27/3/2015

Earlier this March, news about the Port of Melbourne’s proposed 800% rental increase became one of the most controversial logistics topics around the globe.

BR International (BRi) Director, Aaron Poole, has previously shared his insights regarding the rental increase. This was published in his very first Pulse article via LinkedIn entitled, “Port of Melbourne: Soon to be the most expensive in Australia.”

The article has been read and commented on by various professionals including Darren Dumbleton MAICP, Managing Director of Quay Shipping Australia Pty Ltd.

 

Today, the issue remains a hot topic not only for the logistics industry but also amongst retailers, importers and exporters operating through the Port of Melbourne. Some of the major concerns which have been raised include:

• Increased freight handling charges
• Re-routing of container ships to cheaper port
• Potential job losses in the Melbourne logistics supply chain

Read on to know how ACCC aims to resolve this matter.

Asciano and DP World demand the Australian Competition & Consumer Commission’s (ACCC) Intervention

Paul Scurrah, DP World’s Managing Director met with ACCC Chairman Rod Sims on March 13 to discuss this matter. Paul expressed his and other stevedoring companies’ frustration and anger over the port’s proposed 800% rent increase. As a result, Rod has called on the government to give ACCC authority to intervene in port pricing disputes, such as this.

“A regulator wouldn’t allow prices to be set on somebody bidding for the assets because it could lead to an “upwards spiral” in price.” Sims stated during his interview with the Australian Financial Review.

ACCC proposes port regulation under the National Access Regime

ACCC and Stevedores strongly believe that regulation of ports under the National Access Regime is the best method of addressing port rental rate disputes. It would help address the lack of effective competition due to natural monopoly in market infrastructure services where access is required for third parties to compete effectively in dependent markets.

However certain aspects have to be considered prior to its implementation such as:

• Facility based arrangements
• Application of industry specific regimes
• Caution when exercising mandatory undertakings to be implemented in the future

How ACCC is to be granted legislative power by the Government regarding port regulations

The following economic rationale for the ACCC’s power to direct infrastructure extension has been published in the Australian Government Productivity Commission’s website.

“Prior to legislative power being given to ACCC, it is recommended that Part IIIA be amended. This ensures the safeguards set out in the legislation will also apply to directed expansion.

“Once done, a public consultation has to take place.  Soon after, ACCC is to develop guidelines showing how it would exercise legislative power in directing extensions aimed to generate net benefits to the community.

“Lastly, safeguards are to be construed such that a service provider could be required to pay the upfront costs of the directed extension or capacity extension.”

Port of Melbourne and the issue of privatisation

The privatisation of the Port of Melbourne has been challenged by various organisations, including the logistics industry, primarily because of the impact it will bring to port costs. There is no denying that the Government’s goal in privatisation is to maximise sale price. The public is aware that profit will be used for future government projects such as the Port of Hastings development.

However, it should be made clear that such privatisations should not lead to poor industry structures and inadequate regulations. If it does, then it only means applying effectively a “tax” on future generations which could only lead to greater costs for container stevedores, port users, businesses and ultimately the consumers.

Rome is burning, but is there a way to put out the fire?

Maurice James, Chief Executive of Qube Holdings has exclaimed ‘Rome is burning.” He further added, “I call on the government to give certainty to industry before it goes into the privatisation process.

“The framework for privatisation (must be) known by industry before they get into it and not become an outcome after the event.”

This is a looming crisis for the Victorian government. It is an issue that has reached the attention of Victoria’s Premiere, Daniel Andrews. He had expressed his concerns about the very significant rental increase and his desire to keep the Port of Melbourne the freight and logistics centre of Australia.

Competitive rates and better infrastructure, is this possible?

In a previous Pulse article, Aaron has understandably expressed the importance of all parties providing competitive rates so importers can deliver affordable products and services to Australian consumers. He welcomes better infrastructure, road and rail projects, too; but not to the detriment of importers via an increase in landed cost.

With these points presented before you, do you think competitive rates and better infrastructure could be achievable in the Port of Melbourne? Share your comments with us.

Sources:

http://www.pc.gov.au/inquiries/completed/access-regime/report

http://www.afr.com/business/infrastructure/ports/container-ports-need-regulation-to-prevent-soaring-rents-accc-chief-rod-sims-20150315-143kz4

http://www.theaustralian.com.au/business/companies/asciano-and-dp-world-urge-accc-action-on-ports/story-fn91v9q3-1227259148635

http://www.fullyloaded.com.au/logistics-news/1503/tasmania-keeps-heat-on-melbourne-port-rent-issue/

This entry was posted in Public News on March 27, 2015 by Aaron Poole.

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