(Commonwealth_ The year 2024 has proven particularly difficult for containerized cargo shippers, as global supply chain disruptions exacerbate inflationary pressures. Geopolitical tensions and persistently low water levels in the Panama Canal have destabilized shipping routes, compounding domestic logistics challenges. These disruptions have placed a heavy burden on countries like Australia, where the economic ripple effects have been significant.
In its annual report, the Australian Competition and Consumer Commission (ACCC) identified supply chain disruptions as a major factor contributing to high inflation. According to the report, some Australian importers have been forced to pay between four to 11 times more for ocean freight compared to a year earlier, highlighting the scale of the crisis.
“It’s been a difficult time for businesses dependent on the container freight supply chain, which in turn affects consumers and impacts the Australian economy through higher costs and shipping delays,” said Anna Brakey, ACCC Commissioner. “We have found there are likely market failures in the container supply chain which may warrant a policy or regulatory response.”
Rising Costs and Market Failures in the Supply Chain
The ACCC report sheds light on specific weaknesses within Australia’s container freight system. The market power of stevedores and empty-container storage yards, which enables them to set uncompetitive landside charges for transport operators, is particularly concerning. This market dominance has led to price hikes that significantly exceed any increases in operating costs, thereby burdening consumers and businesses.
Over the last seven years, Australian stevedores have significantly raised their landside charges. Between 2016-17 and 2023-24, real stevedoring industry revenue per container lift increased by $45 (22.6%), while real costs per lift rose by only $15 (8.9%). The disproportionate increase in revenue compared to operating costs underscores the lack of competitive pressure on stevedores.
The situation is equally concerning for empty-container storage yards. Since 2008, these facilities have dramatically increased their fees, further straining the logistics sector. For instance, in Sydney, fees skyrocketed from $3 per container in 2018 to an astounding $112 per container in the first half of 2024.
Impacts on businesses and consumers
These cost increases ripple through the supply chain, raising expenses for businesses reliant on container freight services. Importers and exporters are left with few alternatives, as their ability to negotiate better rates or switch providers is severely limited by the entrenched market power of stevedores and storage yards.The ACCC warns that these uncompetitive practices have far-reaching consequences. Higher operating costs for businesses often result in price increases for consumers. This dynamic contributes to the broader inflationary pressures affecting the Australian economy.
The ACCC report underscores the urgency of addressing these market failures. Without intervention, the unchecked power of stevedores and storage yards threatens to further destabilize supply chains and undermine economic recovery efforts.
The Case for Regulatory Intervention
The ACCC has called for greater scrutiny of the container freight supply chain, emphasizing the need for potential policy or regulatory responses. By addressing the underlying market failures, policymakers could help mitigate the impact of rising landside charges and improve the overall efficiency of the supply chain.
Key areas for potential intervention include:
Market Competition: Introducing measures to enhance competition among stevedores and storage yards, ensuring fair pricing for transport operators.
Transparent Pricing: Requiring stevedores and storage facilities to provide clear justifications for fee increases, tying them to actual operating costs.
Oversight Mechanisms: Establishing independent oversight to monitor pricing practices and prevent uncompetitive behavior.
Infrastructure Investments: Encouraging investment in port and logistics infrastructure to reduce bottlenecks and improve operational efficiency.
The ACCC’s findings also point to the need for collaborative efforts between government, industry stakeholders, and regulators to tackle systemic inefficiencies. By fostering a more competitive and transparent environment, Australia can better position itself to navigate future supply chain challenges.
