To Boldly Go…

Speaking at the 3rd Intermodal Asia Conference held in Brisbane in October, Capt Setchell firmly outlined the case for a third force in container handling in Australia, a force that will effectively break the duopoly currently maintained by P&O Ports/DP World and Patrick/Toll.

After tracing the evolution of the Australian container handling industry Capt Setchell concluded “the barriers to entry are now substantial”. And that “only an experienced operator with deep pockets could contemplate entry into such a protected market and hope to obtain an acceptable return. With a combined market value in excess of A$30bn,” he elaborated,”the two terminal operators today can buy anything and almost anybody. “It is about the power of money now,” he stressed. “The power of Goliaths.”

Clearly,though,this does not phase Capt Setchell who has forged an alliance with Manila-based International Container Terminals Services Inc (ICTSI), via which his organisation and ICTSI have formed Australian International Container Terminals Limited (AICTL), an entity whose goal is to establish a significant presence in the Australian container handling market. AICTL initial objectives are the new container handling concession now being offered in Brisbane and the forthcoming new concession in Sydney where existing terminal operators have been excluded from the bid process.

Perfect Timing Capt Setchell strongly rejected the view that the market was too small for a third force and went on to say that even relatively short-term forecast growth pointed to the need for this new competitive alternative. “Today,we have a market of approximately five million containers,” he explained. “Some say too small for a third operator. I say not.

“With both operators earning A$100m pre-tax profits and experiencing massive returns on capital invested,” he continued, “there is a clear need for another competitor or two. “This won’t send the incumbents to the wall.

“Even if decisions are made today to change the status quo, it will be another five years before another competitor has an opportunity to secure a competitive position. At current rates of growth, the Australian market,”Capt Setchell underlined,”will be approaching 10m teu by then.”

This means an annual throughput in Brisbane in 2011 of 1.3m-1.4m teu, 2m teu in Sydney and Melbourne even more.

“Such growth,” said Capt Setchell, “means that the impact of a third entrant on the existing terminal operators will be small – even if they respond with more modest tariffs and the accelerated introduction of more technology.

“As things are now,” he concludes, “the timing for change is perfect.”

And what will it bring? Innovation, greater productivity,lower prices,more permanent employment, greater choice, market stimulus, real market forces – all these positives according to Capt Setchell.

The game is thus well and truly in play and while Capt Setchell,in a former “life”managing director of P&O Ports, is seen by the existing incumbents – P&O Ports/DP World and Patrick/Toll – as having moved from the position of gamekeeper to poacher, he clearly has a well thoughtout vision of a Brave New World.

A world where, as he puts it, the consumer receives a competitive service and not the current one where the service provider determines what he will give the customer.