In recent years, Synergies has been working with Ports Australia to identify potential opportunites for coastal shipping to play a greater role in the domestic freight task. This follows numerous parliamentary inquiries into challenges associated with developing a stronger coastal shipping industry in Australia. Together with Ports Australia, we completed several case studies which identified particularly commodity supply chains where coastal shipping had been successful, together with areas of opportunity. Synergies has welcomed this opportunity to provide advice on an issue that can lift our domestic shipping competitiveness and propel Australia forward to meet our freight needs over the next century.
Coastal shipping plays a modest and declining role in meeting Australia’s freight task. Australia is not alone: this trend is part of a wider global phenomenon with many overseas countries (e.g. Canada) also having lost much of their domestic shipborne commerce to other modes. The decline has primarily been driven by changes in industry structure and logistics practices; and there is no simple answer to remedy or reverse this.
Currently, coastal shipping is mostly focused on transporting lower-value bulk commodities. This is because a shipping task is well suited to the movement of bulky, low value goods which can be moved in relatively large volumes. Expanding the role of coastal shipping beyond this current purview is a significant challenge.
While the challenges of coastal shipping are well known, the policy solutions are less clear.
To better understand the opportunities for greater contestability in freight services from coastal shipping, Synergies was engaged by Ports Australia in 2019 and 2020 to prepare a series of case studies on supply chain experience of key commodities.
In total, we examined 8 commodity supply chains, from two main perspectives:
instances where coastal shipping operates in competition with land based transport modes,
instances where coastal shipping has the potential to support increased domestic manufacturing.
The supply chains we examined were:
Coastal shipping vs land transport
These following case studies focussed on where coastal shipping offers a strong competitive alternative to land transport, but where coastal shipping has had varying success in attracting the freight movements:
Containerised freight from Sydney/Melbourne to Perth
Bulk sugar from Mackay to Melbourne
Break bulk steel from Port Kembla to Hastings Point
Next, we focussed on identifying products and routes for which coastal shipping is not currently used, but where there may be an opportunity for coastal shipping:
Flyash from Gladstone to Brisbane
Construction sand from Newcastle to Sydney
Coastal shipping vs international shipping
These case studies examined commodities where increased coastal shipping could potentially support expanded domestic production
Clinker shipments from Port Adelaide to Brisbane, substituting for imports from Malaysia;
Gypsum shipments to Western Australia Brisbane, in substitution for imports from SE Asia or the Middle East;
Fertiliser shipments from Townsville to Perth, which could potentially replace imports from China.
For each case study, Synergies modelled the estimated freight costs of key elements of the relevant supply chains for moving the product from its origin to destination using our in-house costing models for shipping, rail transport and road transport.
Summary of conclusions
Our analysis showed that, for domestic freight movements, despite coastal shipping often having a clear cost advantage, sea is not always the preferred mode. This suggests there are a wide range of factors other than cost that impact on the modal choice decisions made by shippers, several of which are supply chain-specific. These factors include reliability, transit times, service frequency, cargo care and customer service, to name a few.
When compared to the cost of international imports, the costs of coastal shipping from domestic sources generally compared favourably with international imports when they use a dedicated service. However, Australia’s strong export focus means that there is a surplus of inbound capacity on bulk vessels. Our analysis also showed that it is difficult for a dedicated coastal shipping service to compete effectively with an international import that operates as a backhaul service using this surplus inbound capacity.
We identified that there would be increased opportunities for coastal shipping of domestically produced dry bulk products, if these were able to be undertaken with loaded vessels in each direction, as part of either a larger international or coastal vessel schedule.
Our analysis provided two key benefits for our client:
Access to well informed advice based on comprehensive quantitative analysis on the cost, challenges and opportunities for coastal shipping; an
A solid platform for advocacy for coastal shipping reform based on sound economic rationale and based on a genuine understanding of the complexities associated with meeting Australia’s freight needs.
What our client said
The Board were pleased with the case study summary. The case studies and summary report will definitely prove useful in refining our policy position on coastal shipping in advance of government consultation on reforms.
Margie Barbouttis, Ports Australia Policy and Operations Director