Australia’s dominant container terminal operators are enjoying surging profits, prompting accusations from the competition regulator they are not subject to sufficient pricing pressure.
The recent highly profitable period for stevedoring companies, which coincides with pandemic-related disruptions to the global container freight supply chain, is also driving up prices for consumers, according to industry groups unhappy with charging rates.
The Australian Competition and Consumer Commission (ACCC) said in a report released on Wednesday that industry profits had rapidly increased during the pandemic years in a sector dominated by multi-port stevedores DP World and Patrick Terminals.
Container stevedoring involves lifting containers on and off ships, making it a crucial juncture in imports and exports.
The ACCC report found that profit margins in Australia’s container stevedoring industry increased to almost 25% in 2022-23, rising from less than 6% before the pandemic.
Profit margins measure the difference between revenue and costs, with any expansion indicating a period of increased profitability. Margins are now at around 15-year highs.
The competition regulator said competition from newer competitors Hutchison and Victoria International Container Terminal (VICT) had not had the desired effect.
“While we have not formed a conclusive view on the stevedores’ profit margins, we are concerned by emerging evidence that the two new entrants of the last decade, Hutchison and VICT, are not constraining the incumbent multi-port stevedores as effectively as we had hoped,” ACCC’s commissioner, Anna Brakey, said.
The ACCC report said it had not reached a view on whether the stevedores’ recent expanded profit margins, achieved primarily through higher charges, would be sustained over the long term.
The regulator said it would scrutinise whether any impediments were contributing to the higher profits and if regulatory responses were warranted.
A spokesperson for Patrick said the industry was characterised by long-term infrastructure investment and fluctuating supply and demand.
“Detailed economic analysis undertaken on behalf of Patrick Terminals shows that across these longer-term indicators, stevedoring industry profitability remains well below both an index of comparable Australian companies and global stevedoring returns,” the spokesperson said.
DP World was contacted for comment.
The container terminal sector is among a select group of tightly held industries that have been able to greatly expand profit margins during the recent pandemic and inflationary period. Australia’s major supermarkets, banks and airlines also expanded margins, raising concerns they profiteered during a period of rapidly rising household costs.
Paul Zalai, the director of the Freight and Trade Alliance representing importers, exporters and other market participants, said stevedoring companies were recording landside revenues through rising terminal access charges.
“Stevedores are laughing all the way to the bank with their unregulated money tap,” Zalai said.
“While it may not be collusion, it is definitely a case of follow the leader with stevedores taking turns to ratchet up the fee on transport operators who have no option but to pay to get access to container facilities.”
Operations at DP World were recently disrupted by a major cyber-attack, as well as prolonged industrial action by port workers.
Zalai said that the high terminal charges set by stevedores, as well as the costs of delays linked to the industrial action, were resulting in higher consumer prices.
“These costs cascade down the supply chain, on the import side it will inflate consumer costs, and for exports, the costs will flow back to regional producers, farmers and local communities,” Zalai said.
