ACCC to investigate the enormous profit margins reported by Australia’s stevedoring industry
The nation’s stevedoring industry recorded operating profit margins of 24.9 per cent last year, and that’s prompted interest from the Australian Competition and Consumer Commission.
The competition regulator will further investigate the operations and financial prowess of the nation’s stevedoring industry after its annual monitoring report discovered enormous operating profit margins of 24.9 per cent.
According to the latest stevedoring report, profit margins strongly lifted from their lows of 5.8 per cent in 2018-19 to hit 15-year highs as the nation’s shipping companies saw their combined profits lift from $90.9m in 2018-19 to $481.6m in 2022-23.
And this fivefold increase in profit margins came despite new entrants entering the market which should have introduced more competition at the nation’s ports and put a handbrake on swelling profits.
The Australian Competition and Consumer Commission has not yet reached a view on whether stevedores’ recent higher profit margins, achieved primarily through higher landside charges, are likely to be temporary or sustained but has pledged to further investigate.
“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 commissioner Anna Brakey said.
She said the higher profit margins are likely being fed by higher landside charges (operations facilitating the exchange of containers between land transport operators and container stevedores) which have risen by more than quay side charges (the lifting of containers on and off container ships at berth) have reduced.
Ms Brakey said more work needed to be done by the regulator to discover the reasons for the resilient profit margins at a time when higher shipping and container costs are likely being passed along the supply chain and ultimately to consumers.
“We do see those profit margins creeping up … it is something we are going to look into and do some more analysis and collect more information over the next year,” she said.
During the peak of the pandemic, shipping container charges increased as much as sevenfold, placing extra cost burdens on importers, with many wholesalers and retailers forced to pass those costs on to consumers – all feeding into inflation.
“Australia is a trade-exposed country and many of the goods that we rely on in our everyday lives come through our container ports,” Ms Brakey said.
The latest ACCC report into the stevedoring sector found that supply chains were returning to more normal patterns, and pricing, since the peak of the pandemic with improvements in vessel schedule reliability helping to reduce congestion.
Global shipping container freight rates fell considerably over the course of 2022-23, the ACCC said, and are now largely back to pre-Covid rates. However, while in many cases Australian freight rates had fallen considerably, rates had not decreased significantly for all container types.
One exporter told the ACCC that freight rates for refrigerated containers were not significantly lower in 2023 than in 2022.
Start-ups rising to the green challenge, says KPMG
Start-ups here are increasingly choosing to tackle issues of climate change and green technology, KPMG Australia chief Andrew Yates says.
Firms looking to chop costs with wage cuts, lay-offs
Some 20,000 financial services and telecommunications roles have been shifted overseas as local contractors are given the flick and employers begin to cut costs.