Uncertainty in Australia’s container stevedoring industry: Report

The operating profit margin of Australia’s container stevedoring industry has increased by 14 per cent since the start of the COVID pandemic, which is the highest level observed in a decade, according to a new report.

The Australian Competition & Consumer Commission’s (ACCC) Container Stevedoring Monitoring Report 2021-22 revealed 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.

According to the report, this is the highest level observed since the Patrick and DP World duopoly ended around 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,” said ACCC Commissioner, Anna Brakey.

According to ACCC, 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.

The report also explained that COVID continued to cause significant congestion and delays in the container freight supply chain in the 2021-22 financial year, although global shipping schedule reliability has improved in the second half of this year.

“Ongoing congestion in global supply chains means it’s still harder to move containers than it was pre-pandemic, but the situation has improved considerably this year,” Brakey said.

The recent slowdown in global trade has put downward pressure on global freight spot rates, which fell below $2,950 per 40-foot container according to the Platts Container Index produced by S&P Global Commodity Insights.

In September 2021 global freight spot rates peaked at nearly $11,800 but fell to around $7,400 by the end of June 2022.

“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.

The ACCC believes that the regulation of Australia’s monopoly container ports is ineffective, and the threat of further regulation in most states is not sufficiently credible.

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