Selling to Australia more quickly and cheaply
Selling to Australia more quickly and cheaply
Duncan Graham, Contributor, Surabaya
Is the shortest distance between two points always a straight
line? Not in the world of international shipping.
What comes first -- port or freight? It's a question much
like the chicken and the egg.
These and other conundrums have been plaguing the mind of
Australian transport engineer John Hile for several years as he
has pondered the biggest question of all: How can trade between
Indonesia and Australia be boosted and made more efficient?
In mid-September a ship carrying 55 containers of paper
products from East Java quietly sailed directly from Surabaya to
Darwin as a trial run for what may become a new regular service.
The big boxes were then put on a train and trucks destined for
shops in the capital cities of the southern states.
From go to whoa the journey took about eight days, around one-
third of the time it normally takes on the traditional sea route
Surabaya-Singapore-Melbourne.
To the lay person the logistics look clear enough: Why send
goods north to Singapore before sending them south to Australia?
But of course it is not that simple, as Hile, the landbridging
manager for Australian freight company Toll North, explained:
"Surabaya has traditionally been a feeder port for the hub of
Singapore. Containers are offloaded there and then mixed with
others destined for Australia," he said.
"Australia's major population centers are on the southeast
corner of the continent. Darwin may be a lot closer to
Indonesia, but it's a tiny city and hasn't been a calling port
for ships from Singapore."
It's not just Hile who is trying to alter the shape of
international trade. In late September a team from the Northern
Territory Government, Australian freight carriers and train
operators were in Surabaya trying to persuade shippers to change
their routes.
Last year more than one million TEUs left Surabaya's container
terminal. (A TEU is the unpronounceable industry term for a
"twenty-foot-equivalent unit".) The port at Tanjung Perak could
handle double this load.
Economies of scale are pushing the shipping industry toward
even bigger vessels. The monsters now carrying 8,000 TEUs will
soon be dwarfed by ships with a capacity of 12,500. And, of
course, they'll need deeper harbors, more cranes and larger ports
to unload.
To make a Surabaya-Darwin connection viable exporters need to
know that a scheduled freight service would be departing
Indonesia's second-largest port every week.
But without subsidies or guaranteed loadings a shipping
company would be reluctant to initiate a regular sailing in the
hope that freight will magically appear.
So the Australians spent time trying to stitch deals with
shippers and lobbying local manufacturers. Many were among the
230 delegates from more than 25 nations at the ASEAN Ports and
Shipping Conference in Surabaya.
The Aussie's arguments were based on savings through the
opening last year of the new rail line. This links Darwin to
Adelaide 3,000 kilometers to the south, and the east-west network
to all state capitals.
There is also an all-weather highway between Darwin and
Adelaide open to road trains, and the port of Darwin is being
massively upgraded.
"We're not trying to take over existing shipping lines to
eastern Australia," said John Parkes, general manager for
international marketing of Freightlink, the operators of the
north-south rail line. "We're offering an alternative route."
But his attempted appeasement of the big-time freight shifters
who snap their fingers at trade movements worth millions was
undermined when he revealed ambitions to shift more than 350
containers out of Darwin on every train.
If successful, the ports in Sydney, Melbourne, Adelaide,
Brisbane and Fremantle would see a significant downturn in
business. Clearly some noses would be put out of joint.
Already, the Australian media has carried stories of the high
cost of the rail link and importers preferring to use trucks.
Construction faults at Darwin wharf have also made the industry
edgy about shifting from the tried and trusted ways of taking
goods the long way round.
But the Australian hustlers in East Java flicked away such
naysaying as "politics", and pushed on with their sales pitch.
There may not be much romance in a long steel box that looks
the same in Antwerp or Zanzibar but the enthusiastic Australians
made the business of picking up and plonking down lots of TEUs
sound like one great adventure.
"Change is always difficult but this new route through Darwin
will happen because the commercial realities will make it
happen," said Hile.
"At the moment Indonesia is no better off than China or India
in getting its products into Australia through the current trade
routes.
"East Java has a huge industrial capacity -- much of it
underutilized -- with a low-cost skilled labor force. In the
country next door is a major market. Australia has a tiny
manufacturing industry and not enough workers. The potential for
Surabaya is huge (see adjacent story).
"There's a huge push to have this going within six months --
and we will be successful."