Volumes of containers handled by stevedores at Australia’s container ports grew by 3.7% to 7.2 million TEUs in 2016-17, the highest ever recorded, according to a new report by Australian Competition and Consumer Commission (ACCC).
During this period, Sydney was Australia’s largest stevedoring port.
In addition, increased competition at the east coast ports have contributed to Australia’s two largest stevedores, DP World and Patrick, recording their lowest ever combined shares of containers handled, however they still dominate the market.
Highlights
- Unit revenues continue to fall
Unit revenues continue to fall Revenue per TEU, a proxy for price, continued to fall across the industry in 2016-17. Total revenue fell 2.0% to $169.7 per TEU, while stevedoring revenue fell 4.5% to $138.8 per TEU.
This has continued a very consistent trend which now sees unit stevedoring revenue at a level which is about a quarter less than a decade ago in real terms. Competition and the accompanying expansion in capacity at some ports has no doubt played a role in this trend.
However, this also reflects newly merged shipping lines wielding greater bargaining power, the increasing use of the larger 40 foot containers, and falling unit costs over time due to higher productivity.
- Profit margins increased
Further, the industry’s profit margins, as measured by EBITA over total revenue, increased by 4.0% points to 17.1% in 2016-17 on account of a 6.3% fall in overall costs. Reductions in costs were largely driven by increased economies of scale and reduced overhead expenses by stevedores, particularly Hutchison.
- Quayside productivity growth has been stagnant
Quayside productivity remains close to record levels, however growth has been stagnant. In 2016-17, capital productivity decreased by 1.7% to 29.2 containers per hour, labour productivity decreased by 1.1% to 46.5 containers per hour, while multifactor productivity was flat at 55.6 containers per hour. Australian quayside productivity levels continue to lag levels achieved in comparable countries.
- Landside productivity indicators show mixed outcomes
The size of the landside freight task increased in 2016-17 in line with the increase in the volumes of containers handled. The number of trucks increased at container terminals, however truck productivity measures were mixed: average truck turnaround times improved by 30 seconds to 29.9 minutes, but the average number of containers per truck continued to decrease. The modal share of rail in transporting freight continued to increase at most ports.
- Shipping lines merging in response to continued downturn in global shipping
The shipping industry has sought to consolidate in response to ongoing difficult financial conditions. Almost every major shipping line has been impacted, whether through merger, changed alliance or bankruptcy. Stevedores have reported that the larger shipping lines emerging from this restructuring have been able to use their stronger bargaining power to secure more favourable rates.
For shippers, the downturn and overcapacity within the industry has led to significantly cheaper rates for the transportation of goods overseas. However, the benefits are likely to lessen over time as the consolidation within the industry sees a reduction in shipping competition and possibly the frequency of services.
- Ports and stevedores preparing for larger sized ships
The size of container ships visiting Australian ports continues to grow. This trend is being driven by shipping lines launching their largest new ships on the big freight routes between Europe, Asia and North America, with a cascading effect on smaller routes such as those to Australia. However, Australian ports appear to be well placed to be able to handle larger ships in the future with modest investment.
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