Shipping Australia welcomes the news that industrial relations woes may be over (well, for now at least) at one of our major container terminals.
DPW Australia earlier this week informed the industry that it had finalised its Enterprise Bargaining Agreement, that its terminals are operating normally and without berthing delays.
This is great news, really, it is.
Much more to current events and container logistics woes
However, when considering current events and the container logistics system, there is so much more to consider than that one snippet of information.
For instance, it has also been reported to Shipping Australia that, in some cases, there has been a day to a day-and-a-half wait time at one of the DP World Australia terminals.
Now, before anyone writes in to complain, there could be several valid reasons why the terminal is reporting “no delays” in berthing and why in some cases it has been reported there is a wait time. Logistics is a complicated business and there can be reasonably held, but differing, interpretations of a given set of circumstances.
There are several container terminal operators
Remember too that DPW Australia is just ONE of this country’s several container terminal operators.
Multiple shipping lines are reporting that there are waiting times of anywhere up to seven days at Patrick terminals in Sydney. In September last year that delay stood at 21 days.
Meanwhile, there is the vexed issue of necessary infrastructure upgrades. New cranes are being installed at Patrick in Sydney which will boost performance. That is, of course, welcome.
Unfortunately, it also means some berths will be out of use for some time while the terminal operator installs the crane. A temporary reduction in capacity, unfortunately, means more delay.
Local berths and global issues
It should also be remembered that ocean shipping is a global industry. Ships sail in a loop – they call first at various other countries, then at seaports in Australia, and they then call at those other countries again.
Delays in one country throw vessels off-schedule right around the loop. So what happens on the other side of the ocean may have profound effects here in Australia.
Shipping lines are reporting astonishing delays around the world. Ships are being delayed in South East Asia, the U.S. (due to congestion) and in New Zealand. There is a particularly severe problem on the other side of the Tasman – there are delays of about 20 days in New Zealand. This is causing knock-on effects here in Australia.
Even if the ships go fast in an attempt to catch up, they lose time on their schedules. If there is no berthing window available when the ship arrives, then the ship has to wait until it can be berthed.
Incidentally, it is an important point to note the careful choice of terminology. When the container terminal operators say there is no delay in berthing, they mean that if a ship arrives on-window then there is no delay in getting the ship berthed.
If the ship arrives off-window because of nearly three weeks of delay in New Zealand then the ship likely won’t be berthed immediately. It will have to wait. But, according to the container terminal operators, that’s not a ‘delay’.
Readers will, we are sure, appreciate the subtle difference between “waiting” days for a berth and being “delayed” for days for a berth.
So while there might not be queues of ships lining up off the coast waiting to go into a given port or to a given container terminal, it does not mean that the congestion does not exist.
None of these are problems of the ocean shipping industry’s own making.
Costs of delay
It is clear is that the cost of delay for a ship is massive. Based on recent, publicly available figures, the current one-week cost of a 4,000 to 5,000 TEU ship can be about AU$443,734**.
Ocean shipping companies have been observed to cope with the challenge of delays in different ways.
Some have, in the past, opted for surcharges. Some opted to skip a port or reduced the frequency of calling at that port (e.g. call every other week instead of weekly). Some have, in the past, changed port rotations. Some may decide not to choose any of these options.
Such adaptations to difficult circumstances by shipping lines has boosted the resilience of the Australian supply chain. Ultimately, this means goods continue to be delivered to supermarkets and remain available for everyday Australian families to buy.
Remember, in a free market, it is up to shipping companies to individually decide how they will structure their operations.
Container logistics doesn’t work without containers
Without containers there is no carriage of containerised freight.
The rapid processing, unpacking and return of containers therefore needs to be prioritised. If there were to be little to no cost for consignees to remain in possession of containers, then there would be little incentive for containers to be returned to ocean shipping lines.
Containers would therefore not likely be returned to ocean shipping companies in good time.
If containers are not returned to ocean shipping companies, then the whole logistics system will quickly grind to a halt.
We must always remember that the shipping container is usually (but not always) the asset of the ocean shipping company. It represents tied-up capital that could otherwise be put to different, and perhaps, higher value use.
Shipping companies are entitled to decide for themselves if they want to charge, or if they do not want to charge, for the use of that asset. They are also entitled to charge daily hire fees to a third party who has possession of their container. Or not, if they don’t want to. It’s up to them.
Container hire of containers is a commercial matter between the shipper and the carrier. It makes up part of their carriage contract, so therefore shippers should consider the full cost of transport when choosing a carrier.
If there are any problems, individual users of ocean shipping services can also, if they want, talk to their carrier to discuss any particular term or aspect of the carriage services offered to them or which they have bought.
Ocean shipping companies exist to ship freight
It should also be noted that shipping lines are not in the business of container farming. They are in the business of freight transport. For shipping companies, container rental invoices are not a sign of successful revenue generation – they are a sign that something is going, or has gone, wrong.
Container rental income is a sign to ocean shipping companies that they need to get their containers back from whoever has them and to get the boxes back into circulation.
Capacity to de-hire of containers
Of late there has been a lot of discussion about the problems of de-hiring of containers especially when it is perceived that container parks may be near, or at, capacity.
It is now clear that, despite all the problems, there is capacity in the system… it’s just that currently there’s not a lot of spare capacity during weekday office hours.
Ocean shipping works 24/7. The land transport industry could greatly help itself by extending working time beyond office hours and over the weekend.
After all, if ocean shipping carriers have adapted to current circumstances, then so too can other types of carriers.
Incidentally, as we have previously discussed, ocean shipping lines are deploying sweeper and extra-loader vessels to Australia, at a high financial cost, to help clear the empty container build-up.
Free market in container shipping
Overall, in a free and highly competitive market, it is up to each shipping line to individually decide how it wants to structure its business and its service offerings.
Similarly, no-one is forcing any one person to do business on a given set of terms with any particular shipping company. It is up to users to decide if they will accept or reject the opportunity to do business on a given set of terms.
Misinformation and propaganda
Shipping Australia is saddened to note that there are some in the supply chain who have produced aggressive disinformation and propaganda on the current state of the container logistics system in response to what should be regarded as good news from container terminal operator DP World Australia.
That mis-interpretation and subsequent commentary on the current issues in the container logistics system is fundamentally misleading and wrong.
Editor’s Note: this article was corrected on 01 March 2021. Unfortunately, we made an error in describing the figure of AU$443,734 as a one-day cost. It was, of course, a one-week cost. Incidentally, it should be noted that the one-week cost for a 4,000 to 5,000 TEU ship is based on several variables, not least of which is the passage of time. Past and future versions of this figure may well be quite different from the number given here.