5th July 2007

Review of the Interface between the Land Transport Industries and the Stevedores at Independent Pricing and Regulatory Tribunal of New South Wales Port Botany PO Box Q 290 QVB Post Office NS W 1230

Dear Tribunal Members,

This submission is supplementary to QR National's response to the Review of the Interface between the Land Transport Industries and the Stevedores at Port Botany.

QR National (QR) is the parent company of CRT Group Pty Ltd (CRT). CRT is a national logistics business with integrated services across road, rail and sea. It has a broad customer base and specialises in handling, packaging warehousing and distributing polymer and food ingredient products.

As indicated in the introduction of QR's submission, CRT has been a pioneer in attempting to establish metropolitan port shuttle services between its terminal in Sydney (Yennora) and Port Botany; and between its terminal in Melbourne (Altona North) and the Port of Melbourne.

Unfortunately, the Melbourne service, which was owned and operated by CRT was terminated on 1 8"' February 2007 due to factors such as low priced road transport alternatives and the lack of support for short haul rail. The Yennora - Port Botany service, which is subcontracted to Patrick, remains a regular service operating five days per week.

The "Other Industries - Issues Paper May 2007" poses a number of specific issues on which the Tribunal has requested comment from stakeholders. I shall address these immediately prior to relating the lessons from the Melbourne port shuttle service.

Quality Endorscd Cctmparrj

Australian Standard IS0 9002 LIC No 2027 DLIQ Certn Serv~ccs

Response: Efficiencies in costs and throughput flow would be achieved if shippers were required to notify stevedores prior to entry into the Port as to which area the import containers are to be directed, i.e. road stack or the rail stack, to circumvent additional charges and delays when the container is located incorrectly.

Response : Inefficiencies at the wharf will see the incomplete loading of a train ex the Port due to the expiration of a rail window.

Additional infrastructure at the wharf to reduce the splitting and shunting of rakes of wagons is certainly one way to reduce costs to all.

Stevedore charges (container handling fees for shipping containers transported by rail/VBS access charges for shipping containers transported by road) should be reviewed/restructured to establish a common stevedore shipping container handling fee regardless of the mode of transport used. Any increase in the current VBS fee from such a review would be compensated by the benefits that would be derived from the targeted modal shift along the complete supply chain, as documented by P & 0 in Attachment 1 - Observations from an intermodal operation, Extract from Victorian Freight and Logistics Council Freight Intermodal EfJiciency Group Industry Intermodal Awareness Program. Stakeholders that would benefit include exporters and importers; road transport operators who support the intermodal operation; rail service providers; rail track owners and operators; operators of the intermodal hubs; residents living on the affected local roads; State Government in the delivery of policy documents (40% rail target); port managers through an increase in port capacity without the need for additional short-term capital expenditure; and terminal operators.

Response: The volume of containers moved will be dependent upon the availability of infrastructure to allow for increased train lengths to maximise volume throughput and reduction in train splits/shunts.

4.2 Rail Charges

I k ~ r l - rcril ic~,-ririi?cri (IL~C*CS.F c/~trr*~qc)s c.trl~lcItr/etl:~ C6%~4t trf-e the cosfs /.elciting io the .SC~~I .~L~L ' . \ /O H'III 'CII i l ? ~ C / ? L I I - ~ ~ . C perttrin:' ATL' /he c./?tlrgcj~ C O X / reflccfil?d

@ @%tit *fircior*.~ c/c9,t~,-~r~inc I b~hicl~ nlotke (!f'/r~i~?.s[?o~~*/ is u.se(/ / O N ? O ~ * C sfji~ity!?t :) Is p icv or 1-elitrhili~. jjrrjrac itnj?ortrrr?l. 01- crre il~er-c (~t/?cjr..Ji~ctor.\.s c?f"mor+e nofe?

Yennora Intermodal operator does not impose any charges on the rail operator who services the Port of Botany into/out of Yennora.

The stevedoring charges for 'lifts' should be comparable to the VBS charges.

Rail is under utilized due to track access to and from the port and, windows available at the port due in part, the track access issue. Costs are also of concern.

4.5Hours of operation T/IC~ 7i-ihzm~il ir?ldlr.s choi~l~rrcr?/ on r h ~ fi~llo~.it?'q ( I Z ~ C . Y / ~ O I I S OM /hc issire c!f'1?(1~r1:v (?f' O I [ ~ ~ ~ L E / ion:

Response: 24/7 operation at the port will allow greater throughput of vehicles and trains to service the container movements.

General Comments:

Lessons from CRT Port Shuttle Melbourne Operation:

The expensive lesson learned from the now defunct Melbourne port shuttle operation is that the general market place will not support metropolitan port shuttle rail services when road transport is a much cheaper alternative, principally as a result of the differential charges levied on shipping containers at the port, and in part due to the service provider (Pacific National).

What CRT's experience has shown is that a level playing field must be created for the transport of freight by road and rail for short haul rail to be a financially viable transport alternative.

While charges need to be reviewed along the whole logistics supply chain, the major impediment which prevented short haul (metropolitan port shuttle) rail from being a viable alternative to road transport in Melbourne was the difference between the stevedore VBS fee applicable to shipping containers delivered or collected by truck and the stevedore shipping container handling fee applicable to shipping containers delivered or collected by rail, as represented in Table 1 : CRT Costs by Rail vs CRT Costs by Road.

Cost comparisons were based on a rail payload of 60 teu. The rail rate was cost only with no profit margin. In dollar terms, the difference between transporting a teu by road and rail from CRT's Altona North Terminal to the Port of Melbourne was originally $53 in favour of road.

Table 1

CRT Costs by Rail vs CRT Costs by Road

CRT Port Shuttle

Y'gS Slot Booki

The gap between road and rail widened per teu when increases in charges were introduced as follou7s:

From 1'' December 2006, P & 0 forecast an increase in its stevedore charges for CRT Port Shuttle per t3-enty foot container (TEU) (a 39 per cent increase) and per forty foot container (FEU) (a 23 per cent increase).

From lSt October 2006, Patrick increased its charges for CRT Port Shuttle (to a maximum of 60 TEU) a 1.6 per cent increase.

Patrick attempted to support the Victorian State Government's 30% rail share target by offering the following alternate rate: A $4 per TEU VBS booking fee (as currently applies to containers delivered by road freight) but based upon 100% utilisation of the train's 60 teu capacity which would translate to $480 per Port Shuttle train load (fully loaded return trip). However, a penalty fee of $6,000 (six thousand dollars) per train PLUS labour costs of an unspecified amount would be levied if Port Shuttle arrived or left later than the scheduled time. While no penalty would have been levied if the delay was caused by Patrick, there were simply too many factors beyond CRT's control that could affect the punctuality of the Port Shuttle service. Firstly, track access to and from the Port is determined by ARTC who would not allow Port Shuttle to leave CRT or the Port until clear access was able to be provided in between other access demands on the rail track by commuter and other freight trains. Secondly, the train used for the Port Shuttle service was hired from Pacific National who would not agree to such penalty being passed on to them for any delay that may be attributed to their service operations.

Further, Pacific National had advised that the hire rate for their train for the Port Shuttle service was to be increased per trip (a 70.69 per cent increase) from 1'' January 1 2007.

As you would appreciate, such increases could not be sustained and became the final straw that broke the camel's back.

CRT is not able to provide the same road versus rail cost comparison for its Yennora- Port Botany Shuttle as this service is provided to CRT by Patrick at a negotiated contract rate. However, what appears to be different between Melbourne and Sydney is that road congestion is greater in Sydney, resulting in longer travel times to and from the port. Such factorlimpact of road congestion appears to have been costed into road freight transport rates in Sydney, thereby making it easier for short haul rail to be offered as an alternative to road based transport in Sydney than in Melbourne.

As documented in the Victorian Freight and Logistics Council Consultation Paper "A Toolkit for the Development of Internodal Hubs"(0ctober 2006):

addition, rail has the shor+--- ch --a 7 ' 0 k-lf3 her- i b P 1 J

with road.

As stated in the submission of QR National, CRT's experience supports the following statement made in the Draft Melbourne Port@l Strategy (August 2006) :

"Promoting an increase in rail activity will require a systematic rail growth plan that recognises the current lack of cost competitiveness ofshort-haul urban freight rail. Such a plan will also need to address issues such as terminal governance, truck access, operating prolocols and other policy iniliutives considered appropriate to encourage the use ofrail shuttles from the port to outer-urban intermodal terminals. "

While rail is able to compete effectively with road transport over regional and interstate distances, it cannot over the shorter distances of the metropolitan rail network until governments are able to principally obtain the cooperation of the stevedores to a restructure of charges that will help bring into effect a common charge for the handling of shipping containers at the port, regardless of the mode of transport.

There are many benefits to freight being transported to and from the port via rail as have been documented by P & 0 in "Observations from an intermodal operation" in the VFLC Industry Intermodal Awareness Program Report (April 2004) (Refer to Attachment 1). Such benefits should support the case for the setting of a common stevedore shipping container handling fee, particularly, as stated by P & 0, that the benefits that would be derived from a modal shift from road to rail would be equally shared by many participants in the complete supply chain --- as well as contribute to the general public good of our society.

CRT Group would be pleased to answer any specific questions by the Tribunal. Should you require any clarification on the content of this submission, please contact Ken Batten, Commercial Manager - Rail, on (03) 9290 1783.

Yours sincerely, I

Cameron Dunn Chief Executive Officer