Metodología de trabajo

Several container stevedores emphasised that the MUA exercises substantial negotiating power as the de facto sole supplier of labour to stevedoring. In particular, stevedores contended that the MUA’s bargaining power is a major impediment to changes in work arrangements and improved workplace performance.

There are also some important constraints on competition in container stevedoring which may have reduced the pressure on both employers and employees to change work arrangements and improve workplace performance. These constraints include a high concentration of ownership, considerable barriers to entry and limited interport competition.

Employees’ bargaining power

The bargaining power of the MUA is reflected in its almost complete coverage of operational employees in container stevedoring. This blanket coverage continues even though union preference cannot be legally enforced as a result of the Workplace Relations Act.

The bargaining power of the union is heightened by the high costs of delays or stoppages imposed on shipping lines. This places considerable pressure on the stevedore to resolve any disputes quickly. One participant noted that:

... the majority of ship owners ... tend to have a very short term approach to the settling of labour disputes. The common catch phrase is ... ‘I want you to be firm with the union on this issue, but after my ship has sailed’. ... Often there is a threat made to the stevedoring company that the client will change stevedores if a speedy resolution is not made. (response 1, p. 3)

The cost to a shipping line of delays on the waterfront is approximately $30 000 a day for a ship with a 2000 TEU capacity (BTCE 1995a). Substantial delays have a ‘knock-on’ effect on the shipping schedule for future ports visited.

Stevedores also incur costs when ships are delayed, because contracts may change hands when they are renegotiated with the shipping line in the longer term. Also, if the contract with the shipping line includes a penalty (or performance) clause, the stevedore may incur penalty charges in the short term, depending on the contract with the shipping line. About half of all contracts between container stevedores and shipping lines contain such clauses. These clauses are generally in contracts with the larger shipping lines.1

Participants also noted that the influence of the MUA is further increased by its coverage of other links in the waterfront transport chain, such as tugs and ship crew. Industrial action in any of these links also imposes time-related costs on users, for example shipping lines, exporters and importers. There is some evidence that the introduction of provisions prohibiting secondary boycotts has

1 _{An example of a penalty clause is where a stevedore is contracted to handle a minimum} number of containers each day. If the stevedore does not meet this minimum because of factors within the control of the stevedore, the rate paid to the stevedore for each container declines by, say, 10 per cent.

reduced the likelihood of the MUA using its coverage of other links in the waterfront chain as a source of undue bargaining power (see section 9.4).

The MUA also has links with international maritime industry unions, and their involvement may further strengthen its bargaining power. An example of this was the recent dispute in Cairns (box 6.1).

Competition in container stevedoring

Limitations on the extent of competition in container stevedoring services can reduce pressure on stevedores and employees (or their union representatives) to change work arrangements to improve workplace performance, to the extent that at least some of the costs of inefficiency can be passed on to users (for example, shipping lines, importers and exporters).

A detailed investigation of the extent of competition is beyond the scope of this study, but the major factors and their effects on work arrangements can be identified.

Factors inhibiting competition in container stevedoring include high concentration of ownership in the industry, limited interport competition and considerable barriers to entry. As outlined in chapter 2, a nationwide duopoly exists at the container operations at the large city ports. The main barrier to entry is port leasing arrangements.

Concentrated ownership

A high concentration of ownership facilitates collusive or ‘following’ behaviour. However, it does not in itself preclude periods of competitive behaviour in an industry. There have recently been signs of heightened competitive pressures in shipping that may be placing greater competitive pressures on stevedores (PC 1998). It is apparent that contracts of substantial value change hands within ports.

However shipping lines, with whom the contracts are signed, have a limited choice of container stevedores available to them. Also, one of the two stevedores, P&O Ports, has ownership links with shipping lines owned by P&O. The Industry Commission’s (1993) inquiry into port authority services noted that several inquiry participants were concerned that these links could reduce interport competition in container stevedoring.

Interport competition

Interport competition is reduced by the large distances between ports in Australia and the relatively high cost of land transport compared with sea freight. But interport competition appears to be greater for stevedores at the smaller ports, such as Adelaide and Brisbane, which can lose contracts to stevedores in Melbourne and Sydney respectively. The scope for competition among the largest ports is further reduced by the dominance of the same two stevedores nationally.

Discussions at Sea-Land Adelaide indicated that management, supervisors and employee representatives were all keenly aware of the competition from Melbourne. The potential consequences of a loss of business exert considerable pressure to improve performance at the workplace. One manager noted that:

We don’t have the monopoly here in Adelaide. A third of South Australian cargo goes through Melbourne. The way to fight it is efficiency and cost effectiveness. We need to make profits to get the investment to increase the size of the pie. Our aim is to build a better service here than in Melbourne.

Geography cannot be altered, but its effect could be reduced if lower cost road and rail (and coastal shipping services) enabled users to switch cargo between ports more easily (Trace 1997). In New Zealand, land distances between ports are considerably shorter than in Australia, but efficiencies gained from land transport reforms also placed greater pressure on the ports to improve performance (appendix I).

Barriers to entry

Equipment costs are high in container stevedoring. Detailed discussions suggested that the cost of a quay crane is approximately $10 million and that each straddle carrier costs about $1–2 million. Peter Cochran, New South Wales Shadow Minister for Transport, noted that start-up costs for a basic container terminal in Australia were approximately $100 million (response 4, p. 4). However, the key issue is the extent to which these investments represent a ‘sunk cost’ — that is, a cost that could not be recovered if the business failed — thus increasing the costs of entry. Because such equipment can be sold to other stevedores and moved between ports, the high start-up costs in themselves do not constitute a major barrier to entry.

Given the scarcity of good harbour land, the main barrier to entry in stevedoring within each port appears to be the length of wharf leases. Australian wharves are generally owned and leased out by port authorities. In 1992, the then Trade Practices Commission noted that stevedore leases at the major Australian ports

were for periods of between one year and 25 years (TPC 1992). Many leases had renewal rights for between five years and 21 years.

The Trade Practices Commission stated:

Because waterfront land is a scarce resource, long leases (ie those that exceed the amortisation period of key immovable assets) may impede competition and reduce contestability and efficiency in the stevedoring market. They can entrench existing operators for long periods ... (p. 60)

As recently as 1993, the Port of Melbourne renegotiated its leases for container terminals for periods of more than 20 years.

The Port of Sydney has recently renegotiated the extension of one lease from 25 years to 40 years (table 9.2).

Table 9.2: Length of container terminal leases at the ports of Sydney and Melbourne Lessee Commencement year of lease Length of lease

Additional years if option to renew lease is taken up

Patrick Sydney 1978 40 yearsa _{5 years}

CTAL Sydney 1979 25 years 5 years

Patrick Melbourne 1993 21 years 21 years

P&O Ports Melbourne 1993 20 years 20 years

a Recently renegotiated and increased from 25 years by the stevedore — on the basis of additional capital expenditure of approximately $100 million in the short term.

Sources: Melbourne Ports Corporation; Sydney Ports Corporation

The Metal Trades Industry Association (MTIA) has also expressed concern about a lack of competition in the Australian stevedoring industry resulting from port leasing arrangements (MTIA 1996).

Barriers to entry are lower in New Zealand than in Australia because, among other factors, common user facilities for container stevedoring are available. At the Ports of Auckland, any stevedore can access a berth with container handling facilities (such as quay cranes) for variable lengths of time. This is likely to have contributed to lower stevedore prices in New Zealand relative to those in Australia. Most of the Ports of Auckland’s shares are owned by a statutory body, but they are listed on the New Zealand Stock Exchange and full private ownership of port companies is allowed (box 9.1 and appendix I).

Box 9.1: Effect of competition on New Zealand stevedoring

Broad economic reform in New Zealand included financial market liberalisation, reductions in import barriers and other industry assistance, tax reform and public sector reform. The reforms that had the greatest direct impacts on stevedoring in New Zealand were the transport reforms (commenced in the early 1980s), port reforms (introduced in 1988 and 1990) and substantive labour market reforms (introduced in 1991). The combination of all of these reforms appear to have increased competitive pressures in New Zealand stevedoring.

In New Zealand, several factors have contributed to greater interport competition than in Australia — there are no stevedores operating nationwide; distances between ports are less than in Australia; and transport reform in New Zealand has improved the efficiency of land transport. Competition within ports is also greater because of the availability of common user facilities, whereby a number of stevedores are able to contract with the port company for the use of berths and equipment such as straddle carriers and cranes. Contracts apparently change hands more frequently in New Zealand. The cost of entry is much lower as new entrants with few overheads can undercut existing stevedores. The loss of a major contract continues to force companies out of business. Therefore, the incentive to improve efficiency is great.

Union coverage of the workforce remains high, covering, for example, 70 per cent of the workforce at the Ports of Auckland. However, negotiations at each port take place with the local union branch, not the national body. Local branches are aware that competition from another port may result in the loss of all local stevedoring employment, so the union has more incentive to negotiate change than in many Australian stevedoring workplaces.

Work arrangements vary considerably between workplaces. The proportion of casual relative to permanent employees, for example, varies between 25 per cent and 100 per cent and shift lengths vary between eight hours and 12 hours to shifts of variable lengths. Some stevedores pay flat rates, some contract out maintenance, some pay idle time. Although contracts with employees may be individual or collective, the majority are collective and the union still has considerable influence over employees. Some older employees have found the concept of loyalty to the company difficult to accept. The pay of employees is still relatively high and was in the top 20 per cent of all income earners in New Zealand in 1996.

There is little provision of common user facilities for containers in Australia. Access to berth space is usually provided to private stevedoring companies under exclusive, long-term leases. The stevedores are required to provide their own container handling equipment.

BHP have argued that gains on the waterfront will only occur through new entrants:

Substantial gains on the waterfront will not be made until new stevedoring providers are able to enter the market in competition with existing operators. We suggest that the performance of port infrastructure could be increased significantly by: implementing more flexible work arrangements in stevedoring; ensuring that port authorities are charged with facilitating trade and promoting competition rather than raising revenue for state governments; facilitating access in the provision of port services. The difficulty of new stevedoring companies in obtaining access to port infrastructure continues to limit competition. (BHP 1996, p. 13)

It is important to recognise however, that the level of throughput in the industry influences the number of stevedores that can efficiently operate at any port. It has been noted that economies of scale are a feature of containerisation (Dick 1992). In particular, the ‘thinness’ of shipping trades (long, low-volume routes) operating in Australia limits the ability of Australian stevedores to reach the performance levels of large overseas ports such as Singapore (PC 1998).

Economies of scale may mean that Australian and New Zealand container stevedores may not be able to achieve the performance levels of ports with high levels of throughput, but the New Zealand experience suggests that greater competitive pressure does improve workplace performance.

The New Zealand experience also shows that it is possible to have multiple container stevedores with ‘thin’ traffic and still improve performance. Work arrangements are considerably more flexible in New Zealand than in Australia and are linked to improvements in stevedore performance and greater competitive pressure in the industry (box 9.1 and appendix I).

Contractual arrangements

Market disciplines on container stevedores to change work arrangements are further attenuated by the indirect nature of contractual relationships in sea freight (see also PC 1998). The shipping lines are the only users of stevedore services with a contractual relationship with the stevedore. The interest of the shipping lines is for ships to be loaded and unloaded quickly, because of the high costs of ship delays.

Shipping lines are less concerned about other costs arising from delays in the movement of cargo. Those users affected, such as exporters, importers, road and rail transport companies, have no direct market mechanisms with which to influence container stevedore performance. This limits the pressure on stevedores to improve aspects of stevedore performance that affect those other users.

In 1996, the MTIA surveyed its members about their concerns with the timeliness of stevedore services. It found that companies were dissatisfied with the general level of service. Companies claimed, for example, that there was an excessive gap between cut-off times for containers and the time of ships sailing. Some of the reliability problems on the waterfront could be overcome by improved coordination, but there are few incentives to encourage coordination between the numerous operators (PC 1998).