Profits surge for stevedores during pandemic supply chain disruptions

Australia’s consumer watchdog has put the stevedore industry on notice of closer scrutiny after a new report revealed their profits had increased 14 per cent since the start of the pandemic.

The just-released ACCC’s Container Stevedoring Monitoring probe shows that the industry operating profit margin of Australia’s five stevedores was 24 per cent in 2021-22, up from 10 per cent in 2019-20.

That’s the highest level observed since the Patrick and DP World duopoly ended about a decade ago.

“Importers and exporters benefited from an injection of new competition at our largest ports several years ago, but we’re concerned that in the past few years those gains have been eroded to the detriment of importers and exporters, and, ultimately, Australian consumers,” ACCC Commissioner Anna Brakey said.

The report examines the prices, costs, and profits of stevedores at Australia’s international container ports, but also looks more broadly at the state of the container freight supply chain following the pandemic disruption of recent years.

Between 2000 and 2013, Patrick and DP World (Sydney, Melbourne, Fremantle and Brisbane), and the Adelaide container terminal collectively achieved operating profits of between 21 and 27 per cent; however, competition from Hutchison and VICT combined with large infrastructure investments and other developments led to their margins declining over the following seven years.

The ACCC has not yet formed a conclusive view on the drivers behind the recent increases in stevedores’ operating profits.

Severely constrained global shipping capacity throughout the pandemic 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.

“If stevedores’ higher profits are due to the recent shocks to the global container freight supply chain, we’d expect their profits to decline over time as shipping and terminal congestion eases,” Brakey said.

“We’ll be closely scrutinising the stevedores’ charges and financial performance in the coming years to see if there are any structural or behavioural factors sustaining higher profits, and whether any further policy or regulatory responses are warranted.”

The recent slowdown in global trade has put downward pressure on global freight spot rates, which in November this year fell below US$2000 per 40-foot container according to the Platts Container Index produced by S&P Global Commodity Insights. However, this is still roughly double the average rate in 2019.

Global freight spot rates peaked in September 2021 at nearly US$8000 but fell to about US$5000 by the end of June 2022.

Elevated freight rates and generally higher costs for importers to use the supply chain have contributed to higher prices for Australian consumers and have put upward pressure on inflation.

“There is currently a high degree of economic uncertainty globally, but if there’s a reduction in global trade next year as industry analysts are predicting, it should ease pressure on supply chains and freight rates even further,” Brakey said.

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