Debate rages over how to fix current problems and plan for the future in Australia’s freight transport industry. Joe Parkes examines the big picture and looks at how some exporters tackle time versus cost pressures in getting their goods to market.
In a business where transporting products to market intact and on time is of paramount importance, there are mounting frustrations in some regions about rail corridors which don’t link directly into entrepôts (distribution centres), air carriers who can bounce perishable on-board freight to accommodate passengers, sea ports whose channels aren’t deep enough for new-age mega-ships, and road freighters caught in traffic gridlocks or lagging because updated technologies have been rejected by bureaucrats.
Exporters are demanding to know what is being done to get the system working better before Australia’s freight task doubles over the next 20 years.
Stuart St Clair, CEO of the trucking industry’s peak body, the Australian Trucking Association (ATA), says things are bound to improve for both road and rail carriers. But it won’t be easy.
There are 750 separate agencies across the nation responsible for controlling Australia’s 800,000km of roads—representing a $100 billion asset—and St Clair says this army of “pavement asset protectors” believe the best way to protect the roads system is “to have no one driving on it”.
“The wealth creation of this nation depends on all of us getting a good result from the current moves for change,” he says. He isn’t alone in calling for change.
Federal Transport Minister, Warren Truss, “cannot believe” that there’s still the situation in Australia where a vehicle approved in one state as meeting design requirements cannot operate in another state. “We must operate as a single national market,” he says.
Australia’s transport and logistics sector represents nine percent of GDP, almost $10 billion and about double the contribution of the agriculture sector. It employs more than 400,000 people and, says Truss, plays a key role in achieving domestic and global trade objectives.
The Bureau of Transport and Regional Economics (BTRE) forecasts that in the period up to 2020, domestic non-bulk road freight will double. And perhaps just in time, the Council of Australian Governments (COAG)—the peak combined body of federal and state governments—has endorsed a new National Competition Policy reform agenda aimed at providing a supportive market and regulatory framework for productive investment in transport, energy, and other export-oriented infrastructure.
It has also agreed to work towards implementing a simpler, more consistent national system of rail access regulation for designated nationally-significant railways.
If everything happens as planned, there is truly cause for hope. But St Clair recalls that, in 1999, COAG also agreed to open up major roads in all states to high-mass freight transport. What happened?
Victoria followed through with 99 percent of its road corridors now open for use by freight operators. But as of June 30 this year, New South Wales had opened up just six percent of its road network, most of it on the federally funded Newell Highway.
The big talk in the industry now is about introducing SMART (Safer Management of Road Transport) trucks such as B-triples, quad-axle groups, high productivity rigid trucks, and the Trackaxle steerable axle, which don’t increase overall road wear but don’t fit current rules governing what a truck should look like.
The National Transport Commission (NTC), an independent body funded by state and federal governments to put recommendations for reform to ministers, says it’s time Australian road agencies stopped regulating trucks with a tape measure and a set of scales.
NTC spokesman, Paul Sullivan, says the commission wants truck productivity reform to be treated as ‘crucial’, so heavy vehicles are regulated on the basis of what they can do, rather than what they look like. In other words, a system of Performance-Based Standards (PBS).
The failure to nationally embrace SMART configurations for road freight transport is thrown into stark relief by a decision taken last year in the American state of Pennsylvania to increase truck mass limits so that trucks carrying 40-foot shipping containers full of frozen meat—Australian meat—could travel from ports direct to warehouses. Quad-axle technology allows an operator to carry extra weight on his truck safely and more effectively by fitting a quad-axle instead of a tri-axle.
But when a transport operator applied to gain a similar concession in NSW using a quad-axle group to spread heavier loads across more axles, the permit application failed, making it unfeasible to carry bulk food products to port in appropriately commercial quantities.
Peter McMahon of the NSW Roads and Traffic Authority confirmed that quad-axle technology was not permitted in the state and that any possibility of change remained in the realm of “crystal ball gazing”.
St Clair calls NSW “the cholesterol blocking the arteries of Australian transport” while Sullivan regards this failure as “a tragedy” since Australia leads the world in developing new road transport systems—many of them being created by SMEs.
“The distance factor in Australia has to be looked at and must be considered if we are to be competitive with the rest of the world,” Sullivan adds.
Freight Transport Options
The Federal Government has already gone it alone by introducing higher mass limits for vehicles registered under the Federal Interstate Registration Scheme and fitted with ‘road-friendly’ suspensions. Five years ago it nominated, as the centrepiece of its land transport budget initiatives, a network of national roads connecting ‘inland ports’, rail-heads, and rural manufacturing centres with cities and coastal ports. Another of its priorities was the efficient operation of heavy transport vehicles between these centres.
But some people claim the ‘silver bullet’ that will fix Australia’s freight transport problems is not improved road transport, but rail. Could this be true?
No—says the Australian Transport Commission.
No—says the Australian Trucking Association.
In part—says the Australian Logistics Council (ALC).
“It’s vital that all Australian governments—but especially the states—take action on regulations relating to access like zoning, providing land for intermodal exchanges and preserving the transport corridors,” says Hal Morris, executive director of the ALC. “This is especially relevant on rail.
“While Victoria and Queensland have done a lot of work on these issues, other states seem to have gone missing and the cost to shippers from delays to port access are significant. And there’s the question of regulation. It sounds boring but there’s no point spending millions on infrastructure if the rules and regulations don’t keep pace.
“Domestically, Australia is one of the most decentralised countries on earth, as well as being a long way from its international markets. The argument about boosting our export gain is also about solving the problems of our competing transport infrastructure.
“We need to play catch-up in our rail systems, where the biggest difficulty is in handling growth in demand. Our old tracks mean trains are speed limited and we are hampered by unreliability and the lack of passing lanes on our rail routes. So the total capacity of rail is not up to scratch, except on the east-west route to Perth.
“On other majo
r corridors, like Melbourne to Brisbane or even Melbourne to Sydney, we are struggling to achieve reliability. We must get rail to do its job, making the best use of infrastructure as well investing in new infrastructure. But we’ve got a long way to go.”
But Paul Sullivan points out that only trucks can transport freight to and from warehouses, retail outlets, construction sites, and homes. “Road transport will increase its market share by six percent to 42 percent by 2020,” he says.
St Clair says there are now four—and possibly soon only three—major rail operators in Australia (plus several small ones), while the trucking industry covers 39,000 competitors, including, he adds, some of the most competitive and safe truckers in the world. “There are people out there who suggest rail deserves to be given a more competitive edge. We think rail has a huge future but it needs to get itself organised. We don’t want to see taxes and charges go up in the trucking industry simply to make rail more competitive. Many Australian manufacturers are able to compete globally because their transport costs are competitive.”
The NTC believes rail will have an enormous role to play in helping take up some of the growth projected for Australian freight. “Rail is now in recovery mode and is in the hands of private and commercial owners,” Sullivan says. “It will have a strong role in the future, but it can only service certain corridors defined by its networks.
“Rail clearly has an advantage in bulk freight and carrying heavy freight over long distances—carrying something like 80 percent of that market share. It also offers natural advantages in managing long corridors such as the link from the eastern states to Western Australia, with similar potential for freight between Melbourne and Queensland.”
Rail’s position seems more secure following a decision by COAG at its last meeting to agree on investment in projects aimed at achieving interconnected national road and rail networks that link key production, distribution and export locations.
Australia’s Ports
If the Federal Government was hoping for a wave of unanimous support for Treasurer Peter Costello’s recent suggestion for federal control of Australia’s ports, it must be deeply disappointed.
Llew Russell, chief executive of Shipping Australia, the peak industry body, declares: “It’s not going to happen.” He says all states have dismissed the idea, and he can’t see any of them giving up control of the ports any time soon. “What would the Federal Government do then? Sell them off like they did with the airports?” he asks.
Centralised control could also create “unnecessary competition” for market share between Australia’s ports. Victoria, NSW, and Queensland, have all conducted studies on how to improve international containerised cargo supply chains at major ports, many of which specialise in particular export items.
Russell says entrepôts like Newcastle and Port Kembla focus on coal, Weipa and Gladstone in Queensland and some Western Australian ports specialise in bauxite and aluminium, while ports in South and Western Australia are major grain handlers.
Tuna is shipped out of Port Lincoln in SA, woodchips from Eden in NSW, and regional bulk ports all around Australia handle minerals and bulk primary industry shipments.
“Capital city ports focus on containers and car carriers with some 95 percent of them passing through Sydney, Melbourne, Brisbane, Adelaide and Fremantle. Some go through Darwin and Tasmania—most Tasmanian containers are transhipped through Melbourne—while exporters in regional Australia use rail or road to take containers to the main ports.”
Paul Little, CEO of multinational transport giant, Toll Holdings, says real improvements will come from a reduction of “the fairly intense regulation” of port operations and more coordinated security to encourage efficiencies.
In one promising sign, the COAG forum of governments has identified stevedoring and towage reform as offering potential benefits for exporters. It sees shipping and port authority reform as ‘priority issues’ to improve Australia’s international competitiveness.
But Hal Morris, executive director of the Australian Logistics Council, says he remains concerned that Auslink—the Australian Government’s transport infrastructure planning and development arm—“seems solely concerned with transport corridors while a major problem remains in access to facilities at the end of the corridors where traffic flows in and out of our ports.”
Officialdom also requires carriers to be competitive but prevents firms operating in single supply chains from getting together to talk about implementing efficiencies.
“They’re afraid the ACCC will send them to jail for five years for collusion,” he says.
Export Case Study
The politics of Australia’s internal freight systems are one thing. The day-to-day business of actually getting your products to market is usually something else.
The experiences of Sydney-based exporter, Fidax Foundry, which supplies its iron and steel components to railway, automotive, and industrial buyers in the United States, South America, Asia and Europe, provides an almost text-book example of how the system can work.
Fidax Foundry’s sales director, Jonathon Shwabsky, says the firm exports 30 to 35 percent of its iron components production, all as full container loads. “Our experience is based on our project work which has taught us to select, and stick with, a particular freight forwarder or logistics company to handle our land-based transport and clearances for us,” he says.
“With a current peak of about 20 containers a month going overseas, we just ring the suppliers, ask them to deliver us two containers in a week’s time, then fill them up to be collected and taken to Port Botany.”
Being located at Silverwater in Sydney’s west, Fidax sends its exports through Port Botany, but it has always keenly looked at other potential options. “When they built the Adelaide to Darwin railway, I thought we might send our Asia exports through that system—but the price was three times as much as sending them through Sydney.”
Shwabsky says exporters in Australia should be aware of some natural advantages they possess. “Because Australia is a net importer, there are always a lot of spare containers waiting to be sent back to their countries of origin,” he explains. “Ordinarily, they would be sent back empty, but they can be utilised through what is called ‘container reassignment’ to carry exports. And the costs can offer significant savings. Hire of a container to move goods from China to Australia costs about US$2,000—but if it is reassigned (turned round) to move exports from Sydney to Thailand the cost is only around US$350.
“Freight forwarding and logistics is a competitive market—and you can get good prices if you work at it. Over time, we’ve tried both big and small freight companies but you always face issues like trying to compare pricing systems that are as different as apples and bananas. We rely on our freight forwarder to negotiate the best rate.”
He says timing is important on shipments, and prices can be significantly affected by issues like sending them either direct or as ‘trans-shipments’.
Trans-shipping means sending the load v
ia another port on its way to its destination which involves off-loading and re-loading the consignment somewhere like Singapore. “Transit times are longer, but the cost is much cheaper,” he advises. “If you’re not in a great rush, it’s the way to go.”
Shwabsky says indirect shipments can save money, if you have the time, but all options need to be examined carefully.
Proponents of the Adelaide–Darwin railway claim Australia’s most northerly port is a natural doorway to Asia for southern states. But for Shwabsky, this option is too expensive compared to the cost of sending his exports to Asia directly from Sydney.
“On the other hand, sending your US shipments by rail rather than through the Panama Canal is cheaper,” he says. “Goods for Dortmund in Germany are less expensive routed through Rotterdam and on by barge, rather than directly through Hamburg.”
DIY exporting is not feasible for a company the size of Fidax (or smaller) but can be a reality for firms exporting 10,000 containers a year. Rhicke Jennings, managing director of FedEx Australia, New Zealand and the Pacific Islands, agrees. Freight forwarders consolidate small shipments and work with road transporters, Customs, airlines, and shipping lines, while freight integrators like FedEx ship door-to-door for a single all-up price that usually includes services like insurance.
Jennings says selecting the right form of transportation is often dictated by the product itself. Bulky items like canned goods are ideal for the economies of sea freight, while fresh flowers demanded reliable air transport.
Shipments going simultaneously to a variety of destinations in a particular market—like cities across the United States—can be very expensive unless the products are picked up as one major shipment and split for onwards freight to individual destinations.
Exporters outside the major capitals face special problems, as the experiences of Fletcher International—the family-owned sheep meat processor and exporter—clearly show. CEO, Roger Fletcher, despairs about his exports from New South Wales.
“Tell me one other major sea port in the world that has a two-lane highway linking it with the interior of the country,” he says. “New South Wales is a bloody joke—no major road linking Sydney with the west and no rail line directly into our major port [Port Botany].
“We considered sending our shipments to Melbourne—but it’s double the distance and massive fuel prices have escalated the problem.”
