The container stevedoring industry has imposed higher infrastructure charges on trucks and rail operators at ports within the last year, according to the ACCC’s container stevedoring monitoring report, and charges are expected to continue to rise.
Revenues generated by the infrastructure charges rose by 63 per cent in 2018-19 on the previous year, the report shows. In addition to infrastructure charges, other landside access and ancillary terminal fees increased at ports.
“It is understandable that stevedores seek to recover some costs of upgrading port facilities from transport operators because they, like the shipping lines, benefit from the investment,” ACCC Chair Rod Sims said.
The higher revenue has also helped the industry to offset an 8.1 per cent decline in average quayside revenue because of the increasing bargaining power of the shipping lines.
“But because port users have limited ability to move their business in response to a stevedore raising its infrastructure charge, the stevedores face less competitive pressure to keep the charges down. While the infrastructure charges only represent 12 per cent of the stevedores’ revenues today, the outcome of this may be that importers and exporters end up paying more to ship goods.”
Cargo owners contract with land transport operators to deliver their containers to and from ports and each stevedore is the sole provider of landside access, including to the rail network, to its respective terminal. Stevedores earn revenues from handling landside operations which are paid by truck and rail operators.
As such, the prices paid by land transport operators to use these terminals are largely set on a take-it or leave-it basis. Further, the distance between ports means competition between them is not very strong. Some are subject to oversight, however, such as rail handling fees, in certain states.
These services are essential, including the receiving and delivering of containers, yard services, storage, and other ancillary services to land transport operators.
Stevedores also generate more revenue for handling a full container from a landside perspective. This is because full containers incur infrastructure charges paid by truck and rail operators, while empty containers do not.
Road and rail land transport operators have raised significant concerns with the imposition of the charges given that they are not a product of commercial negotiation, according to the report.
Transport operators must use the stevedores to which they are directed and have no means to move their business in order to avoid price increases. Further, infrastructure charges will continue to increase, says the report.
The transport operators have also said that the increases impose a significant cash flow burden. Stevedores have increased the length of their payment terms, however, in order to assist with this.
“We understand from conversations with stakeholders that the transport industry is typically passing on the cost of the infrastructure charges to cargo owners. It also appears that many transport operators are adding an administrative fee on top of the infrastructure charge,” says the ACCC.
The scale of criticism from transport operators does suggest, however, that many are not able to fully recoup all the costs associated with the charges. This includes the burden on smaller operators needing to hold the debt until they receive payment from their customers.
“It therefore falls to cargo owners to ultimately impose a competitive restraint on infrastructure charge increases. Given that cargo owners have a degree of ability to switch to different shipping services, and by extension to a different stevedore, stevedores are not fully insulated from competitive forces in choosing to rebalance their prices towards the landside,” says the ACCC.
There are considerable limitations to cargo owners’ ability to competitively respond to the charge they concede.
Profitability across the stevedore industry, however, remains low with return on tangible assets falling from 27.8 per cent in 2011-12 to 3.8 per cent in 2018-19, though it varied between stevedores. This drop in returns is thought to be partly due to the growth in the industry’s asset base after investment in new container terminals in the east coast ports.
The increased charges helped lift the average revenue per container for the first time in seven years for the stevedoring industry, says the ACCC.