Coordinated plan needed for Australia's maritime industry

08 April 2020 Consultancy.com.au

The Coronavirus is causing unprecedented global health, economic and social challenges. As Australia grapples with the reality of quarantine, job losses and uncertainty about further isolation measures, how are Australia’s maritime ports affected? Synergy Group’s specialist economists, Jiao Wang and Jan Drienko, consider the storm of economic issues currently facing the sector. 

The world has faced business crises before, including the global financial crisis (2007-08), SARS (2002-04) and the oil crisis (1973, 1979). And similarly, double -digit unemployment has been seen before too (1983, 1991-94). But, “with COVID-19, it’s happening on a much bigger scale,” says Jan. “In many ways, Australia has a fragile system in these perfect storm situations.” 

As a country heavily reliant on imports and exports for physical and economic survival, the flow-on effects of closing air and water ports could be massive. “If we disrupt our import/export economy in any way, we are in deep trouble,” says Jan. “Everything is related to what people spend their money on. Even after services – restaurants, hairdressers – are shut down, people still spend their money on products.”

“By volume, over 98% of our freight is handled by maritime port,” explains Jiao. “Passenger air transport has been grounded, which means 40% of air freight is lost because belly freight contributes to about 40% of total international air freight by volume.” If maritime ports are also restricted, Australia faces tougher times ahead.

Coordinated plan needed for Australia's maritime industry

The maritime system

International ships and tankers typically have a 24-hour window to offload and reload their cargo. It’s a costly exercise to stay any longer – on average it costs shipping companies $25,000 per day to stop at an Australian maritime port. 

As health concerns about international travellers and cruise ships abound, there is rightly concern about the health of the crew members on board frequently visiting cargo ships. “Restrictions on crew members including 14-day isolation periods will cripple our industries,” says Jiao. “Maritime transporters cannot afford to dock for long periods. If every port imposes a 14-day ban, it will cost a ship in the realm of $350,000 per trip, which is likely beyond any commercial profit margin line. They won’t travel to Australia – they’ll go elsewhere.” 

Agricultural and mining exporters are particularly reliant on these international ports, with flow on effects for other businesses. “For farmers exporting livestock, if there is a delay in the ship departing due to crew quarantine, these livestock can die in the time they wait, or cost farmers more to change transportation arrangements.”

Additionally, there’s a huge workforce of freight operators reliant on transporting goods to and from ports. “These operators tend to be individuals rather than companies, so they’re more susceptible to losing their contracts and income if ports close.”

Keep Australia going

There are certainly ways for Australia’s maritime ports to remain active and to keep the loading and unloading processes swift. “Many international ships take 15 days to get here from Asia – that’s a form of quarantine,” explains Jan. “Crews could isolate on board when they arrive and have new crews board the ship for unload/reload. Some ports are highly automated and primarily use cranes. There are solutions, but we need a flexible application of the rules so we don’t damage Australia’s systems.” 

“There are certainly ways for Australia’s maritime ports to remain active… it requires coordination and cooperation.”
– Jiao Wang and Jan Drienko, Synergy Group
 

In times of crisis, it is sometimes easier to take the path of least resistance, but Jiao and Jan warn against a reactive response. “Uncertainty kills the imagination,” says Jan. “Our governments need to think about all options. When Qatar faced a supply chain disruption due to blockade, they flew cows by plane to ensure their milk supply – and housed them in warehouses given the intense heat. There are ways, but it can be costly.” 

“The Chinese market is already re-opening and they will soon have a high demand for Australia’s commodities – agricultural and raw materials such as coal and iron ore. We can’t support farmers if we can’t export.”

Importantly, if supply of products is hampered for Australia, the supply chain disruption will start being seen in supermarkets and beyond. Just as the tourism industry has shut down – and had enormous flow-on effects for people’s businesses and jobs across many industries – so too would the closure of maritime ports. 

“There are hundreds of billions of dollars moving between Australia and the rest of the world – we’re a true island. With a balanced view, coordination and cooperation, the industry needs to find a way to survive this unprecedented situation.”


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