Nationalise the wharves!

Nationalise the wharves!

By Dick Nichols

Imagine that we have just woken up and all of Peter Reith's dreams
about waterfront �reform� have come true. How much do we �average� Australians
stand to gain from it all?

 

You would think that two recent Productivity Commission reports, International
Benchmarking of the Australian Waterfront (IBAW) and Work
Arrangements in Container Stevedoring (WACS) would have at least
tried to answer this question. After all, Reith has been promising huge
gains for ordinary consumers if only the lurks and perks of those �overpaid
bludgers� on the waterfront can be removed.

Every productivity gain has to be paid for by somebody. The two reports
imply clearly enough where the immediate price should be paid — in cuts
to the wharfies' health and safety, wages and working conditions.

More broadly, the recent magnificent struggle to reverse the sacking
of the Patrick wharfies drew its strength from workers' knowledge that
if the wharfies lost the battle, the price of future �productivity improvements�
would be paid by all working people sweating it out in more insecure and
unsafe jobs with less union protection.

WACS provides compelling evidence that, even if the waterfront
work force could be beaten into submission, Reith's dream of a 25 container
per hour average across Australian ports is probably technically impossible.
It notes three main factors affecting the loading and unloading of ships:

• 
  Throughput: �If we had 90% transhipment instead of 10% and vessels of 6000
  TEU [20-foot equivalent units, the standard container measure] capacity
  instead of 600 TEU, with single destination cargoes, and no late changes
  to cargo and lower safety standards, we would achieve over 30 containers
  per crane on all vessels, all of the time� — Tim Blood, container business
  manager for P&O Ports Victoria.

• 
  Difficult stows: �Adelaide may only have half the container rate of some
  SeaLand terminals, but all other terminals trade SeaLand stowed ships.
  Stow is central to productivity. SeaLand ships are computer-stowed. The
  boxes that come off first are stowed on the side of the ship, not in the
  middle where you have to lift them four high to get them out� — Captain
  Andrews, SeaLand, Adelaide.

• 
  Mix of containers: Ships typically contain a mixture of 20-foot and 40-foot
  containers, which slows down container exchange. In the words of a SeaLand
  crane driver: �If we always had ships come in with around 400 40-footers
  all in one bay, instead of one or two here and one or two there, we would
  average 35-40 boxes an hour.�

Despite these comments, and despite IBAW's own evidence that terminal
crane performance is reduced by such factors, IBAW takes the difference
between crane rates at the overseas end of a trade (where these factors
are nearly always more favourable) and the Australian end as a measure
of potential for improving Australian crane rates.

The bodgie nature of the method is confirmed by a recent report by Drewry
Shipping Consultants, World Container Terminals: Global Growth and Private
Profit. That report explains that 60-70% of the variation in
a terminal's capacity is explained by factors that are outside the control
of the terminal manager, and that 50% of the variation is explained by
differences in the percentage of a ship's capacity that is loaded and unloaded.

A study based on Drewry by Dr Clive Hamilton of the Australia Institute
claims that benchmark productivity adjusted for this factor would average
19.1 containers per hour for the five main Australian ports, while actual
productivity averages 18.5.

Who would gain?

So what order of gain for the consumer is feasible? The two reports steer
well clear of providing definite figures because a rigorous presentation
would reveal how pathetically small the figures actually are.

According to IBAW's questionable method, �indicative estimates
of savings from service improvements� amount to $56 per TEU. These figures
assume that the crane rate differential between Australian and overseas
ports can be halved. They also assume a 10% rate of interest for calculating
finance losses on goods being longer in transit.

Given that around 2.2 million TEUs are shipped into and out of Australian
ports each year, total savings at $56 TEU would amount to $123 million
— a lot of money if it were shared out as profit between the stevedoring
duopoly, Patrick and P&O Ports. That's why financial analysts of Patrick
have valued the potential share price of Patrick after a smashing of the
Maritime Union at between $7 and $12, instead of its present $1.70.

In the February 28-March 1 Financial Review, Alan Kohler outlined
the potential gains for chief Patrick shareholders Chris Corrigan and Peter
Scanlon at $35 million and $170 million respectively. He added:

�If pre-tax profit was increased by $100 million, net profit would go
from $3.6 million last year (including a loss of $4.4 million in the second
half) to about $90 million next year. Using the average price-earnings
multiple for smaller companies, that would result in a share price of $12.
It is now $1.60.

�But analyst Rob Hopkins, of ANZ securities, says some of the productivity
gains would have to be handed back to the shipping companies through lower
prices or Corrigan would risk a backlash that could entice new players
to the waterfront, cutting profits through competition.

�Hopkins says the industry believes Patrick could make a return on assets
of up to 15% without risking the arrival of new entrants, which would translate
into a profit of $75 million and a theoretical share price of $10. The
profits for Corrigan and Scanlon would be only slightly less.�

Hopkins has a very realistic view of what would happen to the gains
of a productivity-boosting smashing of the MUA — nearly all the extra
loot would go to profits because there would still be insufficient competition
to force cuts in stevedoring fees.

But just suppose the economic rationalist fairytale of perfect competition
prevailed along the entire transport chain, such that the $56 saving per
TEU actually ended up being passed right down to us shoppers in K-Mart:
how much would the lucky consumer get?

With 2.2 million TEUs carrying $62 billion worth of cargo in and out
of Australia annually, the average value of cargo per container is just
over $28,000. Savings of $56 per TEU would then amount to a cut of 0.002%
in the total value of the transported goods! That's the bonanza awaiting
us if the wharfies are defeated and all the gains are passed on
as lower prices.

What alternative?

So what's the alternative to ongoing war between the waterfront duopoly
and the MUA?

The only immediate solution to the crisis of the stevedoring industry
that doesn't involve the workers paying the price is to hand it over to
public ownership — to nationalise it as a national stevedoring authority.

There's nothing remarkable about such a proposal. The Australian Wheat
Board runs the country's wheat terminals (the most efficient in the world)
and until 1994 Australian Stevedores, as Patrick was then known, was still
25% owned by the Australian National Line.

Of course, this proposal would provoke the usual howls of outrage against
public ownership and monopoly as �inherently inefficient� and anti-international
competitiveness.

These assumptions ooze out of the two Productivity Commission reports.
Yet WACS' single example of a collaborative �workplace culture�
where the class antagonism of the waterfront has supposedly been broken
down, the SeaLand container terminal at Adelaide, is actually Port Adelaide's
monopoly container operator. What's more, SeaLand has the highest net crane
rate of the five Australian terminals surveyed.

Productivity and efficiency in any enterprise are overwhelmingly a product
of the state of technology and equipment employed, combined with the degree
of commitment the workers feel to the enterprise. Public ownership of a
national ports authority would be an advantage, on condition that
its administration was democratically elected, with representation for
the workers as well as the community at large, and its operations were
transparent.

Such an administration would be able to have an objective and open discussion
about productivity, health and safety, technological change and all the
other issues that concern any big enterprise.

Of course, while capitalism continues, a national ports authority would
be subject to many competitive pressures, but it would not have
to generate a 15% rate of return to fund Scanlon's eight-seat private helicopter,
nor would it have to base its investment policy on short-term profit considerations.
It could plan stevedoring capacity Australia-wide rationally.

This would be a step towards a coordinated nationwide transport plan
involving rail, road and sea, instead of today's chaotic scenario, in which
state governments compete to attract new stevedores, the long-distance
road haulage industry is dominated by outfits like Linfox receiving hidden
subsidies and trucking owner-drivers have to drive ever longer hours for
less income.

It would also be the obvious answer to a major cause of stevedoring
inefficiency identified by the two Productivity Commission reports: the
huge queues of trucks waiting for their turn at container depots.

The MUA's recent victory gives the union movement the chance to counterattack,
not only on wages, conditions and employment, but also in support of alternative
solutions to those of capitalism.

Central to this counterattack must be once again taking up the argument
for public ownership of major industry. An MUA campaign for a national
stevedoring authority would be a very good start.