Charges Based on Market Power

charges based on market power

With Sydney stevedores still charging each truck into the port an ‘Infrastructure Charge’ as a well as time slot fees and empty container return fees, businesses like PJG Transport are having to deal with what are, charges based on market power. Each movement at the port ends up costing the client over $130 every time a box is collected. 

“There’s charges when you are late and then charges when you are early,” says Peter Gatt, one of PJG’s owners. “They can call an ‘unforeseen event’ any time they want. In that event, you will miss out on your box. Then you have to get another time slot. We can end up paying over $3000 each month for extra charges, if we have a bad month.”

 

charges based on market power

This is where the skills of a good allocator come in. Lining up all of the jobs and trucks to get them arriving as close to the right time as possible, as regularly as possible. These kinds of issues, in finding the right people to handle jobs like this, are occurring for PJG as the operation grows. Peter has calculated the operation can grow to up to and run efficiently at around 25 trucks if the personnel they bring in have the correct skill levels and industry knowledge. 

On the ground in the Enfield Intermodal Logistics Centre the operation employs an allocator, a planner, a couple handling general administration accounts and invoicing, plus a fork lift driver, who also breaks down loads from containers. 

Linx, who run the intermodal facility, will audit the business for the operational safety systems and procedures. Linx rent the facility from Sydney Ports and uses Pacific National and its own trains to haul containers back and forth to the Port. All of the containers PJG put on the train at Enfield are loaded for export. Empty containers return to the port by road. The idea, at all times, is to minimise the runs where the truck does not have a container on board. 

“Our biggest issue in this part of the industry is the weather,” says Peter. “We can’t return empties when it is windy, because the yards are fearful of an empty blowing onto a truck. Normally, they will only be shut for a day or so. It’s just an inconvenience, because you are driving down there and then they close while you are on the road. 

“Of the three yards we have to work with Hutchison and Patrick will still work in some high wind, but DP World will shut straight away because the trucks drive down between the stacks. It’s an OHS issue, which is fair enough.”

The continuing rise in these infrastructure charges based on market power from the stevedores over the last couple of years has grown from an average of just $2000 a week, to over $5500 a week, with the possibility of further increases to come. This is an amount which the business has to carry until it can be added to customer invoices. 

 

charges based on market power

In essence, the transport operators are subsidising the stevedores’ inefficiency, paying a charge to do business with them. From the point of view of the road transport operators, if it is an ‘infrastructure’ charge, then it should be the shipping companies who foot the bill and not the service providers who distribute the containers. 

This ongoing debate has caused a lot of bitterness in the relationships around the ports. The way the small transport companies have to pay to do business, while the large global shipping operators and global port operators do not, illustrates the unequal power balance which exists in the ports of Australia.

There are a large number of operators running boxes in and out ports. This is not an industry sector which is dominated by the big boys. there are some operations which are major players, like Qube and ACFS, which runs a joint venture with Patrick, but most of the containers leaving the port gates are on the back of trucks in smaller fleets, who struggle with the charges based on market power.

The reason for the proliferation of smaller fleets in this sector is the need for high service levels by the end customer, service levels the larger national operators find difficult to maintain. The good relationships and that personal touch is appreciated by the importers and exporters whose business depends on a smooth supply chain. 

 

charges based on market power