Not Melbourne’s finest hour

Throw into this sensitive equation the idea of whole port privatisation – as undertaken recently in the ports of Brisbane and Sydney, and now mooted for the port of Melbourne – and the political interest that underpins this, then it is apparent that it takes a strong port corporation to keep sight of the latter important fact.

The Port of Melbourne Corporation (PoMC) is an interesting case in point. A key factor in aligning public and private interests to shape a proactive, positive and generally productive port management and development policy is listening to and meeting the requirements of port users. Nowhere does this become more distinct than the task of accommodating increases in ship size and all the more so when your port becomes the weak link in the chain preventing an upscaling in vessel size on a major trade lane or national basis. Such a circumstance, as is the case in the port of Melbourne, can ignite the wrath of cargo shippers – denied the benefits of economies of scale – and frustrate shipping lines who in this day and age of vessel cascading invariably have tonnage at their disposal that they wish to deploy in trade lanes such as those to Australia.

Melbourne is the international gateway for cargo shippers who have a strong interest in securing the cheapest freight rates possible due to the long distance to the international markets they serve. Equally, major lines are known to want PoMC to basically ‘get in step’ with the rest of the world and recognise that prolific vessel cascading is underway; Melbourne has for some time been the roadblock to accommodating larger vessel designs in key East Coast Australia trades.

So, what happened? Going back a few years when PoMC first promoted the idea of a channel deepening project it wheeled out all the arguments in favour of getting on with the job: a need to keep pace with shipping line vessel size requirements; ocean freight rate benefits for shippers; not wanting the port to lose its status as Australia’s premier maritime hub, and so on.

So how are we now supposed to read the recent actions of PoMC in seeking to maintain “the delicate alignment of public and private interests that determines the structure of port management and port development policy?”

Is it fair to say that PoMC’s day-to-day policy and actions may to some extent have been subjugated by the political will behind the desire to privatise the port? The answer has to be yes, with clear examples. Most notable was PoMC’s move to increase terminal rental at DP World’s West Swanson Dock terminal from A$15 per square metre to A$120 per square metre. The thinking here was that the new container terminal concession at Webb Dock, where ICTSI is developing a fully automated terminal, provides a new benchmark in terminal rental costs and that it was thus justifiable to seek a big uplift from existing terminal operators. It was a hugely naïve move. How could PoMC believe that any operator would just sit back and absorb a rental increase of over 750%?

Indeed, the miscalculation behind this move was further highlighted when PoMC backed down and gave DP World what many identify as a sweetheart deal on future terminal rental and one that does nothing to try and level out competitive inequalities.

The two events do little to imbue PoMC with the attributes of enlightened leadership. Add to this its recent reluctance to address initiatives put forward by ICTSI at Webb Dock that seek to facilitate the entrance of vessels of over 8,000 teu and to provide for the simultaneous accommodation, on berth, of two of the now common longer design higher capacity container vessels basically through removing a concrete outcrop from a decommissioned berth, which in any case represents a risk to safe berthing.

History promises to show that this will not go down as PoMC’s finest hour when it comes to delivering timely and objective port management decisions.