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.