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Oz: Logistics Scrutinised
MARITIME LOGISTICS SCRUTINISED
A draft report on Australia’s Maritime Logistics System has been released by the government’s Productivity Commission. Felicity Landon charts its key points
Higher productivity at Australia’s container ports is achievable and could save millions; lack of competition in some areas means consumers pay too much; workplace arrangements lower productivity: these are some of the conclusions of the draft report entitled “Lifting productivity at Australia’s container ports: between water, wharf and warehouse”.
The draft has been published by Australia’s Productivity Commission, the government’s independent research and advisory body on “a range of economic, social and environmental issues affecting the welfare of Australians”. The commission set a mid-October deadline for comments on the draft and will prepare a final report after further submissions, with public meetings planned for November.
The draft report has focused on containerised shipping, to which the ‘biggest problems overwhelmingly relate”, with most attention on maritime logistics chains incorporating the five largest container ports – Brisbane, Sydney (Botany), Melbourne, Adelaide and Fremantle.
The inquiry was sparked by the May 2021 World Bank report which ranked the efficiency of most of Australia’s container ports in the bottom 20 per cent of 351 international ports; six months later, a report from the Australian Competition and Consumer Commission (ACCC) described significant performance issues at the country’s container ports, and a report by Victoria’s Essential Services Commission raised issues of market power at the Port of Melbourne.
It should be mentioned at this juncture that the 2021 report referred to was not received favourably by many industry participants who view its assembly and findings as being inherently flawed. This said, it was still a trigger for the current report.
Normally in a situation where there is alleged poor productivity with terminal working a common finding is a resistance to automation. This is, however, not reflected in the report which actually goes some way towards suggesting the opposite is the case saying that the adoption of technology at Australia’s container ports is, “broadly in line with international practice”.
PERFORMANCE ANALYSIS
The report says that considerable variations in performance both within and across Australia’s container terminal operators point to potential productivity gains from more consistent, high, performance.
“Inefficiencies at Australia’s major container ports directly cost the Australian economy an estimated Aus$605m a year,” says the report. “Ports also have large indirect impacts on Australian businesses and consumers, so that any sustained disruption to imports or exports magnify these costs across the economy.”
One terminal operator, however, comments in this regard that any performance uplift achieved in the terminal area will not necessarily feed benefits along the supply chain. The report, it is pointed out, has not taken into account influential external factors away from the port – for example warehouse receival and delivery times are only during Monday to Friday and just from 07:00 to 16:00, which leads to bottlenecks for transport generally as all parties are congesting the roads during this period to meet the restrictive opening hours of the warehouses.
The major container ports rank poorly in international work that looks at ship turnaround times, it notes. “Slower turnaround times in Australia mainly reflect the use of fewer cranes to handle containers.” However, it adds: “Using more cranes would raise costs with unclear effects on efficiency. Faster turnaround times are good, but not at any cost.”
The draft report also claims that lack of competition in some parts of the maritime logistic system means consumers pay too much. “Transport operators have no choice about which terminal they use when picking up or dropping off a container, so must pay whatever price a terminal operator sets. Recent rapid increases in terminal access charges (TACs) have flowed through to cargo owners (and consumers).”
The theory about lack of choice is, however, not accepted by the terminal sector whose response is, firstly shipping Lines do have a choice as they bid for the work from the consignee and shippers so they are aware of the costs and they directly pass these back to their customers. Secondly, the consignee and shipper also have control over which terminal their containers are processed through as the services they are loading on are already contracted to a particular stevedore in the port. This generally doesn’t change from voyage to voyage and if the consignee or shipper is unhappy with the terminal’s performance, they can change services (as generally most shipping lines have several services calling different terminals) or shipping lines. Bottom line, there is no basis to the argument that the customer (consignee and shipper) can’t decide on where their containers are handled.
The report also highlights the situation where transport operators and cargo owners are paying fees to shipping lines for the late return of containers even where the delay is because the yards for empty containers are full. “The exemption for shipping contracts, which means that these fees fall outside the scope of the Australian consumer law, should be removed,” says the report.
8 The report
addresses the need for better data in order to improve port performance
WORKPLACE AND INFRASTRUCTURE
Next, the report discusses workplace arrangements lowering productivity, and says that incremental changes to the Fair Work Act are needed. More effective remedies are needed to limit unreasonably protracted bargaining and industrial action, it says. Additionally: “Limits should be placed on clauses in container terminal operators’ enterprise agreements that are highly restrictive and constrain the ways that workers and equipment can be deployed.”
Infrastructure needs in the maritime logistics system are being addressed, the report notes. Container port operators and others in the system are investing to accommodate bigger ships and there is no need for government intervention to encourage the use of such ships. Plans are in place to increase the share of freight moving to and from most major container ports by rail over the coming decades but any further government investment needs clear cost-benefit analysis, it says.
This is something of a broad-brush statement and it is perhaps pertinent to add that challenges can be seen to be emerging relating to accommodating larger size vessels. Massive new tonnage is about to be unleashed into the container sector generally and as result the cascading of larger vessels into Australian container trades is already underway but can be expected to accelerate. The terminal sector sees this and certain steps have been taken to accommodate it at a terminal level but the task of ensuring available waterside access for these larger vessels lies fairly and squarely with government.
The report also takes a look at concerns about domestic shipping capacity and training, and says these may be better resolved by means other than a strategic fleet. “Capacity could be acquired as needed from the international market without the costs involved in supporting a national strategic fleet,” it says. “Australian-flagged vessels are not a prerequisite to meeting maritime skill requirements. Cadetships and skilled migration appear to be working well in meeting needs for blue-water experience.”
DATA GAPS
The report addresses the need for better data in order to improve port performance. “A comprehensive framework for measuring port performance would include data on the time taken to move containers through each of the steps involved in marine-side, quayside and landside operations. Comparison of these time-based metrics across ports would then reveal where operations in a port are relatively inefficient. Other performance measures could then be used to understand why these relative inefficiencies exist.”
For example, the report says, analysis of the rates at which cranes move containers can shed light on quayside operation times.
“Current Australian data collections do not support comprehensive analysis of this type. Data are missing for a number of areas of port performance, including, for example, labour inputs, cargo operation times and container dwell times.”
However, the report appears to backtrack slightly by saying: “While performance information could be improved by linking existing data collections and, potentially, augmenting them, collecting, cleaning and maintaining data is not costless. Richer data would support richer insights into port performance, but it is unclear if the associated benefits would outweigh the potential costs inherent in extending existing collections. The commission is seeking feedback on this question.”
The report says available data does suggest that productivity has risen over the longer term, but still the country’s major container ports tend to be ‘considerably slower’ than the average international port in loading and unloading ships. “If all five of Australia’s major container ports achieved turnaround times in line with the global average, and passed the resulting cost savings through, Australia’s importers and exporters combined could save an estimated $605m a year. Although these estimated direct benefits are small relative to the size of the entire Australian economy, they are significant.”
The Melbourne View: We will be engaging
The Port of Melbourne has welcomed the release of the Productivity Commission’s draft report. “We support an industry-wide inquiry into optimising productivity and effi ciency in the maritime supply chain,” Saul Cannon, CEO, told Port Strategy.
“We’ll be further engaging with the Commission to ensure a robust evidence base from the efficiency and productivity debate and developing a shared focus on the infrastructure requirements to support our economy and evolving industry needs.”
Port of Melbourne is considering in detail the specific findings and recommendations of the draft report and will respond accordingly in its submission to the final report, he added.
“We have great respect for the regulatory framework that the Victorian Government put in place at the time of the port lease in 2016 and we strongly believe the framework is working as intended,” says Cannon.
“Infrastructure investment inside the port gate is, of course, critical – we have an anticipated $2bn 10+ year plan to meet the capacity needs of the port. That’s on top of the more than $400m we’ve already invested over the past almost six years.”
Port of Melbourne has a 50-year lease from the Victorian Government to manage and enhance operations at the port: “Port of Melbourne operates the port within a context of stringent statutory, regulatory and contractual commitments,” he notes.
A spokesperson added: “Port of Melbourne is the only Australian port, and only part of the container freight supply chain, that is price regulated. The regulated regime at the Port of Melbourne is working as intended. Since privatisation, Port of Melbourne has invested over $400 million in infrastructure and port prices have been maintained each year in line with CPI consistent with the Tariff Adjustment Limit.”
Port of Melbourne has a 30-year Port Development Strategy that: “responds to Victoria’s future trade needs and outlines investment in 10 major infrastructure projects”.
Cannon concludes: “We are committed to solidifying our position as Australia’s premier port, being a destination of choice for the global supply chain, and the launching pad to the global stage for our exporters. It’s about ensuring that we have the right infrastructure in the right place at the right time to deliver for Victoria.”
