Shipping oranges and lemons

THE CURRENT global financial crisis provides a real opportunity for a sea change in Australian shipping. But the industry does not seem to be able to differentiate between oranges and lemons these days when it comes to shipping cycles.
In the recent boom time for freight rates we were left short. No Australian shippers had invested in Australian vessels through the Howard years, instead waiting for the cornucopia of sweet things promised by the laissez faire policy settings of that government.
So they sucked on the lemons of a tight market with less control over moving their freight. In the interim, the average age of the coastal fleet ballooned.
Now at the bottoming of the cycle, there is some relief to shippers through lower freight rates and therefore lower charter rates.
It is also a wise time to invest in new tonnage for the medium to long term. Yet listening to some in the industry, they still seem to be sucking on that lemon.
With tighter credit and emasculated budgets producing pain and adjustment, it is possible the local industry will not get its act together until the economy picks up, missing the oranges on offer once again.
Productivity
Now is the time for long-term countercyclical capex commitments. The key opportunity is the very favourable commercial conditions combined with the emergence of the new shipping policy coming out of the Rudd government’s inquiry into shipping which recommends favourable fiscal measures.
It is an opportunity not to be missed by firms who rely on shipping for their supply chain needs. 
Not only must the future fiscal environment be supportive but significant expenditure on infrastructure in laying the foundation for real efficiencies and productivity improvement in supply chains and ports needs to be fast tracked by federal/state infrastructure delivery.
Shipping, one of the main pipelines and conveyor belts of coastal and international freight, will then once again become a secure and profitable investment.
Corporations that fell for the Howard shipping policy debacle need to regather their strategy with this new opportunity.
Capex has never been so important and so affordable for major projects reliant on capital productivity.
Some state governments who, guided by those productive investors, are calling for countercyclical investment – and are finding willing partners.
Western Australia and Queensland feature prominently. The Building Australia and Future Funds need to focus quickly on delivery as well.
Careful evaluation of the emerging interest by Chinese and other sovereign equity companies to invest in Australian resources is necessary.
The Federal Government needs to look beyond the onshore impacts and apply conditions on investment decisions.
If we are to partner foreign capital, the quid pro quo is we get a stake in the opportunities.
Take liquified natural gas exports for example: why are we not engineering policy approaches that would see Australian investment in overseas LNG terminals, using Australian technology and engineering/construction expertise, as well as greater investment in the shipping of LNG to build on our 20 years of LNG shipping experience?
Australian ships with Australian crews means Australian employment and all the economic spin offs – in ship provisioning, bunkering, marine insurance and legal services, ship financing, ship repair and maintenance. 
These are the foundation of a maritime cluster, a sustainable sector for a country with our enormous shipping task.
While political luminaries like prime minister Rudd and president Obama have clearly blown the whistle on the days of unrestrained capitalism, a practical analysis on sustainable equity in outcomes in essential industries, in particular, is now critical.
In global supply chains there are great national interest benefits to ensure more shipments of our export commodities occur under CIF/DES shipping terms.
Free on board (FOB) shipping results in a massive transfer of wealth to foreign nations, a massive cost to shippers through demurrage costs and a loss of control over ship scheduling, ship productivity, safety and security.
The benefits flow mainly to the buyer.
Training
Whether it is Rio, Fortescue or any corporation on which our national interest heavily relies, foreign ownership, as with trade agreements, needs to factor this into the conditions of any sale.
Together with fiscal and infrastructure policy promoting the re-investment in our dilapidated and aging fleet, both coastal and international, the renewal of the training regime to secure badly needed competencies in every operational and regulatory aspect of the industry and a genuine partnership and commitment of all stakeholders, there should be plenty of fruit for our shipping and shipper nation.
But let it be sweet rather than sour this time around.

Paddy Crumlin is national secretary of the Maritime Union of Australia.