Shipping agents demand efficiency first

Dionisia Tabureguci
The call by the Fiji Government for shipping companies to consider the removal of port service charges with the arrival now of three new mobile cranes—two for Suva’s King’s Wharf and one for Lautoka Wharf—will be one local shipping agents may find hard to swallow.

And by the looks of things, the issue could become a sticking point for stakeholders, with the government on one side trying to reduce total import and export costs at the ports, while shipping agents, on the other hand, standing to lose a revenue source that fetch them between F$12 million to F$18 million annually.

This figure was revealed in a speech by Isimeli Bose, chairman of Fiji Ports Corporation Ltd (FPCL), during the commissioning of the cranes at the Suva King’s Wharf last month. He took the opportunity to remind shipping agents of an agreement entered into with government, the port company and local shipping agents on behalf of their foreign and local owners, that the port service charge of F$250 per TEU (Twenty Foot Equivalent Unit), or F$500 per FEU (Forty Foot Equivalent Unit) be abolished when the hook handling rates reach 15 or more TEUs per hour.

This levy (it has its origins in the inefficiency of the ports and their inability to turn vessels around quickly) gets factored into the export and import costs borne by Fiji’s exporters and importers.

With the new cranes, loading and discharge frequency is expected to double from the present range of 6 to 10 TEU per hook per hour to 15 to 22 TEU per hook per hour, said Bose, which should reduce the port time of ships by as much as 50 percent.

“There is no question that the two mobile cranes will have an immediate impact,” Bose said, further outlining the four major areas where this impact would be felt.

“We are not pushing for the compulsory use of mobile harbour cranes, but if shipping companies still insist on using their ships’ gears, then serious questions must be asked as to whether they are going to retain this levy.

“We also hope the abolishment of this fee will not see a corresponding increase in freight costs as this will prove that the fee was not charged for port inefficiency but to recoup freight costs.”

But if the government and FPCL are banking on an immediate removal of port service charges, local shipping agents have made it clear that any removal will depend on concrete evidence of an improvement in efficiency and productivity resulting from the new cranes.

“It’s a big call,” said David Aidney, managing director of Williams & Goslings Ltd.

“The port service charge was brought in to put some pressure on ports to increase their efficiency and productivity because the longer the vessels stay in port, the more costs incurred.

“What I’d like to see is to get the cranes working and see how consistently they can bring the productivity up. I am sure that if they are working at a consistent 20 to 40 containers an hour and their rates remain unchanged, the shipping companies will give it consideration.

“But let’s put the cranes into practise and let’s get efficiency up and the vessels turned around faster. Once they can prove this can be done, then let’s sit down and discuss it.”

Aidney pointed out that the talk of moving 20 containers an hour meant an average movement of one container every two and a half minutes, meaning that there had to be an equally efficient organisation on the ground to match that pace. And achieving it, he suggested, would depend on good organisation.

“There are still going to be ships forced to use their own gears because these cranes can’t handle everything at once. So there’s a lot of work to be done. I would say give it three months,” Aidney said.

Another agent, Carpenters Shipping, was of the view that any decision made by them on the call to reduce port service charges would be based on the wider economic benefit it would achieve for the country.

“We will look at the upsides of it,” said Ilaisa Labaibure, Carpenters Shipping’s manager shipping and marketing operations. “If it will bring us a quick turnaround of vessels, it obviously would have contributed to cost reduction for us. But we would like to see the results of the actual operations and only then will we make our appraisal.”

Carpenters Shipping’s views were echoed too by Pacific Agencies (Fiji) Ltd, whose general manager, Greg Von Litzheim, told ISLANDS BUSINESS that while the company saw the arrival of the cranes as a very positive development, the removal of port service charges would have to coincide with the ports’ efficiency.

“There have been discussions at various levels about introduced services and current services,” Von Litzheim said.

“There are a lot of other factors that come into play with a shipping line. The global economy has a lot to do with it. The shore-side operation is only part of the factor determining any rate structures that are measured against a shipping line.

“Vessels are like hired cars where rates are paid per day, so if they could be made to be productive, to move through ports faster, then the costs would be less.”

As for passing that reduced cost to cargo owners by removing the port service charge, Von Litzheim said it was something that would have to be discussed and determined later.

“There has been no concrete evidence given to us on the cost of using the cranes. But any new equipment that could help quicken the loading and discharge of vessels to push them through the ports faster, have got to be seen in a positive light,” he added.

But all this reference to port inefficiency is something FPCL is not amused with.
FPCL chief executive officer, Herbert Hazelman has strong words for shipping agents who talk about the need for the ports to gear up on productivity and efficiency.

“From the day we started the reform, there has been efficiency. Previously, we never worked seven days a week. Sunday was an off day. The vessels come in on Sunday, anchor up and then wait for midnight Sunday which is Monday morning.

“We now work seven days a week, 363 days in a year—only Good Fridays and Christmas days we don’t work. Where has that savings gone to?

“Previously we ordered for labour 24 hours in advance and if the ships don’t come, we still have to pay for the labour. We now need only four hours notice so the savings are here and they have been passed on to the industry and yet all we hear from them is that the ports have been inefficient. Who is telling the truth?”

Hazelman says shipping companies and agents need to acknowledge that some progress has already been made on efficiency and productivity.

“My question to them is are they efficient? If so, how do we measure their efficiency? Do they measure their own efficiency, or do they just blame it on the ports? Is the whole F$250 per container all port inefficiency?

“Because I am sure they would have their own inefficiency themselves.”

While shipping agents believe the onus is on FPCL to do its part to improve port services before the removal of the port service charges is contemplated, Hazelman believes it is the other way around.

“It’s totally up to them. If we are going to maintain more than 15 containers an hour, which is what they’re saying we should do before they remove the charges, what excuse are they going to give then?”

Clearly, the stakeholders may soon need to reach a middle ground on the issue.