‘WHAT’S changed in DP World Australia’s costs that they didn’t know six months’ ago?’
That’s the question CTAA Alliance companies are asking following the recent news that they are to be slugged further increases in Infrastructure Surcharges from January 1, 2018 at DPWA’s container terminals in Melbourne, Sydney and Brisbane.
DPWA has dropped the bombshell that from January 1, 2018, container transport operators in Sydney will face a 78% increase in its Infrastructure Surcharge at Port Botany, 51% in Melbourne and 18% in Brisbane.
These massive increases have been announced only six months since DPWA implemented a 900% increase in its Infrastructure Surcharge in Melbourne and introduced a new Surcharge in Port Botany and Fremantle, through which DPWA, together with similar surcharges imposed rival Patrick, will pocket some $70 million per annum for the two stevedore companies combined (ACCC Container Stevedoring Monitoring Report 2016-17).
Reasons cited by DPWA for these latest announced increases include “significant energy cost imposts” and “property and rent-related cost increases”.
The many cynics in the landside logistics sector however query why DPWA didn’t forecast these cost increases back in March and factor them into their original Infrastructure Surcharges implemented in April 2017?
All businesses have faced rising energy price rises and have been able to forecast these increases. Also, in Melbourne and Sydney, DPWA has known for some time what their negotiated property rent increases were going to be. So why now the further surcharge gouge?
One conclusion is that DPWA believes that they weathered the storm of opposition to the initial increases, with barely a murmur from regulators such as the ACCC, or from Federal and State Governments. So, they simply thought they’d go again to make up their revenue shortfall from dropping their stevedoring rates charged to shipping lines.
After all, it was reported in March that DPWA chief executive, Paul Scurrah, described the surcharge revenue recovery decision as “the riskiest of his working life in logistics”. Well, the gamble has seemingly paid off, with DPWA at best only being hit with a “wet lettuce” from the ACCC pledging to monitor the situation, and barely a peep from other regulatory agencies or incumbent Governments.
Land transport operators (road and rail) and shippers alike feel abandoned by this, and the lack of regulatory price oversight has now led to a free-for-all.
We say it again … transport operators have no input into the quantum of the surcharges, no say in where the money will be spent to supposedly improve landside-stevedore productivity and efficiency, and no choice other than to pay the fees or risk being locked out of the stevedore terminals.
Also, while it is acknowledged DPWA has eventually heeded requests to extend their payment terms to 28 days, the quantum of the announced increases more than negates any cash-flow relief delivered.
The larger transport operators in Melbourne, Sydney and Brisbane who cart the majority of the containers in each port, individually now incur fees from the stevedores for the Vehicle Booking System (VBS) and Infrastructure Surcharges of over $300,000 per month. This impost will increase further from next year.
We will not be surprised if these fee increases contribute to some transport providers going to the wall … honest, hardworking people who have to deal with DPWA dictating all of the terms.
To rub salt into open wounds, transport operators in some ports, particularly in Melbourne, also continue to suffer delays and poor performance by DPWA.
For example, a big issue at present is the lack of slots and capacity provided by DPWA to accept direct empty container de-hires to wharf as directed by shipping lines.
And in Melbourne particularly, it is next to impossible to marry up an empty container return slot with a corresponding import pick up slot in the VBS. This means more empty containers are being staged back through transport yards, unwanted additional truck kilometres and container lifts are incurred, and trucks cannot be scheduled to undertake a two-way run.
This inefficiency comes at a significant cost to transport operators. Given the empty direct to wharf de-hire situation alone, there is a pressing need for transport operators to consider surcharges of their own to their customers to recover the costs of DP World’s continuing inefficiencies and delays.
It’s become the year of the “free-for-all” in surcharges, so why not? Transport operators should push back commercially given the significant additional costs that they are incurring on top of having to bank-roll the stevedore Infrastructure fees.
At the industry level, CTAA also continues to advocate for:
- A full Government-led review of the relationship between stevedore rates to shipping lines, Terminal Handling Charges (THCs) applied by shipping lines to shippers, and the implementation and quantum of the infrastructure surcharges levied by the stevedores on transport operators;
- An investigation of the unfair structure of DP World Australia’s National Carrier Access Agreement, and the benefits that would be derived by negotiated, individual Service Level Agreements (SLAs) between transport operators and stevedore companies; and
- The establishment of independent monitoring of key stevedore performance indicators, including accurate Truck Turnaround Time (TTT) & Container Turn Time (CTT) measurement in all ports; VBS slot capacities per time zone; truck utilisation rates, stevedore practices that limit ‘two-way running’ opportunities; and stevedore infrastructure expenditure that improves landside logistics interface performance.
This is a work of opinion and does not necessarily reflect the view of Daily Cargo News.
* Neil Chambers is a director at Container Transport Alliance Australia