High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Jasmine Ng
May 22 (Bloomberg) — The union representing tugboat workers at Australia’s Port Hedland, the world’s biggest bulk export terminal, will suspend taking strike action for the next 30 days to seek a settlement after “productive” discussions.
The Maritime Union of Australia will also apply to extend the period in which it can take industrial action by 30 days, it said in an e-mailed statement today. The union represents deckhands at Teekay Shipping (Australia) Pty, which is contracted by BHP Billiton Ltd. to run tugboat operations at the port, located 1,300 kilometers (810 miles) north of Perth.
Iron ore climbed 1.3 percent to $98.80 a metric ton in the past two days, rising from a 20-month low of $97.50 on May 20, as BHP and Fortescue Metals Group Ltd. warned a port strike would paralyze operations, with BHP estimating the disruption may cost users about $94 million a day. Tugboat workers approved stoppages on May 12 amid a dispute over wages and annual leave.
“The potential strike that is looming in West Australia is adding an uncertainty to the market and creating some volatility,” Mark Richardson, head of SSY Futures Ltd. in London, said by e-mail today.
Ore with 62 percent content delivered to the Chinese port of Tianjin rose 0.3 percent today, according to The Steel Index Ltd. The commodity fell 26 percent this year.
The union said it has been in talks with Teekay for 12 months and several issues, including wages and annual leave, have not been resolved.
“Discussions between the two parties this week have been productive and both parties would like to see if we can reach a negotiated outcome without the need for industrial action,” union official Will Tracey said. “Intervention from industry groups and the Federal Government was making the negotiating environment unstable. We have moved to stabilize it.”
Deckhands at Teekay, who work 28 straight days for 12 hours a day, are seeking four weeks annual leave, according to the union. While the award rate for deckhands is to receive 70 percent of a master’s rate, those at Port Hedland get 62 percent, it said. The deckhands are seeking a 40 percent increase over four years, BHP said.
Teekay operates 14 tugs in Port Hedland and is responsible for the technical management and crewing of towage operations, according to KT Maritime Services Australia Pty, a joint venture between Kotug International BV and Teekay Shipping. BHP owns nine of the tugs, with five of the vessels chartered through Kotug, according to KT Maritime’s website.
BHP, the world’s biggest mining company, called the union’s demands “unreasonable” and plans to seek government intervention to stop the strike, its iron ore president Jimmy Wilson told reporters in Perth yesterday. Mining operations may start winding down after two days of strike action, he said.
A strike would lead Fortescue to reduce costs and threaten jobs, Chief Executive Officer Nev Power said. The company is preparing an application under the fair work act, which enables third parties harmed by industrial action to seek orders suspending the strike, the company said. A spokesman representing Teekay was not immediately able to comment.
BHP spokeswoman Fiona Hadley said the company’s comments yesterday were its latest position.
A total of 318 million tons of iron ore were shipped through Port Hedland last year, data from the port authority showed. That’s about 26 percent of global seaborne trade in 2013, according to Bloomberg calculations based on figures from Goldman Sachs Group Inc.
–With assistance from Phoebe Sedgman in Melbourne. Copyright 2014 Bloomberg.
Join the 67,723 members that receive our newsletter.
Have a news tip? Let us know.