Australia's move to export more containerised grain is being met with high handling costs and 'bumping' of export containers by shipping lines for more lucrative cargo - costing farmers $54-$150 a metric tonne in costs.
A special investigation for The Land by the Australian Peak Shippers Association has found supply chain costs amounting to multiple extra charges in many areas for NSW grain farmers.
The APSA looked at what happens to regional NSW grain when it leaves the container packing site and found right through there are hold-ups and threats to export markets from the congested world shipping situation and shortage of sea containers.
The only saviour has been the thirst for Australian grain from Asian countries after northern hemisphere grain supplies were constricted by drought. But the scenario will worsen once the northern hemisphere grain markets come back on full stream, and according to the APSA "threatens the future viability of the containerised grain export industry".
It has called on the Federal Government to hold an inquiry into the shipping industry and shipping charges and create a maritime regulator to ensure the future viability of exporters.
APSA director Paul Zalai said the research showed some of the nation's containerised harvest this season was under threat from being exported and in a worst case scenario some grain farmers may have nowhere to unload grain.
"Due to the lack of capacity, exporters physically have not moved as many tonnes this year as anticipated causing an even bigger carryover of grain stockpile heading into another bumper harvest," Mr Zalai said.
"Packers and transporters have consolidated to reduce risk and exposure to the volatility of the shipping industry, in turn reducing the appetite to move grain which is likely to cause bottlenecks this upcoming harvest, leaving farmers potentially nowhere to unload grain."
The stark warning comes as growers enjoy some of the highest prices ever for grain from canola to chickpeas to wheat and barley. The majority of wheat in Australia is exported by bulk but many grain traders have turned to containerised grain exports.
But they face huge logistical challenges getting grain out of the ports. In one extraordinary instance, farmers' returns are cut because exporters have to pay for a ghost rail shipment in some circumstances at Port Botany.
"Several grain exporters over the last 12 months collectively have been impacted by an estimated additional cost of $US37.5 million resulting in diminished financial returns to farmers and regional communities who are still recovering from years of drought, fire and the pandemic, only to face another economic crisis," Mr Zalai said.
The main areas where unexpected charges occur are:
The research found: "A lack of vessel capacity and equipment (containers) limits exporters' ability to make bookings with any certainty. Exporters making successful bookings face the ongoing rerouting of vessels, port omissions or cancellation by shipping lines causing significant delays to existing booked shipments. The costs for failure to meet contractual obligations is resulting in exporters to be subject to hefty fines from customers for late shipping.
Mr Zalai said that "three of our members collectively paid in excess of US$117,000 in contract beaches in the last three months alone, with others also stating low paying cargoes such as grain are getting bumped off vessels at transhipment ports, for higher paying priority cargo."
Impact on affected grain consignments: estimated cost about $10-$20/mt).
Lack of capacity - Vessel space and equipment:
"Shipping lines are profit driven and are understandably aiming for the best return on their assets. The use of an export grain container by one company for sometimes weeks (or months, considering the movements from the time of empty collection to the time of empty return at the point of destination), does not lend itself as an effective return on investment.
Mr Zalai says: "We are seeing shipping lines make decisions to reposition empty containers back to China for use on more "rate" attractive trade lanes (China/USA for example at about US$15,000/container) placing extra pressure on equipment capacity.)
"Export shipping rates are now sky high and space extremely difficult to secure."
Impact on affected grain consignments $20-$100/mt - pending specific destinations, the further away from China the higher the ocean freight.
Grain exports commonly travel to the port in containers via rail. The above referenced items only add to the inability to secure a train booking with any certainty that the vessel booked will match with the train arrival at the port. Failure to do so incurs excessive double handling costs. Mr Zalai says "trains often operate on a take or pay method, meaning you either use the slot or pay for it anyway even if the slot remains empty. The decision for exporters then becomes whether to double handle the container in Botany and pay for storage for the week or pay for the empty train slot and rail it again the following week. Between three exporters, data revealed in excess of A$2 million in double handling and staging costs was paid over a three month period"
Impact on affected grain consignments $12-$15/mt noting double handling the container and paying for storage is a lesser cost than sending an empty train slot.
Stevedoring performance and industrial relations negotiations, which have impacted most stevedores nationwide during the past 12 months, have had a profound impact on exporters and landside logistics costs, the research found.
"In July 2021, the Maritime Union of Australia (MUA) took protected industrial action at Patrick in Port Botany resulting the stevedore closing most rail windows for regional NSW customers forcing freight to be double handled through third party Sydney metropolitan intermodal terminals, with the containers subsequently being delivered to the port by road.
This type of congestion and uncertainty has caused shipping lines to revaluate Sydney and how they price and offer available equipment and space. Some shipping lines during this period are now omitting Sydney with multiple vessels a month because of ongoing congestion. Between four exporters, a reported A$495,000 was paid in double handling and staging costs over a three week period.
(Impact on affected grain consignments $12-$15/mt cost to regional exporters via additional double handling and storage).
Mr Zalai says exports have only kept up only because of huge Asian demand for Australian grain. But he said the long-term future was stark with the "ongoing viability of the Australian containerised grain sector".
"Despite the adversity faced by exporters, the Australian containerised grain sector has continued to survive this season, primarily due to a northern hemisphere low production season. Asian buyers have little choice today than to buy from the Australian market as there are limited offers in the world," he said.
"What is highly concerning is the ongoing viability of the Australian containerised grain sector if/when the world sees a normalised production season. The sector cannot afford to maintain these inflated supply chain costs to market and compete against Australian bulk shippers or northern hemisphere grain origin offers.
"While many factors highlighted in these case studies are out of the control of our Federal Government, at minimum, immediate intervention is required to review competition protections given to foreign owned shipping lines and to introduce regulation to prevent unfair cost impositions on shippers.
"We do not want government interfering with price setting as we need internationally owned shipping lines to be incentivised to continue to service Australian trade in a free and open market. We do, however, see merit in a review to examine whether shipping line vessel sharing arrangements should be conducted in line with competition laws faced by others in Australian commerce.
"If the government is sold on the need to give shipping lines continued exemptions from the Competition and Consumer Act, then we will clearly need a federal maritime regulator to oversee proceedings to safeguard the commercial viability of Australian exporters and importers. Importantly, a critical reform is required for Australian traders to be protected from unfair pricing regimes imposed by shipping line contracted stevedores and empty container parks.
"We need these entities to negotiate rates direct with their commercial client shipping lines rather than imposing hundreds of millions of dollars in fees on transport operators held to ransom with no option to pay or are denied access to container collection/dispatch facilities.
"We look forward to the prospect of engaging with the Federal Government on a comprehensive review of international shipping and logistics - a necessity to protect against detrimental impacts to Australian business and the broader Australian economy."
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