaller transport operators going to the wall. The cost of carrying this debt will be too much. Some people might think that a further rationalisation of road transport operators would be a good thing. Tell that to the small to medium size business owners who work hard day in and day out to run a container transport business servicing their customers,” Mr Chambers observed.