Pilbara Ports Authority (PPA) has introduced a new cash grab, er, port charge at the Port of Port Hedland.
Effective from 1 March 2021, the PPA has decreed that vessels exporting iron ore that use the inner harbour of Port Hedland must pay a “Port Hedland Voluntary Buy-Back Scheme” charge.
There is a sliding scale of charges based on a combination of a vessel’s gross registered tonnage and its movements. Charge-liable ships will be slugged once on the way into the port and once again on the way out. Movements inside the harbour are not charged. The cash grab starts at AUD$1,250 for a 40,000 GRT ship and rises to AUD$6,725 for ships over 80,000 GRT.
The overwhelming majority of iron ore carriers will fall into the highest bracket as the port predominately loads capesize bulkers. So that will likely cost each iron-ore carrying ship AUD$13,450 to enter and leave the port.
According to the PPA Annual Report 2020, there were 6,346 vessel movements at Port Hedland in the 2019/2020 financial year. Multiplying vessel movements by the likely charge gives a total indicative revenue-raising figure of about AUD$85.4 million.
Nice work if you can get it.
So what’s it for?
“Profits from iron ore line the pockets of Australia’s biggest miners and are vital to treasury coffers. The fallout is a thick layer of dust that covers everything,” so wrote the ABC in “The port that swallowed a town“, an article about the dust problems in the town of Port Hedland.
Unfortunately for ports, handling of commodities like iron ore is a dusty business even if dust-suppression systems of various kinds are used.
Breathing in dust of various kinds is not good for health. The risks have to be mitigated and one way to do that is to encourage people not to live near sources of dust pollution. The State Government is trying to buy the houses of residents near the Port of Port Hedland through a voluntary buyback scheme.
There’s nothing inherently wrong with that and it is sensible to try to protect the health of everyday Australians who live near the port.
The kicker, as ever, is in the detail.
“The voluntary scheme will be funded by industry, with work under way to finalise the funding mechanism,” the State Government said.
And that’s why the Port Hedland Voluntary Buy-Back Scheme has been unfairly imposed on the shipping industry.
Whatever happened to the “polluter must pay” principle?
It’s a widely-accepted principle around the world that the “polluter must pay“. You do the dirty, you pay to clean up the mess.
Port Hedland has a dry and windy climate. Iron ore is stockpiled by the port. Wind blows dust off the stockpiles and over the town. So the polluter is the port. The port is owned by the State Government. So the polluter is also the State Government.
In a breathtaking breach of the “polluter must pay” principle, the Pilbara Port Authority has shifted the economic burden from where it correctly belongs – on the joint polluters of Port of Port Hedland and the State Government of WA – to a random innocent third party, namely, the ocean shipping industry.
By way of analogy, imagine the State Government owned a supermarket. Trucks call at the loading dock at the back of the supermarket. Imagine further the the supermarket allows lots of plastic waste to blow out of the back of the loading dock and into the empty street. Everyone would quite reasonably point the finger of blame at the supermarket and would hold both the supermarket and the State Government responsible for cleaning up the mess. No-one would hold the truck driver liable for cleaning up the mess made by the supermarket!
But that’s what’s happening at Port Hedland.
State Government can afford to pay
The State Government of WA already massively benefits from the iron ore trade in multiple ways. Firstly, there’s the multi-billion benefits generated from generally increased economic activity.
Secondly, the State Government directly takes a massive cut through the imposition of mineral royalties. In 2019-2020 the iron ore royalty collections in WA stood at AUD$5.43 billion.
Finally, there’s the profits generated by the PPA itself. In 2019/2020 the PPA generated profits of AUD$188.1 million and returned a dividend of AUD$111.9 million for the State Government.
The State Government is racking up profit, after profit, after profit. It can afford to compensate the people whose lives it has polluted.
How long is the charge meant to last? Will it just become another fee?
Documents supplied by the PPA indicate the start date of the charge but they appear to be silent as to the end date. The PPA’s keen to tell the industry when it’s going to start extracting cash and less keen to say when it will stop.
We can try to figure out when any charge should end (bearing in mind that the polluter – the State Government and / or the PPA – should pay). The ABC reckons that the cost of the buyback is about AUD$200 million. With potential revenues from the new charge of about AUD$85.4 million a year, that figure should be paid off in about two years and a few months.
However, governments are slow to turn off a free-money tap. Income tax was originally introduced as a temporary measure by the UK to fight the French Revolutionary War back in 1799. About 222 years later and we still have income tax. So much for it being a “temporary measure”.
In relation to port pricing, there are examples where a port charge has been introduced and has continued for a period of time, before then simply somehow becoming a permanent fixture on the pricing schedule.
Shipping Australia is concerned that, without an end date, this new charge will, for years into the future, simply become a charge that ships are forced to pay even though original reason for levying it has long been forgotten.
Shipping companies will not be able to pass on the charge
Although remembering that shipping companies should not be paying this charge in the first place, it is highly unlikely that shipping companies will be able to pass on the costs.
Iron ore carrying ships are engaged by the operators of steel mills in other countries and it is those steel makers who have a commercial relationship with the miners of iron ore in Australia. Accordingly, ship operators cannot pass the cost of the charge to iron ore miners. Ships, meanwhile, have no choice as to whether or not they go to Port Hedland – they have to go to the port to pick up the cargo.
“It seems that the ship is just an easy target for this breathtakingly outrageous charge,” said Shipping Australia CEO Melwyn Noronha.
“What can we say? It’s greedy, unfair and unjust… and it’s just another day in WA”.