ACCC: Global container trade disruptions a crisis for Australian businesses

Released today, the Container Stevedoring Monitoring Report 2020-21 looks at the impact of the destabilised container freight supply chain on Australian businesses, as well as the prices, costs and profits of stevedores at international container ports.

According to the report, a surge in demand for containerised cargo and “extreme congestion” across the global supply chain have caused major disruptions and delays.

As such, some Australian exporters are struggling to meet contractual obligations according to the ACCC, and larger retailers are worried cargo will not arrive before Christmas.

To mitigate that, the report found many retailers are actually buying their own shipping containers and chartering their own vessels just to ensure supply arrives in time for the busy summer sales period.

“International shipping line movements normally run lean and just-in-time, but a surge in demand and COVID-19 outbreaks that have forced numerous port operations to temporarily shut down have caused congestion and delays with a cascading effect across the globe,” ACCC chair Rod Sims said.

One stevedore told the ACCC that only 10 per cent of vessels arrived in their designated berth windows in 2020-21 - the lowest rate on record.

Further, the report details how freight rates on key global trade routes are currently about seven times higher than they were just over a year ago. However, even at these rates, the ACCC says shipping lines cannot guarantee on-time delivery.

“Pre-pandemic, the sector would have likely been able to manage such a surge in containerised demand, but the simultaneous destabilisation of almost every part of the supply chain has left them without any spare capacity and struggling to cope,” Sims said.

“The margins of Australian importers and exporters are being squeezed, as they are all around the world, and the current situation is very challenging for businesses that rely on container freight.”

Workplace relations issues causing further disruption

The report also looks at how systemic industrial relations issues and restrictive work practices have further disrupted the supply chain and exacerbated congestion and delays.

Data obtained by the ACCC shows average idle hours, which is the length of time a ship spends in berth, at Port Botany increased from 11.9 hours pre-pandemic to 21.2 hours in 2020-21.

Congestion at Port Botany has become so bad that some shipping lines are skipping the port entirely.

“Industrial action on top of pre-existing congestion has unfortunately put enormous strain on our international container ports at a time when they can least cope with it, and in the case of Port Botany, some shipping lines have decided the delays make using the port commercially unviable,” Sims said. 

The ACCC gave the example of how the Maritime Union of Australia (MUA) recently used industrial action to push for restrictive work practices, including enterprise agreements that limit the ability of stevedores to automate and make recruitment decisions.

For example, Hutchison Ports Australia’s enterprise agreement requires 70 per cent of new recruitments to be ‘family and friends’ of existing employees, or people chosen by the MUA.

The union wants a similar provision in Patrick Terminals’ agreement, but last week Patrick applied to terminate the agreement on the grounds that it restricts it from being able to meet its customers’ requirements.

“The long-running labour issues in the container stevedoring industry have resulted in lower productivity and higher costs for Australian cargo owners,” Sims said.

Changes in the container freight supply chain

The report identifies a number of other longer-term trends that have transformed Australia’s container industry over the past decade.

For example, the ACCC says the entry of Hutchison and VICT changed competitive dynamics between stevedores and, as a result, stevedores are now earning less and investing more.

The report goes on to detail how the privatisation of four major container ports in Australia (Port Adelaide in 2001, Port of Brisbane in 2011, Port Botany in 2013, Port of Melbourne in 2016) has brought some benefits to the container industry through more dynamic port operations. However, it has also led to higher prices, at least at some ports.

“In 2020, the Essential Services Commission of Victoria found that the Port of Melbourne exercised its market power in charging land rents to port operators,” Sims said.

“The ACCC has been saying for some time that the current little or no regulation of container ports in Australia is not fit for purpose. Regulation needs to compensate for a lack of competitive pressure on the ports.”

The report recommends that governments, industry and unions address industrial relations and restrictive work practices, limit privatised ports’ ability to impose excessive rents and charges, and repeal Part X of the Competition and Consumer Act 2010 to facilitate greater competition between shipping lines on Australian trade routes.

It also recommends that public and private infrastructure investments be made to fix inefficiencies in the supply chain caused by larger ships, lack of rail access to Australian container ports and shortage of space in empty container parks.