More stevedores prompts competition at container ports

There are now three stevedores operating at each of the nation’s three largest container ports and the ACCC’s annual Container Stevedoring Monitoring Report predicts that this will spark an increase in competition.

The report states that stevedoring operating profits per TEU have risen by over 25% and volumes of containers handled by stevedores at Australia’s container ports grew by 3.7% to 7.2 million TEUs in 2016–17. While DP World and Patrick — Australia’s two largest stevedores who operate at Brisbane, Fremantle, Melbourne and Sydney — continue to dominate the market, this increasing competition caused by the new east coast ports have led to them recording their lowest ever combined shares of containers handled.

“Competition has significantly increased in recent years with the introduction of a third stevedore in Sydney and Brisbane, and now we can add Melbourne to that list. As such, we expect to see greater levels of price competition as new entrants and incumbents compete for market share,” said ACCC Chairman Rod Sims.

“Stevedores will need to work harder to win or retain their customers, with benefits flowing through to shipping lines, importers and exporters.

“However, this remains a critical period for competition. For sustainable competition to develop, these new entrants will need to win a commercially viable share of the market,” Sims continued.

The report suggests that the sustainable competition mentioned by Sims will only be achievable if new entrants Hutchison and VICT go further than merely causing a short-term reduction in prices for Patrick and DP World.

Located at the mouth of the Yarra River, VICT can accommodate larger sized ships, which may give it a competitive advantage in the future. A $550 million investment from VICT in its new terminal at Melbourne’s Webb Dock also aims to help them during this competitive time. Automation is a key feature at the terminal, helping deliver consistent operations and avoid labour disputes.

DP World and Patrick have introduced or significantly increased ‘infrastructure charges’ at several ports for transport companies collecting or dropping off containers. Although the higher charges are supposedly necessary due to rising property costs and the need to fund new investment, which may have merit, the report argues their overall costs remain stable. This increase could earn the stevedores a combined $70 million in revenues, which is about a 5–6% increase in unit revenue.

“While it is true that the stevedores are facing higher property costs, the ACCC will be interested to see whether these infrastructure charges are used to improve landside facilities beyond business-as-usual levels,” Sims stated.

However, many have said the charges are not justified and are concerned they will not be able to switch stevedores, claiming the charges breach the provisions of the Competition and Consumer Act 2010. However, the Act does not address excessive pricing.

Those benefitting from the increased competition include shipping lines who can capitalise on the fact that revenues have been consistently decreasing over the past 10 years, falling 4.5% to $138.8 per TEU over the last year. Responding to the financial difficulties by restructuring, consolidating and merging with others also means that the larger shipping lines now have stronger bargaining power to negotiate better rates with stevedores.

While the report stated that quayside productivity remains close to record levels, capital productivity decreased by 1.7% and labour productivity fell by 1.1%.

“The stevedoring industry is not reporting the same level of productivity improvements that we have seen in previous years. With the new stevedores now in place along the east coast ports, we will be looking for this productivity growth to return in future,” Sims said.