Australia lags behind the rest of the world, including New Zealand, in being able to efficiently handle modern, large container ships. This is a growing problem for our economy and global competitiveness.
Given about 98 per cent of Australia’s trade travels by sea, it pays to be aware of and responsive to global maritime industry trends.
Container shipping is measured in TEU – the equivalent of a standard 20-foot shipping container.
Ships with capacity to carry almost 10,000 TEU called at Australian ports in 2019, breaking new records just months after claims such ships were decades away from coming here.
But Australia is missing out on the competitive advantages available through the greater economies-of-scale of even larger vessels.
With ships of well in excess of 20,000 TEU, twice the size of what can be accommodated in Australia, now trading between Asia and Europe, shipping lines are increasingly cascading their smaller ships into markets such as Australia.
Port of Tauranga in New Zealand is handling ships of 11,500 TEU. These New Panamax vessels of 10,000 to 14,000 TEU – just over a decade ago considered the giants of the container shipping world – are now the workhorses.
Analysis released in January 2019 by respected economists HoustonKemp identified concerns about accommodating ships of this size in Australia.
Ports here face a variety of challenges related to the height, depth and width of these larger ships. There are also flow-on challenges related to servicing them in a country historically reliant on trucks.
The experience overseas is that big ships require long trains as part of an efficient landside operation.
Lloyd’s List Intelligence found last year that, out of 440 new container ships for completion in 2019, just 30 had capacity for between 3,000 TEU and 11,000 TEU. The rest were either much bigger than what Australia can handle or much smaller than what it does now.
All the evidence shows that global shipping has moved beyond 11,000 TEU. Ultra Large Container Vessels (ULCVs), those with capacity of more than 14,000 TEU, already make up more than half of all newbuild capacity.
All of that capacity will bypass Australia. At the other end of the scale, ships with capacity of less than 3,000 TEU are being ordered at nine times the rate of those 3,000 TEU to 11,000 TEU. These ships are too small for Australia’s major ports.
Shipping lines are deploying ULCVs and New Panamax ships as the hubs, and the sub-3000 TEU ships as the spokes. Australia is stuck in the middle.
The cost benefits of these ULCVs – which replace up to three conventional container ships and steeply reduce the slot cost, the per-unit cost of freight – represent a compelling proposition for shipping lines.
But for the supply chain savings to be made, ports must be able to handle these large vessels and, most importantly, efficiently.
Ports in Europe, East Asia and North America have responded with radical infrastructure investments.
Australia has been in the slow lane. HoustonKemp points to three key factors in servicing bigger ships.
The first is the high cost of creating and then maintaining channel depth.
The second is that wharf side investment needs to occur to ensure the infrastructure can withstand the stresses of larger volumes. Bigger ships require larger and heavier equipment, especially with increased automation.
The third factor is on the landside, with an emphasis on integrated and uncongested access to the national rail and heavy vehicle road networks.
HoustonKemp emphasises the need for longer rail sidings, ease of access to intermodal facilities and the benefits of trains longer than 1.2km.
The clear finding is that ports will be more competitive and deliver the greatest economic benefits when the sum of these costs is lowest compared to an alternative capacity expansion.
Australia’s trade performance hinges on solutions to this problem.
Port of Newcastle is currently progressing a $1.8 billion Newcastle Multi-purpose Deepwater Terminal project.
With a groundswell of industry and political support for the project, the port will soon be in a position to provide a superior option for customers.
Subject to the removal of the $100 per TEU targeted tax on containers through Newcastle, PON is ready to invest $1.8 billion in the very type of infrastructure needed to address these capacity constraints.
Other ports will need to do the same. With a level playing field, shipping lines and Australia’s internationally-trading businesses can make their own choice as to the best supply chain solution for them.
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