Australia’s coastal licensing system is built around nominated voyages. The freight most likely to shift needs a predictable service.
The first article in this series argued that Australia should identify which freight could realistically move by sea rather than keep debating how much ought to. The second found that such freight exists in pieces, spread across businesses with no obvious mechanism for assembling it. The apparent answer to both is simple enough: find enough committed cargo on a corridor and a service becomes viable.
It is less simple than it sounds, because of what “committed” has to mean. A commitment capable of supporting the financing of a vessel is not a letter of intent or a year’s freight budget. It looks more like the take-or-pay contracts used in energy and infrastructure, where the customer pays for the capacity whether or not it uses it. That transfers demand risk from the operator to the cargo owner. Few freight buyers will sign such a thing, and those who might are being asked to underwrite an asset with a working life measured in decades using a contract they can realistically offer for three years. The mismatch does not close easily.
But that problem rests on an assumption worth examining, which is that a ship has to be created before the freight can move. Ships already move between Australian ports. International liner services call here on published schedules, and they run legs between one Australian port and another.
They are not prohibited from carrying domestic cargo on those legs. The Coastal Trading Act provides for it. A vessel not on the Australian register applies for a temporary licence, valid for twelve months and limited to the voyages it authorises. But the application must nominate at least five voyages in advance, with loading and unloading dates, cargo details and vessel details. Voyages must be notified before loading and reported after completion. Where an operator wants to change what was approved, the variation must bear a reasonable resemblance to the original voyage. And the holder of an Australian general licence may lodge a notice saying it could perform the voyage instead.
Set that beside what my research found freight owners want before they will consider sea. Price was not at the top of the list. Sailing frequency was, along with consistent lead times and knowing where the container is. The licensing regime is organised around discrete voyages nominated ahead of time. The freight is looking for a service it can book the way it books a truck. The capacity may already be sailing past. What it cannot readily become is repeatable capacity that a freight manager can plan a supply chain around. One senior respondent described the practical effect more starkly, characterising international lines as confined to positioning moves and one-off voyages. That is not an accurate statement of the law. It is a fair description of how the regime feels to those operating under it.
None of this is accidental. The architecture exists to protect Australian-flagged, Australian-crewed coastal shipping, and the general licence holder’s right to contest an application is the mechanism through which that protection operates. These are legitimate objectives, seriously held. A country with this coastline and this exposure to distant supply routes has good reason to want domestic maritime capability and the skills that sustain it, and recent decisions on the Strategic Fleet reflect that judgement**.
But protection has to be judged by what freight does in response, not only by what it preserves. Where cargo that could plausibly move by sea instead travels thousands of kilometres by road, the protected sector has not won that freight. The protection has kept a foreign-flagged operator from carrying it. It has not kept the freight in maritime transport at all. One senior respondent described domestic options on the east-west run as bare, with some Australian coastal freight transhipping via Singapore. Read it however one likes, that is not the picture of a domestic maritime industry being successfully protected.
The Coastal Trading Act is under independent review, and its first phase asks whether the licensing system remains fit for purpose. That phrase needs a concrete test, and there is one the review could put directly to carriers and cargo owners. Can a service with scheduled capacity between Australian ports offer domestic freight owners something regular, predictable and administratively workable enough to compete with a truck? If it cannot, the answer does not depend on anyone’s general view of cabotage.
The sequence matters. The first test of whether more Australian freight can move by sea may not require another ship. It may require making better use of the ships already sailing between Australian ports.
Susan Oommen has submitted her doctoral thesis at the University of Tasmania (Australian Maritime College) on barriers to shifting road cargoes to sea in Australia. This is the last of three articles drawing on her national-level survey, stakeholder data and the freight mode-choice literature.
Editors’ note: Shipping Australia publishes a variety of articles from several sources for the purposes of information provision and for providing insight to our readers. Publication of a third party-supplied article in our newsletter or on our website should not by itself be viewed either as an endorsement or refutation of any particular viewpoint or policy position by Shipping Australia.
** Shipping Australia is of the view that the current coastal trading regime and the so-called Strategic Fleet policy are both policies that are net-harmful and ought to be cancelled. We support a free-market policy approach in coastal and international shipping.
