The freight cost hammer may not yet have fallen on agricultural exporters as the fight for export space on ships intensifies, the Australian Peak Shippers Association (APSA) has warned.
APSA has made a series of recommendations as part of an upcoming Productivity Commission review, calling on the federal government to make the waterfront more productive to help reduce costs for exporters.
But he warned that exporters could face even tougher and more expensive times as global commodity seasons return to normal.
“Global demand for containerized shipping capacity is at an all-time high, driven primarily by surging cargo imports due to the pandemic, limited shipping capacity and poor operational performance at many key international ports,” said the director of the APSA, Paul Zalai. Productivity Commission.
“This has caused erratic positioning of container equipment, sharp spikes in freight rates, escalating surcharges and service reliability at rock bottom,” he said.
“Australian exporters are competing for available equipment and the ability to reach key markets. Importers are failing to secure supplies on a regular basis, leading to the emergence of new onshore storage models and resulting inflationary pressures are being felt in the Australian economy.
“There is no relief in sight in an environment of consolidation and stronger consortia of shipping companies entering into vessel-sharing agreements, creating significant barriers for new entrants into the global market, not to mention competition with success in a somewhat isolated Australian trade route.”
Mr Zalai is also a director of the Freight & Trade Alliance (FTA), which represents many of Australia’s major agricultural exporters.
Last year, a report by the Australian Competition and Consumer Commission found that Australia had one of the worst performing waterfronts in the developed world (13and on productivity), exporters struggling to secure export space on ships, slow ship turnaround times, outdated labor practices and ongoing industrial unrest, and rising costs.
Mr Zalai suggests that the main beneficiaries of the current crisis “are the shipping lines which proudly display staggering multi-billion dollar profits at a time when traders are on their knees”.
“Who can blame them? The shipping lines that service all of our container trade are after all for-profit foreign trading enterprises. What is overwhelmingly obvious is that Australia’s national interest is a very secondary consideration.” he said.
The APSA/FTA submission provided evidence of long-term trends that are negatively impacting the overall competitiveness of Australian exporters and importers.
The submission gives examples of the introduction of surcharges for foreign-owned shipping lines and increases in freight rates, stating that if not collusion, it is clearly a case of “following the leader” facilitated by a market with no real competitive tension.
“We are not advocating for the Federal Government to interfere with price fixing, as we need foreign shipping companies to continue to have the incentive to serve Australian trade in a free and open market.
“However, we question whether shipping lines’ vessel-sharing arrangements should continue to be protected and exempt from the competition laws faced by other businesses in Australian commerce.” said Zalai.
FTA/APSA is of the view that if exemptions continue for overseas shipping companies, the Australian Competition and Consumer Commission, or the creation of a federal shipping regulator, is needed to oversee procedures to protect viability business of Australian traders.
Also read: We may be earthlings, but the fate of exports remains at sea
The FTA said some stevedores were not passing on reduced quay loads down the line to exporters.
“Shipping companies are not only squeezing importers, exporters and freight forwarders, but they are also benefiting from significantly reduced dockside charges administered by their contracted stevedoring contractors. supply.
“With less dockside revenue, stevedores and empty container yards have resorted to a ‘ransom model’ requiring transport operators to pay designated fees or be denied access to collection/shipping facilities It is not sustainable for our exporters and importers to absorb this additional imposition of hundreds of millions of dollars per year without them being able to influence the service or the price,” Zalai said.
The ALE also wants a review of local working practices and industrial reasons.
Its main recommendations to the PC are:
- Repeal of Part X of the Competition and Consumer Act 2010, with retention of collective bargaining provisions for shippers, leaving two options: (1) foreign shipping companies must operate in accordance with the competition laws faced by other businesses involved in Australian trade; or (2) if it is deemed necessary that foreign-owned shipping lines receive continued protections, expand the role of the ACCC (or introduce a federal shipping regulator) to administer processes to protect the interests of exporters and importers, particularly by monitoring the appropriateness of shipping lines (and contracted stevedore/empty container yard) surcharges, fees and penalties.
- the introduction of an appropriate regulatory framework that provides exporters, importers and freight forwarders with guarantees against “exclusive agreements”, guaranteeing minimum service levels and prescribed change notification periods (minimum 30 days notice according to the regulations American).
- increase infrastructure investment to address supply chain inefficiencies caused by larger vessels, lack of rail access to Australian container ports and lack of space in empty container yards.
- the scope of the National Transportation Commission’s (NTC) review of terminal access charges be broadened to examine the potential of regulations to force stevedores (and empty container yards) to recover costs directly from their commercial customer (shipping company) rather than through third party transport operators.
- the need for federal government action and potential regulation, similar to that of the US Federal Maritime Commission (FMC), to ensure that reasonable container detention policies are enforced.
- the federal government to undertake a formal review of waterfront industrial relations to ensure immediate and future business continuity for what is an “essential service” and our international gateway to major supply chains.
- Ongoing engagement and reporting between the Ministry of Agriculture, Water and Environment and industry to achieve the four reform priorities identified in the Inspector General of Biosafety (IGB) report Model adequacy operational department to effectively mitigate biosecurity risks in changing risk and business environments being: (1) Regulatory maturity; (2) Partnership on the way to risk; (3) Focus on the front line; and (4) Sustainable Funding Model.
- the federal government should allocate additional funds to maintain the International Cargo Assistance Mechanism (IFAM) and/or similar financial relief measures to support the air cargo supply chain sector through the end of 2023 (at a minimum), with the actual allocation of funds subject to reviews pending the return of international passenger flight services.
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