Friday 16th Nov, 2018

COASTAL SHIPPING SPECIAL REPORT: True believers and the case for a coastal service

Photo: Shutterstock
Photo: Shutterstock

SPEAKING with Captain Steve Pelecanos, there is no mistaking his passion for domestic shipping.

“We’re strong believers in a domestic coastal shipping service. It is just crazy stuff that we haven’t got one,” Captain Pelecanos said.

“When you look at it and analyse it, it is just crazy that we haven’t got one.”

Captain Pelecanos and his good mate Captain Denis Gallagher are establishing a coastal service focused on the Queensland coast via their business, Hermes Maritime Pty Ltd.

Captain Pelecanos told Daily Cargo News about why he thinks building a new coastal service is a goal worth pursuing and why it can be successful, even though many who have gone before have failed.

Captain Pelecanos said the two friends – both highly experienced mariners – agreed in late 2016 that it was high time to act.

“We had been looking at the Australian coast since 1987,” he said.

“We’re not men who are endowed with too much money, but in 2016, we thought, ‘if we’re ever going to do it, now is the time to do it’.”

The two men then got to work, conducting their own feasibility study, which finished up in April 2017.
They concluded it would be viable.

“Protectionism created an environment where there were huge problems between unions and management. The environment was one of poor attitudes on both sides.”

Previous failures
Captain Pelecanos said some previous attempts to run coastal shipping operations in Australia failed because people “went into it went in with their eyes shut”.

“They didn’t really understand ship costs and ship operations. They were a bit optimistic in what they thought they believed would happen,” he said frankly.

“I don’t think they were practical. I don’t want to be critical, and I take my hat off to anyone who’s done it, but obviously we didn’t want to make the same mistakes.”

In terms of their feasibility study, he said he and Captain Gallagher were qualified to conduct one, with Denis having an honours degree in economics and law and Captain Pelecanos having a graduate diploma in business shipping. “I’ve done a number of ship feasibility studies,” Captain Pelecanos said.

A passion for shipping
Captain Pelecanos said the geography of Australia was key.

“You have got a country with 10,000-mile coastline and all of its domestic cargo is carried by road and rail,” he said.

“But road and rail have all sorts of associated problems.”

He noted past governments backed road and rail as part of efforts to open up the country.

Then, the Navigation Act was introduced with a view to protect Australian shipping.

“But, that caused issues. Protectionism created an environment where there were huge problems between unions and management.

“The environment was one of poor attitudes on both sides,” Captain Pelecanos said.

“I think those attitudes stemmed from the fact there was this protectionism and ultimately it led to the demise of coastal shipping. The demise of coastal shipping has poorly served the country.”

Captain Pelecanos noted that most of Australia’s population live close to the sea, albeit, cargo is moved around the coast on road and rail, which “just makes little sense”.

“When you look at economies of scale, when you look at the costs of road maintenance and rail maintenance compared with the cost of maintaining an ocean and the environmental impact of moving freight by the three modes, it is just incredible,” he said.

Captain Steve Pelecanos, managing director, Hermes Maritime
Captain Steve Pelecanos, managing director,
Hermes Maritime

Where else but Queensland?
Captain Pelecanos, who lives in Brisbane, and Captain Gallagher (based in Townsville) have chosen to make the Sunshine State front and centre of their audacious business plans.

“Queensland is the most decentralised state,” he said.

“The Queensland coast is serviced by the Bruce Highway where governments have historically pumped money into keeping it maintained.”

He also noted the railway lines in Queensland are losing money and are heavily subsidised by the state government.

“We found people who moved cargo up and down the Queensland coast had little choice – moving cargo by truck is expensive, moving cargo by rail is less expensive but poor service.”

Their plan is to begin operations with a Brisbane – Townsville shuttle.

“We want to get the company in, get our procedures in play and iron out any difficulties. A good reason we are looking at Brisbane – Townsville is that Townsville is a hub for North Queensland,” he said.

“In extreme weather events, you have got rail washout, you have got closures to the Bruce Highway and Townsville and the north gets cut off.

“Once the cyclones have passed there’s a backlog of cargo that takes months to clear.”

“By adding a shipping service local communities can keep going,” he said.

“Part of our strategy in sourcing cargo is to approach those companies that have historically suffered or been price-gouged as a result of extreme weather events.”

Why now?
Captain Pelecanos said a depressed global shipping market made it an opportune time to secure a ship, with chartering costs low.

He also noted studies suggesting that from 2015 to 2035 the domestic freight task is likely to grow 3% year on year.

“When you think about that, that means in order to accommodate that doubling of the freight task, you have got to double the number of trucks and double the number of rail freight,” he said.

“The Bruce Highway and metropolitan transport corridors can’t cope with the trucks that we’ve got now. Can you just imagine doubling it?

“On top of that, trucking and rail now costs the government annually $26.3bn to maintain road and about $13bn to maintain rail.”

He noted also the average age of truck drivers is increasing.

“The average age of the truck driver is 61. Trucking companies just can’t get the drivers for long haul as the truck driver wants to get home every night,” he said.

“Even if trucking companies double the number of trucks to cope with (the added freight task), they can’t get the drivers.”

The role of unions
Captain Pelecanos believes the unions and Hermes are on the same page.

“The maritime unions have suffered a lot in recent years with job losses and loss of members.
“We find they are very business-like now,” he said.

“It’s fair to say, not only the unions, but everyone in the maritime sector has learnt the lessons of the past. I think there is a will now, on behalf of everyone involved in the shipping industry… to move on and develop a coastal shipping service that can properly serve the nation.” 

This article appeared in the July edition of DCN Magazine – Coastal Shipping Special Report

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