As another Australian summer draws to a close it’s instructive to reflect on three months of incredible uncertainty at ports around the country, particularly the Port of Melbourne which experienced almost routine-like industrial and cyber-security unrest, and disruptive political activism.
The usual pre-Christmas speculation about supply chain challenges were super charged for stevedore DP World Australia as prolonged industrial action with the Maritime Union of Australia (MUA), along with a cyber-attack, heightened concerns freight customers and consumers would be hit with delays and shortages.
Webb Dock stevedore VICT was also a regular victim of unrest with political protestors disrupting loading and unloading of Israeli-flagged ships, with the flow-on effects felt by landside operators and further down the supply chain.
Thankfully, DP World contained the cyber-attack and associated retail shortage fears were allayed – toys, clothing, homewares, and other Christmas wish-list items were in good supply thanks to customers anticipating delays and keeping warehouses stocked. The industrial dispute has been resolved with MUA, and Victoria Police have responded effectively and quickly to disruptions at VICT.
A silver lining of these activities has been regular media reports of the myriad of issues at play at the waterfront, helping to educate Australians about the intricacies and sensitivities of supply chain management, and the repercussions for them as freight and logistics consumers.
Coming off 18 months of rising interest rates and inflation, Australian consumers have a deeper understanding of why they are paying more now because of what’s happening overseas.
Geo-political conflict, rampant post-Covid labour shortages, and global supply and demand imbalances, regularly feature on the evening news as reasons for higher prices in the economy. Australians may not like paying more for goods and services, but at least they are appreciating the reasons for it.
This isn’t to say we should lay down and accept price hikes and higher costs that are out of step with community expectations, which is where government can step up and enact reform.
The cost of moving goods in and out of Australia, and more generally worldwide, is increasing exponentially due to higher global container shipping rates, which are making things everywhere more expensive than they should be.
In January, the Drewry World Container Index increased by almost a quarter (23 per cent), with the composite index increasing by 82 per cent compared with the same period in 2023. Generally, prices for freight coming from China are skyrocketing with rates on boxes from Shanghai to Los Angeles, New York, and Rotterdam up almost 30 per cent; conversely, prices for returning boxes decreased around 2 per cent, highlighting the imbalance.
The VTA has long advocated for reform that would contain super profits earned by shipping liners, who currently can access a wide suite of exemptions from Australia’s competition law. Part X of the Competition and Consumer Act (2010) needs to go because it allows shippers to agree on freight rates and quantities and the kinds of goods to be transported on trade routes. Such cartelism has been outlawed in the United States and is complicity unheard of in other parts of the business world.
Unfortunately, landside road freight operators servicing stevedores will be worse off from all this unrest, with freight customers, primary producers, and consumers, paying higher prices for disruption and uncertainty.
Complicating things even further for the landside operator are the comparatively lower margins they charge, providing them with less capacity to pass on higher costs in full, and run the risk of losing business by not doing so.
While the rate of inflation is easing, prices continue to increase in the economy. Now is not the time for landside operators to expose their businesses to financial risk by limiting cost recovery.
Attaining greater port efficiencies and reducing clogging and congestion for in and outbound trade will be a major issue this year, underscoring shipping super profit reform urgency and for landside productivity improvement to offset seaside disputes.
If we cannot resolve serial waterfront disruption there is a heightened potential for the kind of sovereign risk creation that will give manufacturers, primary producers, and shippers pause to re-consider Australia – with its higher costs – as an export market. Such a scenario must be avoided at all costs.
- Peter Anderson is the CEO of the Victorian Transport Association.