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Melbourne’s port plan contains disruptor

Melbourne’s port plan contains disruptor

The emerging third stevedore at the Port of Melbourne has complained that the new private equity owner of Australia’s biggest container hub is “unduly focused” on legacy operators, who it claims are favoured when it comes to both rents and infrastructure investment.

In a combative submission to the Essential Service Commission’s Market Rent Inquiry, Victoria International Container Terminal (VICT) delivered a compounding slate of criticism of post-privatisation operation of the port, where management is accused of concentrating on revenue flows at the expense of access and efficiency.

The third operator’s bold submission asserted there are further profound shifts ahead in a Victorian container business that was once shared in cyclically unequal measure by the incumbent east coast stevedore duopoly, Patrick and DP World Australia (DPWA).

VICT told the inquiry that since it started business in 2017 it had accumulated a 20 per cent share of the volumes that enter Australia’s biggest container port. It then predicted that its market share would hit about 30 per cent “within the coming six months”.

That can only mean that VICT is on track to lure another high-volume contract or two from the port’s legacy operators. If recent trends hold true, the biggest loser could be DPWA, whose local and national market share has been under pressure over the past 12 months or so.

Whether that promise is fulfilled or not, VICT is already by leagues the most successful of the third stevedores that were invited by port operators around the nation to add competitive tension to a duopoly that had, ironically, already been made more effective and efficient by the reforms that flowed from Chris Corrigan’s waterfront wars.

While trumpeting its success, VICT complains that its sprint to market relevance could be forced into stasis and maybe retreat by Port of Melbourne management, which is “entirely focused on the needs of the old port”.

Before we get into the detail, it must be noted that VICT’s submission pretty much ignores one of the hot-button issues that triggered the government review in the first place – the ballooning land-side fee flow that arrives mostly in the form of terminal infrastructure fees.

Instead, central VICT’s submission lands heavy with complaint about the discordance between the rents paid by the three operators; a proposed new rail shuttle that would favour incumbents and expose the inefficiencies of the distance between the new and legacy terminals; the user-pays mechanisms that are used to pay for new port infrastructure; and the fact that its Webb Dock operation has still not been delivered the asset that was promised by the terms of the controversial tender that delivered it purchase on Melbourne’s waterfront.

To understand VICT’s frustration, you need to appreciate the geography of the Port of Melbourne’s now divided estate.

The “old port” orbits wharfs at Swanson Dock. Named after Victor Swanson, the chairman of the Port of Melbourne’s predecessor operator, the Swanson dock was opened in 1969 and sits on the north bank of the Yarra River.

This means that the “old port” sits on the city side of the West Gate Bridge. So far that has not proved too much of a problem. But VICT has taken a long bet that it will be soon enough. And that should entrench the competitive advantage of its Webb Dock site, which sits on the Port Phillip Bay side of a bridge of subtle beauty that might soon become a barrier between the “old port” and a new breed of very, very big ships.

The VICT thesis is that a new generation of super container vessels will become ever more ubiquitous in international shipping fleets, and it claims (to dispute from the Swanson Dock operators) that its bay-facing terminal is the only one capable of dealing with them.