Stevedoring profit margins up says ACCC report

Last month, the Australian Competition and Consumer Commission (ACCC) released a report which found the operating profit margin of Australia's five stevedores, which involves the loading and unloading of ships, was 24 per cent in 2021-22, up from 10pc in 2019-20.

According to the Container Stevedoring Monitoring Report 2021-22, severely constrained global shipping capacity throughout COVID-19 made it harder for importers and exporters to change to a different shipping service, and by implication a different stevedore, which may have weakened price competition between stevedores.

It's something which had not gone unnoticed by Premium Grain Handlers manager John Orr, however he said the booking fees for transporters delivering containers to the terminal had been rising dramatically over the past five years.

The company exports barley, wheat, lupins, faba beans, chickpeas and lentils in containers from the Fremantle port and as an exporter, pays for stevedoring services as part of the shipping fees in its freight contracts.

However, according to Mr Orr, the stevedore companies have started double dipping and Premium Grain Handlers have also been hit with charges when their trucks deliver containers to the terminals under the guise of booking fees.

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"The terminals have worked out they can increase those booking fees without negotiation with the deliverers as they have a captured audience - the deliverers have no choice but to pay that booking fee if they want to deliver that container to the wharf," Mr Orr said.

"Ultimately, the terminals have realised they can use their market power to increase those fees dramatically."

In Australia, the bulk export of grain is by far their main source of exports, rather than containerisation.

In Victoria, New South Wales and Queensland about 30 per cent of all grain exported is done so in containers.

WA is nationally unique in being almost entirely devoted to the bulk export of grain and regularly only exports between 500,000 tonnes and 800,000t of containerised grain which makes up less than 5pc of the State's annual grain exports.

While containerised grain may make up a small amount of WA's exports, it still forms a key part of the industry especially within key markets such as Vietnam, Philippines and South Korea.

Mr Orr said as a result of the stevedores making excessive profits by using their market power to do so, the cost of exporting containerised grain had increased dramatically which had impacted their export competitiveness for those agricultural products.

"It is doing a lot of damage to commodity exports, like grain or hay, where the margins are low and we're in a very internationally competitive situation," he said.

The ACCC's report found the regulation of Australia's monopoly container ports was ineffective, and the threat of further regulation in most States was not sufficiently credible.

It said there was the potential for the exercise of market power to exist undetected due to the inadequate level of regulatory scrutiny.

The ACCC's findings were met with alarm by peak industry bodies, with GrainGrowers policy and advocacy general manager Zachary Whale saying it was clear the system was not working in the interests of Australian export industries.

"As an industry, we have been calling for change for some time and this report has shown there is a clear need for stronger port regulation," Mr Whale said.

"The finding that price competition between stevedores at our largest ports has eroded over the past several years highlights that operators can exercise considerable market power to the detriment of exporters and importers.

"The simple fact is that we rely highly on Australia's ports and shipping networks to transport grain to international markets, but skyrocketing terminal charges and protracted industrial action at ports across Australia harm our competitiveness and reputation.

"Steps must be taken before high costs, and delays at ports inflict long-term damage to our vital export industries."

In September, the Productivity Commission released a draft report on Australia's container ports and recommended repealing Part X of the Competition and Consumer Act to encourage greater competition between shipping companies on Australian trade routes.

It was a recommendation supported by the ACCC, GrainGrowers and Mr Orr who all agreed greater competition, industrial relations reform and established benchmarks to measure productivity in the ports were critical.

"Container shipping is critical to a trade-exposed economy like Australia," said ACCC commissioner Anna Brakey.

"A well-functioning and more efficient supply chain would benefit all Australian businesses and consumers."

At the moment, there is nothing stopping the stevedores from further increasing the costs they impose and Mr Orr believes action is needed now as the industry can't afford Australia to become less attractive for international shipping.

"I'm hoping the Federal government will listen to the recommendation, especially as it comes from the Productivity Commission and has now been backed up by the ACCC," he said.

"The two bodies have clearly shown that the stevedore companies are making excessive profits by exploiting their unfair market power and that can not be ignored."