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Sunday 3 June 2012

Australian shipping revitalisation...It's desirable but unachievable.

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The Australian Government wants to revitalise the shipping industry to help with what the transport minister describes as an immense freight task with the resources boom. Currently there are five bills making their way through the parliamentary process. These bills include substantial changes to existing coastal shipping legislation and tax incentives for Australian ship owners and operators.

As an island continent I would personally love to see Australia's shipping industry revitalised however I believe the governments efforts are focused on the wrong things and with the shipping industry struggling financially, they are completely mistimed. 

As a consequence of the governments reforms, on Friday night Hoegh Autoliners announced to the market they are suspending their Australian coastal service. They are not the first carrier to do so however Hoegh were one of the largest RoRo operators providing this extremely important service. To my clients, who ship heavy and wide mining and construction machinery, which is difficult and extremely expensive to move via road and impossible to rail, this is a real blow and I suggest creates another cost impost on the mining industry. For the road using public, this means that suddenly much more wide, heavy and slow moving freight will be hitting our highways creating even more pressure on the road network.

In essence the government is wanting to create a broad range of incentives to companies willing to invest in rebuilding the shipping industry. They are also making it more costly and difficult for foreign owned carriers like Hoegh, to participate in coastal trade. So to any Australian company brave enough, in competitive terms and in theory, you should have a pretty good chance of building a viable business with government legislative support.

That is of course if as a ship owner you can overcome a few other obstacles to operating in Australia such as:
-Financing the purchase of suitable multi-purpose ships. Currently shipping financiers globally are simply not lending much. This is because global charter rates are very low and the value of ships in general terms has dropped about 30% thus weakening any financiers security position.
-Stevedoring in Australia is still currently far less efficient than other countries and in itself creates a significant cost burden on any operator. Recently MISC, the Malaysian owned shipping line, withdrew services from Australia citing inefficient waterfront practices as one the main reasons for making their Australian service unviable.
-Very high salaries and wages for Australian seamen compared with labour from other countries.
-The market being able to accept what will need to be very high ocean freight rates as coastal traders will not have the benefit of revenue from international cargo like foreign operators do which effectively subsidises coast freight rates.

We seem to have a short memory. Australian National Line (ANL) used to be our national carrier and in it's day, owned and operated good multi-purpose vessels internationally and coast-ally but some years ago it was sold by the government to the French owned CMA CGM. It was sold because financially it couldn't deal with these very factors. Apart from some intended tax and depreciation relief the legislation contemplates, I can't see that anything has really changed or changed enough to allow an Australian shipping industry to take root successfully again.

From my perspective to achieve the governments goal of shipping helping Australia with it's freight task they should be making it easier, not harder, for foreign operators. Australians need to face the reality that our labour costs here are prohibitive and will remain so to the shipping industry. Further waterfront labour reform is needed to help make our stevedores deliver worlds best efficiency thus making servicing this country more attractive.

If these things are done then shipping will be able to greatly help the Australian freight task but if not, then this humble shipping bloke really can't see anything changing except for there being alot more heavy traffic taking to our roadways.

All for now,

Brad Skelton

The Shipping Bloke