Exporters in New South Wales are bound to face a severe shortage of empty containers as the Empty Container Incentive Scheme at Port Botany increasingly and unnecessarily aggravates a short-supply.
There is a backlog of boxes to be unpacked and moved in New South Wales. This backlog was caused by the recent pandemic outbreak in NSW when Omicron ran wild. Infections caused a huge labour shortage in the stevedoring and trucking sectors. We’re not blaming either the stevedores or truckers – we’re just pointing out that there was a huge COVID-induced shortfall in the supply of labour because of Omicron.
With such a huge chunk of the transport workforce off sick, boxes couldn’t be moved, or unstuffed. We understand that the backlog is still with us, that warehouses are full, consignees are struggling to unpack, and that importers have been unable to get the boxes back into the supply chain. They’re paying ongoing hire and are using the boxes for storage, basically.
So that puts boxes into short supply.
Meanwhile, on the East Coast of Australia, it has been… a tad wet. You may have noticed a few drops of rain here and there.
Brisbane has been repeatedly shut. Sydney has been affected by bad weather. Ships have been unable to call as often, as regularly, or in the same volumes as normal because of the bad weather. Ships have been diverting to Melbourne where they have dropped off cargo.
All of this means that, for the last couple of months, there has been a severe shortfall of empty boxes (especially twenties) and empties haven’t been exported in as great as volume as normal.
And this is where the Sydney-based private port operator’s unnecessary, unwanted, and aggressive Empty Container Incentive Scheme shows its nasty side.
The private port operator has imperiously decreed that there will be a 98% load / discharge ratio, meaning there needs to be nearly one box out for every one box in. As Shipping Australia has explained, that’s just not how the Australian container system works.
The Sydney Empty Container bill is worked out on a three-monthly basis. Because of what’s gone on over the quarter (labour shortages, terrible weather etc) shipping lines already know that this quarter’s bills from the port operator are going to hurt. But it appears that the port operator isn’t going to take any of the issues such as labour shortages and bad weather into account. They have no room for leniency.
“The ratio is 98%. But if you hit 97.9%, you get billed for every empty container. It is not limited to the shortfall. Unfortunately, the port company doesn’t seem to care; they don’t take anything into account. They simply bill the shipping lines. They are not budging,” one shipping executive has said.
As the shipping lines know that they cannot now hit the load / discharge ratio for the first quarter then they are better off not sending any empties in March as they would then be spared any penalty for those containers.
Shipping lines would be better off waiting for April, and then starting off fresh for the new quarter as, that way, they would pay less penalties.
“We wouldn’t do that of course,” the shipping executive said.
Now, you may think this is a good thing because it “incentivises” the shipping lines to evacuate empty containers. And, shipping lines evacuating empty containers is (normally) a good thing. But not when there is already a massive shortage of empty boxes.
Exporters take heed: you might find it very difficult to get boxes for export.
Meanwhile, shipping companies don’t need to be incentivised to export containers. They already evacuate empty containers, either through their regular operations or through putting on empty loaders (empty container ships that call specifically to pick up and take away empty boxes).
It’s already in the interests of shipping lines to get boxes full of Australian cargo to overseas customers – that’s what shipping lines get paid to do. It’s already in the interests of shipping lines to get empty boxes back into the supply chain for re-filling, because the shipping lines will then be paid to carry full boxes back to Australia.
Meanwhile, there are many factors over which shipping lines have absolutely no control. Landside labour shortages, sweeping pandemics, and importers hanging onto boxes are just three examples. Shipping line staff can’t just randomly burst into warehouse full of containers, unstuff the boxes, and then drag them back to the ship for export.
Everyone will suffer from the private port operator’s Empty Container Incentive Scheme.
Everyone, that is, except the port.
It gets extra revenue.
It is time for this ill-thought-out and unnecessary policy to be scrapped.
Exporters and farmers deserve better.
