Mining may lift port's fortunes

Increased mining-based container traffic through the Esperance port could offer opportunity for more competitive container ocean freight rates and boost the potential for grain-based container trade from the Esperance port.

A shift in shipping logistics within WA could also make such trade feasible, if it resulted in increased back freighting opportunities.

Summarising the findings of Stage 1 of the South East Premium Wheat Growers Association (SEPWA) project which examined the potential for such a trade, association project officer Nigel Metz said it was difficult to economically justify container exports from the port.

Stage 1 of the study, which aimed to determine the economic feasibility of shipping grain from the region, has been completed.

It involved researching and comparing the supply chain costs associated with delivering grain to markets in South-East Asia and southern India and also a comparison of container supply chain costs for Esperance grain to South-East Asia and southern India via Fremantle and Esperance ports, and Victorian grain via Melbourne.

Mr Metz observed that the consistent cost competitiveness of grain from Melbourne to both destinations covered by the project explained why national grain traders consistently choose to pack their exports from that port.

“It may be that containers from the Esperance port could be cost competitive to some destinations, however the niche shipping service nature of the current service provider would limit market destinations and hence overall potential demand via a container supply chain,” he said.

In his report, Mr Metz said that despite being able to bring grain to a delivered container terminal basis relatively cheaply, the ocean freight rates from Esperance were not competitive compared to those available from Melbourne or Fremantle.

“The cost advantage prior to shipping is lost in the ocean freight component of the supply chain.

“Currently, national grain traders would not be attracted to pack containers from the Esperance port.”

Mr Metz said that competitive container ocean freight rates required both importers and exporters paying freight.

“The ocean freight rates quoted for exporting containers from Esperance was expensive for two reasons,” he said.

One reason was that a single shipping line servicing Esperance for nickel was not forced to compete for additional business that was not part of its essential revenue stream.

The second reason was that importing of the empty containers meant the ocean freight rate charged for exporting had to cover the empty ship’s loading stevedoring charges, the importing ocean freight as well as the standard exporting charges.

Mr Metz said that an increase in mining based container traffic could change that scenario. He said this increased trade could also be a source of empty containers from which grain exports could begin.

“The proposition of container grain exports from the Esperance port is reliant on further development of the container trade,” he said.

Mr Metz said that although it was unlikely that the back freighting opportunities that existed in capital city ports would ever exist in Esperance, further opportunity for an increased container trade out of the Esperance port might exist via the coupling of the Kalgoorlie logistics and freight hub through the Esperance port rather than Fremantle as is currently the case.

“This is a significant paradigm shift for WA logistics, however one that is not unrealistic given the congestion experienced in Fremantle port land-based services,” he said.