CONGESTION, delays and higher costs caused by supply chain disruptions have resulted in some importers having to pays four to 11 times as much for ocean freight as they did a year earlier, according to the Container stevedoring monitoring report 2023-24.
The Australian Competition and Consumer Commission publishes the report annually, presenting information on the financial and operational performance of container stevedores at Adelaide, Brisbane, Fremantle, Melbourne and Sydney. The latest report was released today, Friday 20 December.
Throughout 2024, the ACCC examined charges levied by stevedores to transport operators over the past seven years. The ACCC also conducted enquiries into charges levied by empty-container parks to transport operators, known as notification fees.
In its commentary of the report, ACCC flagged concerns raised about limited competition on landside charges charged by stevedores, and notification fees charged by empty-container parks leading to “poor outcomes” for Australian consumers and businesses.
The commission noted the container freight supply chain had largely recovered from pandemic-induced disruptions, only to experience Panama Canal restrictions and Red Sea attacks, which caused shipping lines to avoid the Suez Canal.
In addition, “industrial action at DP World’s terminals contributed to further disruptions in the container stevedoring market”, the ACCC said.
The report found importers and exporters experienced increased costs and delays, leading to lost sales, cashflow issues and potential reputational damage.
“It’s been a difficult time for businesses dependant on the container freight supply chain, which in turn affects consumers and impacts the Australian economy through higher costs and shipping delays,” ACCC Commissioner Anna Brakey said.
“We have found there are likely market failures in the container freight supply chain which may warrant a policy or a regulatory response,” she said.
A look at the market
The ACCC found stevedores and empty-container parks “appear to have little incentive to pursue increases in market share by discounting their charges to transport operators”, the reason being that stevedores and empty container parks levy one set of landside charges to all transport operators.
The report observed what appears to be a disincentive for them to offer discounts to win new customers, as those discounts would apply to all transport operators.
“Importers and exporters are unable to negotiate directly with stevedores and empty-container parks and can only respond to charges indirectly, by switching shipping services,” the report authors wrote.
“Some Australian importers and exporters have only limited ability to do so, either because the shipping is arranged by their overseas counterparty or because there are no suitable alternative shipping service options on their trade route.”
The report found many other importers and exporters are constrained in switching services because they face switching costs, would have to forego non-price benefits that they value or cannot be certain that any savings in landside charges or notification fees will last due to the unpredictable nature of increases in these charges.
“We have found that a combination of factors likely contributed to higher charges for stevedoring and empty-container park services over the past seven years, likely creating a market failure in the container freight supply chain,” Ms Brakey said.
“Reform may be needed to improve the efficiency of the container freight supply chain. Measures may be needed to address apparent market failures relating to landside charges levied by stevedores and notification fees levied by empty-container parks.”
Price increases
The ACCC report also suggests stevedores have increased their total prices above levels they expected to negotiate with shipping lines.
Australian importers and exporters initially appeared to be benefiting from new entry of Hutchison and Victoria International Container Terminal, according to the ACCC. In the period between 2013 and 2017, stevedores “competed aggressively” to win shipping services to retain and increase their market share, which put significant downward pressure on stevedores’ prices to shipping lines.
ACCC said it obtained information indicating that, despite increases in their operating costs at the time, some stevedores expected stevedoring prices to remain subdued while there was significant spare terminal capacity in the market.
While total industry throughput increased over the past seven years, Patrick Terminals’ internal estimates show that there is still significant spare terminal capacity in the market.
“Despite this, stevedores have materially increased their overall prices by significantly raising landside charges over the past seven years,” the commission said.
These overall price increases far exceeded increases in stevedores’ operating costs per container. Between 2016-17 and 2023-24, real stevedoring industry total revenue per lift (proxy for total stevedoring prices) has increased by $72.16 per container (or 22.6%), while real stevedoring industry total costs per lift have increased by $24.22 per container (or 8.9%).
The ACCC said it recognises that stevedoring is a capital-intensive business and that stevedores have made significant capital investments over the past ten years.
“However, in ‘workably competitive’ markets that are characterised by significant spare capacity, firms cannot profitably increase their prices at a time of their choosing to increase the return on their capital investments,” it said.
ACCC also obtained information from stevedores indicating there is currently “very limited” competition between stevedores on landside charges. This appears to have resulted in importers and exporters paying more for stevedoring services than they would have if stevedores continued to negotiate all their overall prices with shipping lines.
“Stevedores appear to be able to raise landside charges more easily than charges to shipping lines as importers and exporters are constrained in their capacity to respond to increases in landside charges,” Ms Brakey said.
“Stevedores appear to have undermined the pricing benefits that importer and exporters were receiving from competitive dynamics in the stevedoring market that followed new entry of Hutchison and Victoria International Container Terminal.”
“Given current cost of living pressures, we consider this element of the supply chain might benefit from a policy or regulatory response which improves efficiency by addressing market failures,” Ms Brakey said.
Rapid rise in ECP notification fees warrant scrutiny
ACCC also noted that empty-container park notification fees to transport operators have increased “significantly” across Australia since 2018, in a similar way to the stevedores’ landside charges. The report found this indicates a lack of competitive tension and warrants closer scrutiny.
Empty-container parks introduced notification fees on transport operators soon after stevedores started increasing terminal access charges. The commission said these notification fees have increased significantly since 2018, demonstrated by highest fees in Sydney and Brisbane increasing from $5.50 per container in 2018 to $179.40 or $143.30 per container, respectively, in the first half of 2024.
ACCC said this shows that importers and exporters appear to be constrained in their ability to respond to the increases in notification fees.
“This seems to be another part of the container freight supply chain that may not be working for the benefit of Australian businesses and consumers and warrants closer scrutiny,” Ms Brakey said.
The full Container stevedoring monitoring report 2023-24 is available here.
