By Susan Oommen*
This is the first article in a series of three.
Australia keeps arguing about how much freight should move to sea. The more useful question is which freight could.
For as long as coastal shipping has been debated in this country, the argument has been conducted in aggregates. What share of the national freight task moves by sea. How far that share has fallen. What it might be under a different policy settlement. My earlier series argued that the barriers holding coastal shipping back are institutional rather than operational. This article starts somewhere else, with the freight itself.
Let’s begin by conceding the obvious. Road carries a substantial amount of Australia’s non-bulk freight because road is genuinely better at most of it. Door to door, no handover, no schedule to meet, no port to negotiate. For a great deal of what moves on Australian highways, no coastal service, however well run or well-funded, would be the rational choice. Advocacy that implies otherwise is easy for a freight manager to dismiss and is dismissed.
But not all freight looks like that. Freight economics has long recognised, and my research confirmed, that a minority of the task has a distinctly different profile. It moves in large volumes. It is not especially valuable per tonne, so the cost of capital sitting in transit is low. It travels a long way between two points that both happen to sit near a port. And it is not urgent. For freight of that description the calculation changes, and the changes are not marginal. This is the contestable freight, yet Australian coastal shipping policy has rarely begun by systematically identifying it.
That omission has consequences. Because the debate is conducted in aggregates, policy gets designed for freight in general, which means it gets designed largely for freight that was never going to move. Subsidy, regulatory relief and promotion aimed at the whole task will always look expensive relative to the response, because much of the task is structurally unsuited to coastal shipping. The same effort aimed at the contestable slice would look quite different.
The corridors are not a mystery. The long runs between eastern seaboard capitals and the east-west route to Fremantle carry the distance and volume characteristics the theory calls for. But identifying the freight is necessary and not sufficient. The stakeholders in my research who move cargo daily were consistent about what a coastal service would have to deliver before they would consider it, and price was not at the top of the list. Sailing frequency. Consistent lead times. Knowing where the box is. A cheaper service that sails when it sails will not win contestable freight, because the freight is only contestable if the service is predictable enough to plan around.
Then comes the harder part. Even where the cargo suits and the service is credible, an individual shipper may not have enough contestable volume on a particular corridor to support the economics of a service call. The freight exists, but it exists in pieces, spread across many businesses that have no particular reason to talk to one another. Assembling it is a different problem from finding it. And the stakeholders in my research who would have to do the assembling were among the least likely to describe it as a problem at all. That disagreement is the subject of the next article.
There is one thing, though, that any business can do without waiting for anybody else. Take your own freight and sort it. Which movements could realistically go by sea, on which corridors, against what service standard. Most will not qualify, and that is not a defeat. It is the point. Nobody can aggregate demand that has not been identified, and an industry that has not done the sorting is in no position to answer the aggregation question when it is finally asked.
Coastal shipping’s difficulty has never been that Australia has too little freight. It is that we have never been willing to say which freight we meant.
*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 first of three articles drawing on her national-level survey, stakeholder data and the freight mode-choice literature.
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