NSW Ports CEO Marika Calfas puts shipping disruptions in context, explains the importance of protecting our industrial land and wishes everyone a safe and happy holiday.
With the Christmas period upon us, it’s incredible to realise that 2021 is almost over.
As an island nation our ports have always been our gateways to the world, moving 98% of Australia’s trade volume by sea. With the pressures of the Covid-19 pandemic and increased consumer goods purchasing, awareness of the role of our ports and supply chains in supporting the nation’s economy and the lifestyles of Australians has grown significantly.
Through the latest lockdowns, Port Botany and Port Kembla have remained resilient, operating 24/7 to service businesses and the community and keep our economy moving.
Global Disruptions and Shipping Costs
While in FY21 Port Botany handled record container volumes of 2.7 million TEU, it is important to recognise that Australia represents around 1% of the 800 million TEU per year handled globally. As a small and geographically remote market, we have felt the effects of global issues such as global container shortages, shipping disruptions and increased ocean freight rates. This has been compounded by local disruptions such as industrial action.
Some international ports have had substantial numbers of ships waiting to enter their ports throughout the year. Australia has not experienced such widespread delays. However, the increased global demand for goods, combined with global disruptions due to Covid-19, has resulted in a shortage of shipping capacity, leading to higher costs for ocean freight transport all around the world. In Australia we have seen ocean freight rates increase by around 400% from the levels prior to the Covid pandemic. [MC1]
Ocean freight costs are typically the largest contributor to total freight costs. Whilst the exact proportion depends on the origin and destination of the container, for many imports via Port Botany ocean freight rates now comprise about 80% of the delivered cost of an import container (up 20% from pre-Covid). The next largest cost component is landside transport costs.
Review of Maritime Logistics Systems and Supply Chains in Australia
Whilst the current shipping disruptions and higher ocean freight costs are a result of global influences, in Australia we need to focus on ensuring our domestic supply chains are as efficient as possible. This requires all parts of our interconnected supply chain network to operate efficiently through investment in supply chain capacity, minimising disruptions, improving technology, effective land use planning and streamlined regulatory structures.
In this context, the Productivity Commission has recently been tasked to review the maritime logistics system and connected supply chains in Australia. We encourage this review to consider the interconnected nature of supply chains and the entire spectrum of opportunities for improved efficiency and resilience.
Industrial Lands Review
A significant contributor to achieving efficient supply chains is through effective land use policy.
Protecting industrial lands is critical for the productivity of Sydney’s freight and logistics systems, and to ensure we build a city which delivers for the people of New South Wales and its future generations.
The discussion of land use and the importance of industrial lands is live in New South Wales at present, as the Greater Sydney Commission conducts a review of the NSW Government’s Industrial and Urban Services Land Policy.
Historically, Sydney has witnessed a significant reduction in industrial land area. Today, only 4% of lands in Eastern Sydney and 7% of lands in Greater Sydney are industrial lands. In a future where technology is advancing quickly and freight demand is expected to increase in NSW at a rate faster than population growth, the impact of poor land use decisions now will be felt even more acutely in the future. A whole-of-system policy to improving, and securing for the future, Sydney’s freight and logistics productivity is needed.
It is critical that we work collectively as an industry to ensure the small amount of remaining industrial lands in Sydney are protected from rezoning and urban encroachment. To this end, NSW Ports is a signatory to a joint letter from a coalition of industry leaders, urging the Greater Sydney Commission and other relevant political stakeholders to retain and protect Sydney’s industrial lands.
Encouragingly, in its December Project Update, the Greater Sydney Commission confirmed that industrial and urban services lands play a critical role in supporting Greater Sydney and that a ‘retain and manage’ policy is needed for the protection of industrial lands in Greater Sydney. This policy should maximise the productivity of industrial lands and optimise productivity over competing land-uses across Greater Sydney.
We welcome the Greater Sydney Commission’s preliminary findings, as outlined in the December Project Update. These preliminary findings will now be subject to stakeholder engagement in early 2022 before the Commission finalises its recommendations.
You can help maintain awareness of this important issue. Please contact us if your organisation would like to lend its support to the protection of industrial lands.
Port Trades – An Economic Indicator
Trade volumes through our ports continue to reflect pandemic and broader economic trends. As we reach the end of the year, we have compared January to November 2021 data with the same period last year.
Bulk grain exports – these increased from 15,000 tonnes last year to 3.3 million tonnes in 2021, reflecting the strength of the grain market this year following a period of significant drought. The containerised export of grain also increased 662% on last year.
Home improvements – being forced to stay at home during lockdowns continued the trend of home improvements and renovations, as spending shifted away from travel and services. Imports of whitegoods were up 44%, while a strong residential construction market underpinned the demand for building material imports, up 13%. Electronics imports (including computer monitors and TVs) also rose significantly (52%) this year, in line with home furnishings improvements as well as working from home set ups.
Food and beverages – Australian consumers mirrored the global lockdown trend of increased spending on food and beverages, with imports up 5%.
Fuel – The lockdown in July 2021 due to the Covid-19 Delta variant meant that travel was restricted, which translated into slightly lower imports of refined fuels (excluding aviation fuel) down 4% on last year. The Delta variant had the most significant impact on commuter movements, as working from home measures and travel restrictions meant that unleaded fuel imports (i.e. ULP 91, 95, 98) dropped 8% compared to the same period last year.
Bulk liquid diesel fuel imports remained steady, with only a 1% variation from last year. Freight activity did not slow down during lockdowns and the agricultural and mining sectors also remained strong – which has supported the volume of diesel imports used to fuel trucks, trains, mining and farm machinery.
Imports of aviation fuel dropped by 50% as air travel was significantly disrupted. January to March 2020 saw 3 months of regular travel, followed by several lockdowns restricting flight activity. While international travel resumed in October of 2021, most of the aviation fuel imported in 2021 was for domestic travel interstate.
As 2021 comes to a close, on behalf of everyone at NSW Ports, I’d like to wish you all a safe and happy holiday season. NSW Ports looks forward to continuing to work with you in 2022, to service the port trades that underpin the NSW economy and support the people and businesses of NSW and Australia.
Marika Calfas
Chief Executive Officer
NSW Ports