PATRICK Terminals released a media statement on Monday 19 August 2024 referencing an analysis by Synergies Economic Consulting, titled Synergies Analysis Confirms Container Terminal Charges are not a driver of Cost of Living pressures.
Correspondence received by Patrick’s CEO the next day provided a confidential extract of the analysis and confirmed this move is to counter commentaries from Freight & Trade Alliance and the Australian Peak Shippers Association where we stated stevedore-imposed terminal access charges (TAC) are one of many unfair commercial shipping practices impacting costs of containerised trade.
The timing of the Patrick media release is in the lead up to the next Australian Competition and Consumer Commission’s Stevedore Monitoring Report (scheduled for November 2024) which the federal treasurer has indicated will be key as a part of the government’s consideration for regulatory intervention.
The main points from the Patrick media release are accepted
It is acknowledged that there are numerous causes of inflationary pressures and each incremental increase in a TAC, when looked at in isolation, may have a minimal percentage impact on the retail price of certain goods (particularly small volume and high value items).
It is also acknowledged that Patrick has made significant investment in infrastructure in an aim to maximise the efficiency of terminals and to be well-placed to handle projected volume increases in the years ahead. This makes good business sense.
Patrick and the other stevedores have developed an alternate model
All businesses should be managing their growth plans in an environment of increasing competition and higher costs (rents, labour, energy, insurances, etcetera). If associated costs cannot be contained, these are to be passed on to the business’ commercial customer in negotiated rates. This is how commerce generally operates.
The cost has rapidly grown this year with further increases in TACs by all stevedores nationally.
FTA and APSA acknowledge that Patrick also operates in a highly competitive environment, especially on the Australian east coast where three stevedores exist, fighting to retain and gain shipping line business with most operating in powerful consortia with exemptions from Australian competition law under Part X of the Competition and Consumer Act 2010.
In response, and as evidenced in consecutive ACCC Stevedore Monitoring Reports, stevedores have reduced quayside revenue and are self-compensating (some may argue profiteering) with increases in landside rates via TACs; a “ransom model” with charges that transport operators, freight forwarders, importers and exporters cannot negotiate and are pure price takers.
Empty container parks appear to be in a similar predicament as stevedores
Data received by FTA and APSA suggest daily storage rates of empty containers charged back to shipping lines are negligible, leaving the empty container parks with little option but to also deploy a model with charges administered via their vehicle booking systems; again, a charge that transport operators, freight forwarders, importers and exporters cannot negotiate and are pure price takers.
Double-dipping with additional costs via terminal handling charges
FTA and APSA have provided detailed evidence to the ACCC and federal government ministers that the collective charges across Australian empty container parks and stevedores are more than $1 billion per year.
The result is foreign owned shipping lines are benefitting from a reduction in quayside charges with most maintaining or increasing terminal handling charges that they impose on freight forwarders, importers and exporters.
FTA and APSA are exploring avenues as to how to achieve more transparency in how shipping lines derive this charge. In the interim, the shipping lines are the clear winners with yet another revenue stream contributing to their ongoing multi-billion-dollar profits.
It’s not all about cost of living; there are other implications
It is interesting to note that the Patrick media release and summary avoids any reference to the FTA and APSA commentaries about the impact on Australian containerised exporters, many who trade high volume and low value commodities.
Feedback received from members and shared in our formal submission to the Productivity Commission’s review of Australia’s maritime logistics system highlight the devastating commercial impacts of TACs, in some cases jeopardising the international competitiveness of certain produce.
The magnitude of TAC increases is staggering
Over the last three years, TACs have totalled approximately $1.36 billion.
The cost has rapidly grown this year with further increases in TACs by all stevedores nationally. Of most significance, in February this year, DP World made an absolute mockery of the Victorian voluntary protocols by increasing their TAC on exporters in the Port of Melbourne by 52%.
FTA and APSA trust that the federal government will see through this latest strategic move by Patrick and will be guided by the upcoming ACCC analysis, broader industry engagement and the Productivity Commission’s well-considered recommendation to introduce a mandatory code providing controls and oversight on stevedore landside charges.
