A recent media release by the Container Transport Alliance of Australia (CTAA) highlights the issues currently facing road transport in Australia.
Between rising fuel and fuel additive costs caused by global factors & demand, labour & skills shortages, long equipment purchase lead times, supply chain capacity constraints, and fees imposed by third parties, the profit margins and cash flows of container transport operators are being squeezed right around the country. To survive and ride out this wave, costs are being passed to freight forwarders, importers and exporters.
What are the key drivers of the rising costs?
- Increases in diesel fuel prices are hurting, to put it lightly. The Australian Institute of Petroleum highlighted in late June 2022 that the average Terminal gate (wholesale) price last week was 225.9 cents per litre (cpl). This is an increase of 4.83% compared to the previous week, up 7.83% in the last four weeks, and up 16.80% on average in the last twelve weeks. Most concerningly, this is up a phenomenal 41.19%, on average, in the last 12 months.
- Just prior to the May 2022 Australian federal election, road transport operators lost the ability to claim their fuel tax credits for on-road diesel use. This means heavy vehicle users are 17 cpl worse off on top of diesel fuel price increases. The flowing cash flow impact of this will be felt when Q4 Business Activity Statements (BAS) are due.
- COVID and associated issues continue to drive the well-publicised labour and skills shortages, which continue to cause higher costs and operational delays throughout the container logistics chain. Driver availability has dried up and the cost of employing drivers, warehouse staff and all other labour categories has risen.
- Rising fees and levies within the industry continue to place pressure on margins and cash flows. Key amongst these charges are container detention fees levied by shipping lines on importers for the late return of empty containers, and on exporters, if export containers are held too long before shipment.
- Challenges are also being experienced in containerised rail freight with capacity and performance issues present.
- The container logistics sector has also struggled with high container throughput demand during the COVID pandemic due to infrastructure capacity constraints. This has been seen in transport yards, overstocked warehouses, empty container depots at capacity, and congested container stevedore terminals leading to shipping and logistics delays and deteriorating wharf productivity performance.
What does this mean for transport operators, importers and exporters?
The Federal Government has acknowledged the above issues and is considering their position on a number of points. The severity of the challenges and pressure on margins transport operators are significant, meaning that action needs to be taken as soon as possible to help the struggling container road transport sector. The CTAA has made it clear that its members have had little choice but to pass on rising costs to freight forwarders, importers & exporters, and if rising fuel costs continue to be reviewed by operators on a monthly or longer-term basis, the operators would have to absorb much of the increases themselves. This has resulted in operators reviewing their Fuel Surcharge (FSC) more regularly on a fortnightly and even weekly basis, something the industry in Australia has never seen before.
How will these issues be rectified?
Although the challenges in the container logistics sector are only a small portion of the overall economic challenges Australia is currently facing, the CTAA suggested the following as some keys to a solution forming:
- A skilled migration drive facilitated by the Federal Government, with the inclusion of heavy vehicle drivers in the skilled migration list, as well as other labour categories in the container logistics chain which are in short supply
- Greater training and skills development incentives
- A fundamental overhaul of heavy vehicle licensing standards that embrace competency-based learning and testing outcomes to provide a clear path to driver recruitment, training and career progression, as well as an accelerated path through the heavy vehicle licence categories.
Deteriorating global conditions and variables additionally plays a big part in everything that is happening right around the world. A stabilisation of oil prices and international regulatory pressure on shipping lines to control discretionary price hikes are two key areas that need to be addressed to see some sort of relief.
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