The Port of Melbourne and the Government of Victoria have been accused of trying the ‘fatten the pig’ for sale by increasing stevedores’ rates by almost 800%, making the Port of Melbourne the single most expensive container port in the world.
Asciano Limited chief executive officer and managing director John Mullen has cautioned about the impact of proposed rent increases at the Port of Melbourne on the Victorian supply chain. Mr Mullen called on the Victorian Government to resolve the issue to minimise the impact on local business and jobs.
“The frenetic race by governments to realise short-term financial gain by selling critical assets like their ports, irrespective of the harm that artificially ramping up value may cause to the state and the nation over the long term, is one of the key current issues facing Australia’s supply chain.
“While higher rents, longer committed lease periods and entrenched monopoly positions for port authorities help generate maximum value from port asset sales, the resulting flow-through to costs become an additional tax on a state’s importers and exporters, pushing up prices for consumers and making it harder for struggling manufacturers and exporters to compete.
“It’s a golden gravy train for state governments, investment banks and consultants, but ultimately it’s local industry and consumers that are left to pay the bill.”
Mr Mullen said while he supports privatisation of the Port of Melbourne, the currently proposed port rent increases for port users need to be addressed to minimise impact on the Victorian economy.
“If the port rent increases currently proposed go ahead, they will have significant negative flow-on impacts to Victorian businesses and jobs. In addition to the macro impact of Victorian industry becoming less competitive, the increases will significantly alter the economics that currently make it impractical to divert material volumes from one port to another in Australia. We estimate up to 20 per cent of current container volumes through the Port of Melbourne could be lost.
“For example, the cost increases would put at risk trans-shipment freight volumes destined for Adelaide and Hobart that are currently moved through Melbourne, along with regional freight volumes that are railed to Melbourne from western New South Wales. Over the longer term, this disparity in competitiveness would enable Sydney to become a deep water hub for larger vessels, with a significant amount of volume being unloaded and loaded in Sydney and then moved by rail and truck to and from Melbourne.”
Mr Mullen said the public and private sector need to work closely together to ensure Melbourne remains competitive.
“Given what is at stake, we believe the ACCC should have an enhanced role in regulating the conduct of monopoly port operators through the national access regime established in the Competition and Consumer Act, and we have already consulted fairly extensively with other port users, shipping lines, importers and exporters and other industry players to explore the grounds for taking this forward.”
DP World Australia calls on Victorian Government for ‘common sense to prevail’
DP World Australia managing director and CEO Paul Scurrah said he is determined to do all he can to make sure that Melbourne remains the freight and logistics capital of the nation.
Mr Scurrah warned that more than 300 jobs are at risk at the Melbourne terminal if the rent increase were to go ahead.
“Further, the impact on jobs and businesses across the Victorian economy will be significant,” Mr Scurrah says.
“We don’t see this issue being resolved without the involvement of the Victorian Government and again call on Premier Andrews to ensure this does not become an enduring, negative legacy for the State of Victoria.
“There will be a lot fewer Melbourne-based transport companies delivering and collecting containers to and from Port of Melbourne – and a lot more Sydney and Adelaide based trucking companies delivering containers across Victoria.”
Under the Port of Melbourne Corporation’s proposal, rental costs on DP World Melbourne’s West Swanson Terminal would rise from $4 million per annum in 2014 to $31 million from 1 January 2015, and then to $60 million from 1 July 2016.
The cost of moving a container through the Port of Melbourne would significantly increase for exporters and importers – and the hundreds of transport and logistics companies that service them – making it the most expensive port in the world.
In the DP World global family, Melbourne will be the most expensive of 65 terminals and will cost more than twice as much as the second most expensive terminal.
The company was notified of the rent increase on 23 December 2014.
DP World Australia has since held emergency discussions with a number of shipping lines and major logistics operators that rely on trade through the Port of Melbourne.
Companies such as Wakefield Transport, which exports high volumes of primary produce from Mildura, say they will cease to trade through Melbourne in favour of other ports should the proposed rent hike take effect.
“Producers from more southerly regions such as South Gippsland and the major importers based in Melbourne may have no option but to pay the higher charges,” Mr Scurrah said.
“Our discussions with the major shipping and transport companies that use the Port of Melbourne indicate that around 20 per cent of volume could be moved from Melbourne to Adelaide or Sydney.
“It appears that very little thought has been given to the massive cost increase that will now be imposed on every Victorian business that uses the port.
“We call on the new Victorian Labor government, who were elected on a platform of job creation, to intervene and prevent this long-term economic risk to the consumers and businesses of Victoria.” Mr Scurrah concluded.