Australian box ports present one of the greatest risks of disruption to Australia’s supply chains. Specifically, the events of the last 18 months, including the surge in trade, have demonstrated that our ports just don’t have the capability to handle upsets.
Submission to supply chain study highlights box port risks
Shipping Australia highlighted this risk in our recent submission to the Productivity Commission’s supply chain study.
There has been lots of disruption at Australia’s box ports over the last 18 months that has resulted in inability to cope with a surge in trade. That’s led to ships being required to stay away from the wharf – for days leading into weeks – as container ports can’t find space for box ships (a pretty significant failure for a container port you would have thought) – and box ports have only been able to work vessels when they are able to get around to it.
And as for a box port’s inability to handle the disruption caused by industrial action – well… you can read pages and pages and pages of material on the Shipping Australia website detailing just how badly container ports have been disrupted by industrial action.
While all those failures are terrible enough (especially when you consider just how vital the box trade is to the interests of Australian families and Australian exporters), if there is a serious incident at one of our container ports then it is potentially catastrophic to Australia’s economic interests.
Some risks cannot be eradicated, only managed
By way of analogy, let’s think about the recent blockage of the Suez Canal for a minute.
Unfortunately, it happened. Inevitably, some might say. The key thing to realise is this: we live in a world of risks and some risks just cannot be eradicated. Only managed.
International maritime logistics as a whole has a certain level of ineradicable risks caused by such things as: the action of the sea, forces exerted by the wind, other weather, corrosion, certain curious effects of hydrodynamics in enclosed waters such as the bank effect, unexpected and unforseeable mechanical failure, and so, and so on. The existence of these risks is no-one’s fault. They’re inherent to the business of sailing giant metal objects across vast distances over massive bodies of the metal-corroding and turbulent oceans.
Recognising that such risks are inescapable and that, inevitably, harm from those risks will materialise from time-to-time, is a key responsibility of management. It therefore follows that a consequent responsibility of management is to identify the risk and prepare to mitigate any harm.
Let’s go back to the Suez Canal. When it was blocked, the Canal authorities responded by deploying mini-diggers on the side of the Canal while they were also mobilising help from the big dredging companies. Salvors were on the scene pretty quickly and, before you knew it, the Canal was unblocked. They also had further back-up plans to unblock the Canal if the early attempts failed.
The Canal Authorities had obviously foreseen the risk (the Canal has been blocked from time-to-time in the past) and they had prepared to deal with it.
Suez Canal incident demonstrated shipping resilience and box port vulnerability
During and just after the blockage, there was a lot of ill-informed and self-interested commentary following the temporary blockage of the Suez Canal. In fact, the blockage actually showed the resilience of global shipping.
The blockage did not put the world economy into a tail-spin and, while there was, of course, a lot of wasted cost and lost productivity, it was a temporary event. So temporary, that experts at the respected maritime analyst, Sea-Intelligence, noted that there was a reducing effect which slowly evaporated with the expectation that the ripples would be mostly gone by early June.
Shipping companies had some tools to manage the situation. Some of their ships will have simply slowed down en-route to the Canal (giving time for the blockage to be cleared before they arrived at the Canal). Some will have increased speed after the blockage was cleared so as to claw back some time lost on the schedule. Yet others will simply have diverted around South Africa. Even if the Canal had been blocked for a long time, ships had several alternative routes from which to choose.
Applying the lessons of the Suez Canal blockage to Australia’s box ports
Of course, the consequences of the Suez Canal blockage for Egypt weren’t great. The country lost out on a huge amount of revenue, incurred costs and lost productivity. And, if you think about it, the blockage of the Canal is a good analogy for what could happen if one of our major container ports become blocked.
The Canal demonstrates what can happen if narrow marine channels are blocked. And, although you can’t see it because it’s underwater, each container port has a long, canal-like, submarine channel that allows ships to enter and leave port. As it is expensive to dig and maintain underwater channels, box ports only tend to have one channel and it tends to be only just big enough to allow ships to enter and leave safely. If that channel gets blocked then the whole port is out-of-action.
Having a box port out of action is a particularly big deal because Australia’s box ports have captured a very high market share. NSW Ports, the private and for-profit operator of Port Botany, for instance, claims a 95% market share on containers into Sydney. In Victoria, the Port of Melbourne also has a near-monopoly over a vast hinterland. It is angling to expand and extend its port and one of the consequences of that expansion, should it go ahead, is that the Melbourne port expansion could potentially squeeze out rival developments in its hinterland. There are container port monopolies / near monopolies in Brisbane, Adelaide, Tasmania and Fremantle too.
So lengthy blockages of near-monopoly box port infrastructure should arouse concerns. Underwater infrastructure could potentially be blocked briefly or for a longer time for a several different reasons.
This could potentially happen for relatively mundane reasons such as engine failure, machinery failure or even just because of bad weather. It could also happen in more extreme scenarios such as criminal activity (some kind of sabotage) or, in the event of some kind of armed conflict, through enemy action.
Ships can sometimes become the centre of legal disputes, although in such cases the ships are normally moved (either under their own power or under tow) out of the way to an anchorage area. However, during the global Hanjin Bankruptcy crisis, there were fears expressed as to what might happen in Sydney if multiple Hanjin ships were arrested.
The private port operator of Port Botany, NSW Ports, is not well equipped to cope with such disruption – Port Botany doesn’t even have an offshore anchorage area – and if multiple ships were to have been arrested during the Hanjin bankruptcy, then there were concerns about the availability of berths for those ships. This blockage scenario did not eventuate because Hanjin ordered its ships to stay out of ports during the crisis. But fears of multiple ships being arrested and blocking up box ports was a very real concern back then. Particularly so in relation to Port Botany because of the lack of an anchorage area to hold a multitude of arrested ships.
It’s time for policy makers to consider the box port risks
It’s time for some serious consideration of the strategic risks that container ports pose to the national economy. Policy makers may wish to turn their attention to the possibility of Australian box ports becoming blocked, potentially for long periods of time.
Because the seaborne-economy is so vital to our national interests, all Australians (exporters especially) depend on the smooth and uninterrupted functioning of our container ports. Unfortunately, our box ports have repeatedly proved that they are not always dependable.
Policy makers may therefore wish to satisfy themselves with some kind of review of box ports so they can know that there are a variety of reasonable options available to ensure that the vital task of shipping will continue with as little interruption as possible.
