Industry groups CTAA and RFNSW have welcomed the ACCC’s Container Stevedoring Monitoring Report 2016-2017 on the stevedoring industry.
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.
- 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.
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.”