A step too far down under?

When it comes in on January 1, 2019, the latest rise — by 73% to A$85.30 — will mark the culmination of an 162% overall increase in infrastructure charges, applicable per loaded container, in the two-year period from January 1, 2017 to January 1, 2019. From the lower base of A$3.45, applicable before the first increase in 2017, Melbourne importers and exporters have been stung by a 2372% increase from infrastructure charges levied by DP World (DPW).

DPW has, since it embarked on the trail of applying regular increases in infrastructure charges, come up with a lot of reasons why it has been necessary to increase these charges. Some of these are questionable and some contradictory.

The news release from DPW announcing the new tier of infrastructure charges for 2019 seemed to recognise that the latest round of increased charges would attract heavy criticism. It said: “We understand that increases in charges and fees will attract some criticism, and that we do appreciate that this will be positioned as an effective doubling of the Infrastructure Access Charge.”

PS is not the first media outlet to point out that this represents much more than a “doubling” if you calculate the increases from 2016 and come to 2372%. The press release also goes so far as to say: “The increase in the Infrastructure Access Charge applied at West Swanson would, for example, add just one tenth of a cent to the delivered cost of an iPhone … quarter of a cent to school shoes … ten cents to a microwave oven and fifteen cents to the delivered cost of a flat screen TV.” No rationale is given as to how these figures were calculated but they are notably all high-value products and of a size whereby a considerable quantity can be put into one container. Australia is a long way from its export markets and where the export of lower value products is concerned — typically agricultural products — it would be a different story with a distinct negative impact. Containerised agriproducts exported from Australia include cotton, containerised grain and meat, with farmers overall exporting 60% of what they produce.

Widespread objections

Objections are also being received from higher up the product value chain. Kingspan Insulation of Melbourne, for example, recently complained in Australia’s Daily Cargo News that port related charges per container in Melbourne amounted to over A$700, while the actual cost of the sea freight rate per container was just A$250!

Diverse industry associations have also been quick to complain. The Australian Peak Shippers Association publicly stated that it believes the situation to be “completely unacceptable, especially as shippers have no direct or contractual relationship with the stevedores and no ability to influence the charges”. The point is further made that these increases are directed at a fragmented sector — much of which is made up of small to medium-size companies and not the shipping lines, who represent a bigger power bloc.

DPW is not alone in implementing infrastructure charges — the other terminal operators have followed suit — but DPW has undoubtedly driven the trend. This latest move has caught the attention of the Australian Competition and Consumer Commission which has moved from its former position of noting the addition of increased infrastructure charges to actively scrutinising them. This is clearly a common sense position given the influence of important factors such as maintaining export competitiveness and the reality that truckers and logistics companies have also recently applied increased charges.

Last, but not least, it is relevant to ask what infrastructure investments DPW is making and how they relate to the services provided. A fully-transparent and objective answer to this fundamental question would provide clarity in what has become a very patchy picture.