Thursday, November 4, 2021


The Australian Competition and Consumer Commission (ACCC) Container Stevedoring Monitoring Report 2020-21, released today 4 November 2021, looks at the impact of the current global logistics crisis on Australia's container trade, as well as the prices, costs, and profits of stevedores at Australia's international container ports.
The 81 page report provides extensive detail and a forward looking agenda. The following points are of significant note: 

  • The report finds that 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 report shows that freight rates on key global trade routes are currently about seven times higher than they were just over a year ago. However, even at these rates, shipping lines cannot guarantee on-time delivery.  
  • The ACCC considers that the operation of the global supply chain will be restored, and freight rates will fall once the shocks caused by the pandemic stop. However, Australia risks becoming a less attractive destination for shipping lines unless productivity, workplace relations, and supply chain inefficiencies are addressed.  
  • The report also looks at how systemic industrial relations issues and restrictive work practices have further disrupted the supply chain and exacerbated congestion and delays. Data obtained by the ACCC shows average idle hours, which is the length of time a ship spends in berth, at Port Botany increased from 11.9 hours pre-pandemic to 21.2 hours in 2020-21. Congestion at Port Botany has become so bad that some shipping lines are skipping the port entirely.  
  • The report identifies a number of other longer-term trends that have transformed Australia's container industry over the past decade. For example, the entry of Hutchison and VICT has changed competitive dynamics between stevedores and, as a result, stevedores are now earning less and investing more. They have also had to rely more on revenue from charges levied on landside transport operators than they have in the past.  
  • 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.
Jennifer Wiggins produced an article in today's Australian Financial Review titled ACCC urges legal changes to stop shipping line 'cartel activity'
The article makes detailed references to the ACCC Container Stevedoring Monitoring Report 2020-21 noting the shipping industry has become more concentrated over the past decade, with shipping lines merging, and a risk shipping companies could use Part X of the Competition and Consumer Act 201 to artificially elevate freight rates in the future.

In terms of Part X and its exemptions from Australia's competition law, the article quotes ACCC Chair Rod Sims as saying it potentially allows shipping lines to "get together and engage in cartel activity" and points out that several other countries have already scaled back or removed equivalent legal exemptions.
The ACCC Container Stevedoring Monitoring Report 2020-21 and associated media coverage is an important validation of our advocacy for an independent Federal Government-led review (refer report to our reports on engagement with the Federal Trade Minister and Treasurer).

It is evident that reform in the below key areas is essential in driving Australia's economic recovery.:
  • As outlined in our direct engagement with the Attorney-General and departmental representatives, FTA/APSA are seeking intervention to ensure port operations are treated as an essential service with permanent change to industrial relation law to ensure our trade gateways remain unimpeded.
  • FTA/APSA does not see a role in the regulation of pricing as we need foreign owned international shipping lines to continue servicing Australia and to avoid the risk of vessel re-deployment to more lucrative markets.
  • Equally, FTA/APSA appreciate the need for ongoing vessel sharing arrangements as larger vessels are deployed to provide economies of scale and potential cost efficiencies.
  • FTA/APSA do however note the 2015 Australian Competition Policy Review (Harper Inquiry) that found that Part X is outdated and unnecessary – the inquiry suggested the Australian Competition and Consumer Commission (ACCC) introduce a narrower 'class exemption' as a first step to its repeal.
  • FTA / APSA see merit in this approach as outlined in a detailed submission in response to the ACCC's December 2019 discussion paper 'Proposed Class exemption for Ocean Liner Shipping' – furthermore, a focus is also required on exclusive dealings to ensure that shipping line end-to-end logistics services do not lessen competition. 
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.
  • As per the US, FTA/APSA recommend shipping lines should be forced to provide a minimum 30 day notice period on any freight or surcharge variation – this provides importers and exporters the opportunity to factor in costs and make commercial viability assessments
  • FTA/APSA also see merit in implementing measures similar to the current US Federal Maritime Commission review, to ensure fair and reasonable container detention practices are administered by shipping lines for the dehire (return) and handling of empty containers.
  • All businesses face a dilemma of how to deal with unavoidable costs such as rent, infrastructure, labour and power. Those same businesses are then forced to either absorb costs or pass them on to their commercial clients. Similarly, 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.
  • As outlined in the FTA/APSA submission to the Deputy Prime Minister in May 2020, 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.
  • FTA/APSA have been privy to the draft National voluntary guidelines for landside stevedore charges, prepared by the National Transport Commission (NTC)
  • These guidelines appear to be largely modelled on the Victorian government's Voluntary Port of Melbourne Performance Model (VPPM) – to date, the Victorian experience has shown to be futile, allowing stevedores to continue rapid increases in Terminal Access Charges and in effect, giving tacit approval for this charging regime.
  • FTA/APSA see a need for a revised scope of the NTC review 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.

FTA/APSA will keep members up to date on pertinent developments as we continue our relentless advocacy campaign for shipping reform via ongoing submissions, engagement with industry peers, government liaison and our high profile coverage in mainstream media.
Paul Zalai - Director FTA | Secretariat APSA | Director GSF