ASIA
12 January 2022
AUSTRALIA’S INTERNATIONAL CONTAINER PORTS.
Australia's inefficient container ports are impeding the country's export economy, according to Glen Robinson.
Australia is a small and isolated trading nation, distant from international ports. It has benefitted from the containerisation of cargoes which was introduced in the 1950’s and has also benefited from the bulk handling process for mined products.
There has been some criticism of the efficiency of the container ports when they are compared with international compatriots and this inefficiency has been exacerbated by the Corona virus and the current disruptions and have had intermittent effects on the supply chain.
There has been a plethora of studies, enquiries and reports on the efficiency of the container ports and the performance of the Australian container ports as seen by analysts over at least a 10-year period, and some of these are reviewed in this report.
NOTE: Frequent use is made of the term TEU ‘s in this document.
A TEU is the standard unit of measurement for shipping containers. One TEU is equivalent to one 20-foot shipping container and a 40-foot shipping container is equivalent to 2 TEU’s
Unfortunately, that is not the case. The reports are damning of the performance of Australia’s container ports with comments such as “are near to completely failing Australian exporters, importers, shippers, shipping lines and society in general because they have terrible on-the-job performance” (1) and this is despite the frequent and in-depth examinations by way of commissions, studies, inquiries, benchmarking, and subsequent reporting.
The shipping industry has enjoyed a healthy growth since the widespread introduction of containers in the 1950’s, which fostered significant improvement in port efficiency. It is notable that the global trade volumes involving containers has increased annually by 8.1% in the period 1980 to 2020, whereas the total maritime trade has increased by just under 3% for the same period. Therefore, container ports are extremely important to Australia. (2)
In this analysis, the ports are described, and the international evaluations are outlined, however, no attempt has been made to investigate the reasons for the poor performance nor propose specific actions which could improve the situation.
Further, there is a large difference between the ports for international shipping and those for local use, so this report focusses on the international ports. The three categories of ports:
[1] those which are designed for large international containerised ships:
[2] bulk carriers, generally for mining products, liquids [oil, petroleum, gas etc.]
[3] those which are designed for smaller localized shipping
The ports are generally designed for the specific use and in this analysis, category [1] only will be discussed.
A search was made of the available material, and it was found that there is an incredible amount of detailed information already published. In it the commentators have an extremely high level of credibility, the reports indicate a high level of interest and breadth of interest, and there is a plethora of benchmarking information which includes relevant international ports. Therefore, the difficulty was making the decisions as to what to leave out, rather than what should be included. It is hoped that the decisions are to the satisfaction of the reader.
International Standard Container Ports -- Port of Brisbane, Port of Dampier, Port of Melbourne, Port of Newcastle, Port of Sydney (Port Botany), Port of Wellington, Port of Adelaide, Port of Darwin, Port of Fremantle, Port of Hedland
There are several evaluations on the relative performance of the Australian ports, and “The Container Port Performance Index 2020” (3) published by World Bank Group and IHS Markit undertakes a comparable assessment of container port performance of 351 of the world’s ports. It ranks them on two different scales, a Statistical approach, and an administrative approach, and while the results of the two are very similar the Statistical approach is reported here for the Australian ports.
The rankings from the 351 ports are as follows
Port of Brisbane; Ranking 246; In the bottom 30%
Port of Melbourne; Ranking 302; In the bottom 15%
Port of Fremantle; Ranking 326; In the bottom 5%
Port of Sydney; Ranking 337; In the bottom 5%
Port of Adelaide; Ranking 339; In the bottom 5%
The results confirm that performance of the Australian ports is well below other international container ports, and well below the normal expectations. Further, information published by UNCTAD shows that in 2019 the median in-port time for container ships visiting Australia was three times longer than Japan, twice as long as China and 50% longer than Singapore or New Zealand, (4) and in 2020 the information on the number of ships which visit and the in-port duration in number of days for a number of countries is as follows (10) : -
COUNTRY MEDIAN PORT TIME [Days] NUMBER OF VISITS in 2020
Australia 1.46 3,658
Brazil 0.86 7,609
China 0.68 74,400
France 0.78 4,650
Germany 0.98 7,139
India 094 7,865
Italy 0.93 7,929
Japan 0.34 37,956
United Kingdom 0.73 7,834
GLOBAL AVERAGE 0.78
The only conclusion which can be drawn from these assessments of comparable container port performance released by the World Bank, in association with internationally respected analyst firm IHS Markit (3) is the poor performance of Australian ports.
The operating capacity and infrastructure of each of the 5 Australian ports can be seen in the following table (2)
Port of Brisbane; 9 Container berths
Port of Melbourne; 10 Container berths plus 1 general cargo berth
Port of Fremantle; 4 Container berths
Port of Sydney; 11 Container berths
Port of Adelaide; 2 Container berths
As the performance of the Australian container ports is well below what would be expected, we certainly need a significant change, and there is a plethora of information on the changes which are required, and the actions needed to achieve those changes. This information has its history at least back to 1998 (5) and is regularly reiterated, but it is apparent that the information is patently ignored or is regarded as incorrect or irrelevant.
Firstly, the lingering results of the Covid Pandemic and unfortunately, we do not know for how long the effects will remain with us, nor do we yet know the severity or the physical spread of the disease, and of course it is impossible to anticipate the new variants which may develop. But the pandemic has had a disastrous effect on most ports, including the Australian ones.
Secondly, the effects of climate change are likely to be profound, and we have not yet begun to contemplate their breadth nor depth. But the international community have really taken the situation seriously, and are taking corrective action, but unfortunately, we in Australia have not, so it is not possible to anticipate the specifics at this stage.
Those two factors will conflate to a degree which is impossible to predict at this stage but conflate they will, and significantly affect our future, and certainly the operation of ports.
Thirdly, overlay these changes with the changes necessary to bring the performance of the ports up to an international “reasonable” performance, and it is clear that significant changes are required, and the question becomes one of what is required? and who is going to initiate the changes? and then manage those changes?
One of the changes is the response to the technology changes already occurring in the industry. The capacity of the container carrying ships is increasing so the “minimum” standard is 10,000 TEU, and Australia’s container ports are struggling to handle ships of that size. It is anticipated that the next generation of standard ships are to have carrying capacity of at least 12,000 to 15,000 TEU
Each of these detailed reports, and several others not identified here, sets out the strategy and the action plans required to bring the ports up to international standard.
Industrial Relations. This is an issue on the waterfront, whereas management and employees in most other industries have overcome their difficulties and are operating to a common theme. It is an oft quoted reason for the poor performance on the waterfront, and it certainly is an issue, but whether it is really a level 10 issue but is quoted as a level 1 issue in order to distract attention from other reasons is not known. Why the waterfront still has “industrial relations issues” is not really canvassed in this study, but it has real issues which warrant considerable effort to rationalise them.
Larger Vessels. These have continuing significant impact on port operations. They provide economies of scale, and anecdotally a ship of 20,000 TEU has running costs on a per TEU basis are half that of a ship of 2,000 capacity, when both are fully laden. Other benefits relate to reduced emissions. The downside relates to the costs associated with structural changes required to the port infrastructure, and even though significant changes have been made to some Australian ports, they have not kept up with the requirements of a larger vessel.
Frequency of larger vessels. While the 5 largest ports can accommodate larger vessels, generally they can only accommodate low frequency and volume of the larger vessels, and as the longer-term tendency is to larger vessels, Australian ports are falling behind. This adds costs as waiting times are experienced, but also more concerning is that shippers are reluctant to include Australia in their schedules, a situation which must be avoided.
Environmental Issues. There is a longer-term trend for port authorities to require environmentally acceptable fuels, and there are limits on the level of sulphur in fuels which can be used. That is causing some hesitancy as the available technology is still being evaluated, and it is speculated that some ship construction is being delayed until more modern technologies are clarified. Presently, alternative fuel sources are in short supply.
Port Privatisation. Most of the Australian container ports have been privatised, and there are opportunities for the owners to take operating and cost efficiencies. While this has occurred to a limited extent, it is insufficient as the costs and operating efficiencies have not been fully realised.
Empty Container Storage. The storage of empty containers is a constant management issue, particularly as there are more containers being imported than being exported, so the storage and management is an issue. It is suspected that as it is an “invisible” issue it does not receive the management attention to which it otherwise deserves.
Supply Chain Management. The operation of the port with the substantial number of disparate functions, many under separate management, is extremely difficult, and disruptions and delays are an ever-present possibility or even probability. One delay in the chain and that event carries forward to the next port and the ship has missed its planned arrival and hence adds to the disruption of that port. The need for expert port management is paramount.
Linkage to Freight. The linkage to incoming and outgoing freight is extremely important and is also an activity which requires an appropriate location so that access is not hindered, but also the planning and execution needs to be efficiently and expertly handled. The disruption to the local environment is significant and is a disincentive to increasing the activities of the container port.
Competition & Consumer Act. The Competition & Consumer Act 2010 (4) of which Part X allows the shipping companies to: -
Agree on prices,
Pool or apportion earnings, losses of traffic
Regulates capacity
Coordinate schedules
All of which are not allowed under normal anti-competitive activity. There has been comments from the industry that this Act has adversely impacted on the supply chain.
Government Regulation and Application. The action of the government planning and execution process is fundamental to the smooth and efficient of a port. It is also a fundamental to have the appropriate regulatory framework in place to ensure that the freight process is integrated into the supply chain process, that the charges of port operation are relevant to the operating costs, ensure that freight is a factor in government planning and decision making, and ensure that the regulatory burden does not become too overwhelming.
The factors which contribute to an efficient port operation are many, and while the above list may appear all inclusive, there are other factors which can either prevent a port being an efficient one or turn an efficient port into an inefficient one.
As a consequence, the cost of shipping full containers has increased by a factor of 7.7, that is, a cargo trip which previously cost $1000 can now cost $7700 [Nov 2021] (9) and it is widely tipped to further increase.
This commercial sector is one which has apparently been studied from every angle by qualified and competent people and detailed action plans, those plans have been appropriately documented, but the situation has not improved. Why there has been no change? It is a question begging for a sensible response. It is difficult to accept the “conventional wisdom” that it is the industrial relations which are the problem, as they may be a factor, but they are hardly the main reason. If they are a significant reason, it certainly points to other corporate deficiencies.
The Prime Minister has announced that a Royal Commission is to be conducted to determine what action should be taken to solve the issues of the waterfront. The Commissioners should just re-read the [at least] 6 previous enquiries, and then enact action to either undertake or implement the suggestions and recommendations contained within.
No attempt has been made in this document to estimate the additional costs which are attributed to the poor performance of the port activity, except to quote that the cost of a ship delayed at the port can be $100,000 per day, and as a consequence, delays or late arrivals are passed on at most subsequent ports. Nor has there been any attempt made to investigate the reasons for the poor performance nor propose specific actions which may improve the situation.
Glen is a director of the Australia Thailand Business Council and a Councillor of the Australia Institute of International Affairs NSW. GLEN ROBINSON B.Sc. [Tech], JP
GLEN ROBINSON B.Sc. [Tech], JP
Mob: + 61(0)412 229 664
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
There has been some criticism of the efficiency of the container ports when they are compared with international compatriots and this inefficiency has been exacerbated by the Corona virus and the current disruptions and have had intermittent effects on the supply chain.
There has been a plethora of studies, enquiries and reports on the efficiency of the container ports and the performance of the Australian container ports as seen by analysts over at least a 10-year period, and some of these are reviewed in this report.
NOTE: Frequent use is made of the term TEU ‘s in this document.
A TEU is the standard unit of measurement for shipping containers. One TEU is equivalent to one 20-foot shipping container and a 40-foot shipping container is equivalent to 2 TEU’s
INTRODUCTION
Australia has a very heavy reliance on seaports due to its particularly large continent with a sparse population and significant sea distance from larger markets. Consequently, the ports should be among the most efficient in the world, ensuring that the shipped containers reach the market in good time, and at an efficient cost.Unfortunately, that is not the case. The reports are damning of the performance of Australia’s container ports with comments such as “are near to completely failing Australian exporters, importers, shippers, shipping lines and society in general because they have terrible on-the-job performance” (1) and this is despite the frequent and in-depth examinations by way of commissions, studies, inquiries, benchmarking, and subsequent reporting.
The shipping industry has enjoyed a healthy growth since the widespread introduction of containers in the 1950’s, which fostered significant improvement in port efficiency. It is notable that the global trade volumes involving containers has increased annually by 8.1% in the period 1980 to 2020, whereas the total maritime trade has increased by just under 3% for the same period. Therefore, container ports are extremely important to Australia. (2)
In this analysis, the ports are described, and the international evaluations are outlined, however, no attempt has been made to investigate the reasons for the poor performance nor propose specific actions which could improve the situation.
Further, there is a large difference between the ports for international shipping and those for local use, so this report focusses on the international ports. The three categories of ports:
[1] those which are designed for large international containerised ships:
[2] bulk carriers, generally for mining products, liquids [oil, petroleum, gas etc.]
[3] those which are designed for smaller localized shipping
The ports are generally designed for the specific use and in this analysis, category [1] only will be discussed.
A search was made of the available material, and it was found that there is an incredible amount of detailed information already published. In it the commentators have an extremely high level of credibility, the reports indicate a high level of interest and breadth of interest, and there is a plethora of benchmarking information which includes relevant international ports. Therefore, the difficulty was making the decisions as to what to leave out, rather than what should be included. It is hoped that the decisions are to the satisfaction of the reader.
INTERNATIONAL RANKING OF PORTS
Australia has 10 container ports which may be described as of international standard, and of those, 5 are of international size.International Standard Container Ports -- Port of Brisbane, Port of Dampier, Port of Melbourne, Port of Newcastle, Port of Sydney (Port Botany), Port of Wellington, Port of Adelaide, Port of Darwin, Port of Fremantle, Port of Hedland
There are several evaluations on the relative performance of the Australian ports, and “The Container Port Performance Index 2020” (3) published by World Bank Group and IHS Markit undertakes a comparable assessment of container port performance of 351 of the world’s ports. It ranks them on two different scales, a Statistical approach, and an administrative approach, and while the results of the two are very similar the Statistical approach is reported here for the Australian ports.
The rankings from the 351 ports are as follows
Port of Brisbane; Ranking 246; In the bottom 30%
Port of Melbourne; Ranking 302; In the bottom 15%
Port of Fremantle; Ranking 326; In the bottom 5%
Port of Sydney; Ranking 337; In the bottom 5%
Port of Adelaide; Ranking 339; In the bottom 5%
The results confirm that performance of the Australian ports is well below other international container ports, and well below the normal expectations. Further, information published by UNCTAD shows that in 2019 the median in-port time for container ships visiting Australia was three times longer than Japan, twice as long as China and 50% longer than Singapore or New Zealand, (4) and in 2020 the information on the number of ships which visit and the in-port duration in number of days for a number of countries is as follows (10) : -
COUNTRY MEDIAN PORT TIME [Days] NUMBER OF VISITS in 2020
Australia 1.46 3,658
Brazil 0.86 7,609
China 0.68 74,400
France 0.78 4,650
Germany 0.98 7,139
India 094 7,865
Italy 0.93 7,929
Japan 0.34 37,956
United Kingdom 0.73 7,834
GLOBAL AVERAGE 0.78
The only conclusion which can be drawn from these assessments of comparable container port performance released by the World Bank, in association with internationally respected analyst firm IHS Markit (3) is the poor performance of Australian ports.
The operating capacity and infrastructure of each of the 5 Australian ports can be seen in the following table (2)
Port of Brisbane; 9 Container berths
Port of Melbourne; 10 Container berths plus 1 general cargo berth
Port of Fremantle; 4 Container berths
Port of Sydney; 11 Container berths
Port of Adelaide; 2 Container berths
As the performance of the Australian container ports is well below what would be expected, we certainly need a significant change, and there is a plethora of information on the changes which are required, and the actions needed to achieve those changes. This information has its history at least back to 1998 (5) and is regularly reiterated, but it is apparent that the information is patently ignored or is regarded as incorrect or irrelevant.
THE FUTURE
As we enter into a new era, we reflect on the immediate past as it may be an indicator of the future, however it is most likely that the future is going to be very different from the past. What that difference will be is the subject of speculative thinking, but the changes will be very noticeable, dramatic, widespread, and permanent. Some will be popular, some will be resented, but there will be changes, some small, some moderate and some quite spectacular. Mostly these will be as a result of 3 factors: -Firstly, the lingering results of the Covid Pandemic and unfortunately, we do not know for how long the effects will remain with us, nor do we yet know the severity or the physical spread of the disease, and of course it is impossible to anticipate the new variants which may develop. But the pandemic has had a disastrous effect on most ports, including the Australian ones.
Secondly, the effects of climate change are likely to be profound, and we have not yet begun to contemplate their breadth nor depth. But the international community have really taken the situation seriously, and are taking corrective action, but unfortunately, we in Australia have not, so it is not possible to anticipate the specifics at this stage.
Those two factors will conflate to a degree which is impossible to predict at this stage but conflate they will, and significantly affect our future, and certainly the operation of ports.
Thirdly, overlay these changes with the changes necessary to bring the performance of the ports up to an international “reasonable” performance, and it is clear that significant changes are required, and the question becomes one of what is required? and who is going to initiate the changes? and then manage those changes?
One of the changes is the response to the technology changes already occurring in the industry. The capacity of the container carrying ships is increasing so the “minimum” standard is 10,000 TEU, and Australia’s container ports are struggling to handle ships of that size. It is anticipated that the next generation of standard ships are to have carrying capacity of at least 12,000 to 15,000 TEU
PREVIOUS REPORTS
The National Ports Strategy (6) documents the enquiry and is a detailed analysis of the purpose, objectives, priorities, implementation plan, action plan, and follow up plan, and as such is a detailed step by step strategy to bring the nations ports up to international standards. This plan was published in 2011 and is an excellent document. This was followed by the National Freight & Supply chain Priorities in 2018 (7) and the National Freight & Supply Chain Strategy in 2019 (8), and all that was topped of by the extremely detailed and voluminous Container Stevedoring Monitoring Report of 2020-2021(4)Each of these detailed reports, and several others not identified here, sets out the strategy and the action plans required to bring the ports up to international standard.
FACTORS CONTRIBUTING TO LOW PERFORMANCE
The factors which are contributing to Australia’s low performance in comparison to the international standards are somewhat varied, nevertheless the supply chain effectiveness is subject to a number of factors including: -Industrial Relations. This is an issue on the waterfront, whereas management and employees in most other industries have overcome their difficulties and are operating to a common theme. It is an oft quoted reason for the poor performance on the waterfront, and it certainly is an issue, but whether it is really a level 10 issue but is quoted as a level 1 issue in order to distract attention from other reasons is not known. Why the waterfront still has “industrial relations issues” is not really canvassed in this study, but it has real issues which warrant considerable effort to rationalise them.
Larger Vessels. These have continuing significant impact on port operations. They provide economies of scale, and anecdotally a ship of 20,000 TEU has running costs on a per TEU basis are half that of a ship of 2,000 capacity, when both are fully laden. Other benefits relate to reduced emissions. The downside relates to the costs associated with structural changes required to the port infrastructure, and even though significant changes have been made to some Australian ports, they have not kept up with the requirements of a larger vessel.
Frequency of larger vessels. While the 5 largest ports can accommodate larger vessels, generally they can only accommodate low frequency and volume of the larger vessels, and as the longer-term tendency is to larger vessels, Australian ports are falling behind. This adds costs as waiting times are experienced, but also more concerning is that shippers are reluctant to include Australia in their schedules, a situation which must be avoided.
Environmental Issues. There is a longer-term trend for port authorities to require environmentally acceptable fuels, and there are limits on the level of sulphur in fuels which can be used. That is causing some hesitancy as the available technology is still being evaluated, and it is speculated that some ship construction is being delayed until more modern technologies are clarified. Presently, alternative fuel sources are in short supply.
Port Privatisation. Most of the Australian container ports have been privatised, and there are opportunities for the owners to take operating and cost efficiencies. While this has occurred to a limited extent, it is insufficient as the costs and operating efficiencies have not been fully realised.
Empty Container Storage. The storage of empty containers is a constant management issue, particularly as there are more containers being imported than being exported, so the storage and management is an issue. It is suspected that as it is an “invisible” issue it does not receive the management attention to which it otherwise deserves.
Supply Chain Management. The operation of the port with the substantial number of disparate functions, many under separate management, is extremely difficult, and disruptions and delays are an ever-present possibility or even probability. One delay in the chain and that event carries forward to the next port and the ship has missed its planned arrival and hence adds to the disruption of that port. The need for expert port management is paramount.
Linkage to Freight. The linkage to incoming and outgoing freight is extremely important and is also an activity which requires an appropriate location so that access is not hindered, but also the planning and execution needs to be efficiently and expertly handled. The disruption to the local environment is significant and is a disincentive to increasing the activities of the container port.
Competition & Consumer Act. The Competition & Consumer Act 2010 (4) of which Part X allows the shipping companies to: -
Agree on prices,
Pool or apportion earnings, losses of traffic
Regulates capacity
Coordinate schedules
All of which are not allowed under normal anti-competitive activity. There has been comments from the industry that this Act has adversely impacted on the supply chain.
Government Regulation and Application. The action of the government planning and execution process is fundamental to the smooth and efficient of a port. It is also a fundamental to have the appropriate regulatory framework in place to ensure that the freight process is integrated into the supply chain process, that the charges of port operation are relevant to the operating costs, ensure that freight is a factor in government planning and decision making, and ensure that the regulatory burden does not become too overwhelming.
The factors which contribute to an efficient port operation are many, and while the above list may appear all inclusive, there are other factors which can either prevent a port being an efficient one or turn an efficient port into an inefficient one.
THE EFFECT OF THE COVID PANDEMIC
The Covid Pandemic has had a disastrous effect on the global supply chains, and apparently no country has been immune from the problems. Delays due to port shutdowns, lockdowns, absentee labour staff, create the flow-on effects. The knock-on effect of having empty containers stored in countries which are net importers, like Australia, and the shipping companies are reluctant to ship empty containers as they are low value cargo. There is the further issue that the nature of the cargoes has changed as there is a significant increase in manufactured goods which require more containerization. Further, shipping companies are reluctant to ship to net importing country as they cannot obtain a paying cargo for the return journey. The net effect is that prior to the pandemic the system would have had sufficient capacity to withstand the demand in containerised cargoes, however the pandemic has significantly increased the load onto all sections of the containerised transport system.As a consequence, the cost of shipping full containers has increased by a factor of 7.7, that is, a cargo trip which previously cost $1000 can now cost $7700 [Nov 2021] (9) and it is widely tipped to further increase.
CONCLUSION
It is clear that the major Australian container ports are certainly not up to international standard and may be unnecessarily inflating the cost of imported goods, and unfortunately the covid Pandemic is adding to the inflated costs and may be obscuring the real issues. What is a major issue is the apparent inaction, or ineffective action, in relation to the previous examinations, commissions, studies, inquiries, benchmarking, and subsequent reports.This commercial sector is one which has apparently been studied from every angle by qualified and competent people and detailed action plans, those plans have been appropriately documented, but the situation has not improved. Why there has been no change? It is a question begging for a sensible response. It is difficult to accept the “conventional wisdom” that it is the industrial relations which are the problem, as they may be a factor, but they are hardly the main reason. If they are a significant reason, it certainly points to other corporate deficiencies.
The Prime Minister has announced that a Royal Commission is to be conducted to determine what action should be taken to solve the issues of the waterfront. The Commissioners should just re-read the [at least] 6 previous enquiries, and then enact action to either undertake or implement the suggestions and recommendations contained within.
No attempt has been made in this document to estimate the additional costs which are attributed to the poor performance of the port activity, except to quote that the cost of a ship delayed at the port can be $100,000 per day, and as a consequence, delays or late arrivals are passed on at most subsequent ports. Nor has there been any attempt made to investigate the reasons for the poor performance nor propose specific actions which may improve the situation.
About the Author
Glen Robinson Glen Robinson is a co-founder and director of Asean Focus Group with Peter Church which was formed in 1990 to provide advice and assistance to those organisations which wished to take a commercial presence in ASEAN and other Asian countries. A number of years ago the company entered into a joint venture with the Venture Group and now both jointly trade as AFG Venture Group.Glen is a director of the Australia Thailand Business Council and a Councillor of the Australia Institute of International Affairs NSW. GLEN ROBINSON B.Sc. [Tech], JP
GLEN ROBINSON B.Sc. [Tech], JP
Mob: + 61(0)412 229 664
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.