War brewing on the waterfront

War brewing on the waterfront

The stevedore: DP World Australia welcomes ACCC report

DP World Australia has welcomed the ACCC’s Container stevedoring monitoring report 2017-18, focusing on the report’s confirmation that industry profits continued to decline.

“We are pleased to see that the report confirms contextual factors that led to our decision to increase Infrastructure Access Charges at our three east coast terminals, effective from 1 January 2019,” the company said in a statement. “These include: an increase in port capacity; the increased market power of shipping lines; increases in property-related costs; a substantial investment in infrastructure, and; a sharp fall in profitability for all stevedores.

“We note the ACCC finds that there may be some justification for the use of charges, that it’s not unreasonable for stevedores to seek to recover some costs from the landside, and that it has no view on the appropriateness of the current charges.

However, the company said shippers, transporters are crying foul.

“We don’t agree with concerns about the potential impacts of Infrastructure Access Charges throughout the supply chain. Evidence from previous years shows that the increases can be, and are, passed through the supply chain. This is, in fact, what happened in 2017. Evidence from previous years shows that the increases led to very small increases to the prices of delivered goods. The increase in the Infrastructure Access Charge to be applied at West Swanson from 1 January 2019 would, for example, add just one-tenth of a cent to the delivered cost of an iPhone. Such increases can be passed through without dampening demand, as is evidenced by growth numbers following previous increases in charges.”

As for government regulation: bring it on!

“We note the ACCC’s remarks that the recent rises in Infrastructure Access Charges may warrant review by state policy makers. We are prepared to make our case – for a more equitable pricing structure for all users, for ongoing investment and for our sustainable future – in any forum.”

And besides, you need us.

“A financially healthy stevedoring industry is vital for the long term economic well-being of Australia.”

Farmers don’t agree

Farmers believe urgent action is needed on port infrastructure charges.

The Victorian Farmers Federation (VFF) Grains Group is calling on the State Government to address skyrocketing port infrastructure charges at the Port of Melbourne.

According to the ACCC’s Container Stevedoring Monitoring Report released this week, DP World stevedoring rates have risen 2372% since the first port infrastructure charge of $3.45 per container was introduced in late 2016.

“It was promised by the government during the sale of the port in 2016 that adequate protections against unreasonable fee increases would be in place,” said VFF Grains Group president Ross Johns.

“While the VFF welcomes the recent announcement from Minister Donnellan that an investigation into port access fees will be brought forward, it is vital that this investigation ensures those promised protections are set in place.”

The charges, which apply to truck or rail operators dropping off or collecting containers, have brought in $100 million for stevedores in 2017-18 alone.

“All these extra costs flow straight back down the supply chain to the farm gate. Victorian farmers are already battling to maintain access to valuable export markets in the face of the high production costs and competition from cheaper supply chains in other exporting countries,” said Mr Johns.

“DP World’s recent comments that the charges can simply be ‘passed through the supply chain, without negative impact’ demonstrate that they have no understanding of what the increases mean for Victorian farmers who cannot pass the costs on. In the case of containerised wheat exports, these increases are typically borne by one farmer who will deliver the entire 25mt to fill the container.

“These increases only make Victorian exports less competitive, eroding potential earnings from the Victorian economy, as buyers of Australian grain look to cover their demand from countries with cheaper supply chains.”

Now that Victoria is in caretaker mode, the VFF has called on all parties to support the commitment to undertake an investigation, and to ensure adequate measures are in place to protect the Victorian agriculture industry from these excessive port infrastructure charges.

The union: TWU calls for government intervention

The Transport Workers’ Union is calling on federal and state governments to regulate stevedores as a report by the ACCC has expressed concern over the impact of fee hikes on supply chains.

The fee hikes are causing financial problems for transport operators at the ports, which will have an impact on safety, said TWU National Secretary Michael Kaine.

“Drivers and transport operators have been voicing concerns since these fee hikes began. Now the ACCC has backed their concerns and spoken about the impact they are having. Governments need to step in and regulate this industry or risk safety at the ports,” Mr Kaine said.

The road safety watchdog torn down in April 2016 was investigating safety in transport at the ports and was due to release findings. Evidence was being presented to show how a financial squeeze from the top was resulting in transport operators and drivers under pressure to cut safety corners.

“We had in place a watchdog that was beginning the process of regulating the top of the supply chain at the ports to ensure safety is the number one priority. The watchdog was hearing from port drivers who were giving evidence about delays, lack of training, badly maintained vehicles and poor rates which do not reflect the time or cost required to carrying out work.  The Federal Government tore down this body and now we have the unfettered greed of stevedores unleased on the transport industry. This is exactly what happens when regulatory gaps are left to fester. The ACCC report shows stevedores are still highly profitable, making $60 million profit with revenues up 6.8% to $1.3 billion. This industry must end its squeeze on transport,” Mr Kaine added.

“We welcome the Victorian government’s review into pricing and charges at the ports. We urge the review to be carried out with the utmost urgency and for other state governments to follow suit,” he said.

The ACCC report refers to the lack of choice for transport operators at the ports. “Transport operators have no ability to choose a stevedore that has lower infrastructure charges.” It adds: “There is an incentive for stevedores to increase infrastructure charges.”

Transport owners: we agree but not your way

The National Road Transport Association (NatRoad) also wants action on portside land charges, but has rejected the TWU’s suggestion.

The organisation has responded to the Transport Workers Union’s comment on the ongoing problem of unregulated landside port charges, calling it a “puzzling ‘solution’”.

NatRoad CEO Warren Clark said that the recent ACCC report had thrown light on the lack of state government-based regulation of landside port charges.

“The way in which these charges have been applied to landside contracts is a misuse of market power given the inability of downstream service providers in landside logistics having any capacity to effectively negotiate solutions to these price increases.

“But suggesting that the rightfully defunct Road Safety Remuneration Tribunal could have assisted to solve this problem is plainly wrong.

“NatRoad supports private enterprise. We believe that commercial outcomes should be promoted by establishing competitive market frameworks in preference to regulation. However, where there is a need for regulatory oversight of prices, the introduction of price monitoring should be considered as a first step.

“Price regulation is appropriate where public assets like ports are utilised by private operators, including in respect of landside services, and State governments should act to stop the increases that appear out of control.  For example, the ACCC has noted that the increase in charges has been most notable in Melbourne, where DP World’s charge will have increased from $3.45 per container in April 2017 to $85.30 from 1 January 2019.

“NatRoad has a deep commitment to improving road safety.  But raising the RSRT as some sort of magic pudding whenever there is a supply chain pricing issue just doesn’t hold up to logic.  Economic arguments about prices in any part of the transport chain should be looked at from the point of view of market-based solutions first and then Government intervention where market power has been abused.

“NatRoad will be renewing our call to the NSW Government to get involved in the issue of landside port charges. We want these charges to be included as part of its price monitoring regime, requiring all New South Wales port lessees and sub-lessees like stevedoring companies to provide a rationale for how a relevant price increase is calculated and why it is needed. If, as appears to be the present case, it is for the operator to invest in further capital assets rather than as a direct result of legitimate price increases then government should step in.

“We will be making similar arguments to other state governments and to the Commonwealth Government, but we will not be talking about resurrecting a price-setting tribunal that did not and should not have a legitimate role in the transport industry,” Mr Clark concluded.

 

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