Analysis Of Coastal Shipping Industry In Australia

The cash flow analysis of the Voyage provides details regarding the amount of earning from freights and the details regarding the expenses.  The cash flow analysis shows that there are certain key component of costs that are important in determining the net cash flow. In the Voyage cash flow analysis the key component of cost of the cash flows are the broker’s commission, voyage costs and operating. The voyage costs include bunker oil for main engine, diesel oil, port costs and canal dues. The component of the cost of the voyage that are included in the cash flow are dependent on the various factors that includes both the operational factors and the market factors. The cash flow analysis shows that key component of cost includes broker commission.  The commission of the broker is dependent on the amount of freight. The rate of the broker’s commission is 1.5% of the total freight (Vallely & Brown, 2015). There are certain operational and market factors that affects the commission of the broker this includes demand of the voyage. The broker commission is directly dependent on the freight therefore if the freight increases then the commission will increase and if the freight decreases then the commission will decrease. The increase and decrease of freight is dependent on the factors like overall demand and the international economic condition that affects the international trade. The cash flow analysis shows that another important component of cost are the voyage costs. There are different component of the voyage costs and there are different factors that influences these components of costs of the voyage. The cost oil that are used for the voyage are affected by the consumption price of the oil. The price of the oil is dependent on the international market conditions. It can be said that if the international price of the oil increases then the factor cost of the voyage that are represented by the oil will also increase. The operational factors can also increase the cost of the oil includes. This can happen due to increase in consumption of the oil due to inefficient operations or other external factors that are beyond the control. The voyage costs also includes the port costs and the canal dues. The cost of this factors can increase if the cost charged by the respective authorities increases. In addition to this, the cost of these factors is also dependent on the efficiency of the operation. The cash flow analysis shows that another key component of the cost is the operating costs. The operating costs represents the cost that is incurred for each day of the voyage. That means if the number of days of the voyage increases then the operating cost of the voyage also increases. The operating cost depends on the efficiency with the operations are conducted. That means if the operations are conducted efficiently then the operating costs of the project will be low and vice versa.

The analysis above shows that different component of costs are dependent on different factors. The above points also highlights the factors that influences these costs. Based on the above discussion various measures can be suggested so that the shipping company can manage its cost efficiently. It is suggested that in order to reduce the cost of oil consumption the efficiency of operation should be maintained. In addition to this, the proper maintenance of the machines in which the oil is consumed can also reduce the cost of the oil significantly. It is suggested that the cost related to the port and canal dues can be reduced if the loading and unloading tine at the port is reduced by performing this functions efficiently. The operating cost can be reduced by taking measures foe efficient management of resources reducing wastes and making people accountable for the costs incurred. The brokerage cost can be managed by including clauses that incentivizes the broker that brings more freight to the company. This means that there should be no blanket rate and the rate should be dependent on the level of freight. The measures suggested will help the shipping company in reducing the cost and increase efficiency.

The costal shipping is the modern term of the short sea voyages. The costal shipping is engaged in the moving of cargos and passengers through seas in the coastal areas and across the ocean. In Australia, the majority of the population is located near the sea so the costal trading is very popular in the country. The majority of the export of the country is through sea route therefore it can be said that the shipping plays a significant role in the economy of the country. The report submitted by the house of representative suggests that the costal shipping industry  has seen decline for some years. The data produced in the report shows that out of the total vessels the Australia registered fleet are 46%. This number was 75% in the year 1996 so it can be seen that the participation of the foreign fleet has increased significantly over the years. The increase in the foreign vessels in the carrying of goods have detrimental effect on the costal shipping fleet of Australia. In this, the significance of the barrier that are faced by the international shipping companies in the costal shipping market of Australia is evaluated and analyzed (Venkatesh et al., 2017).

The competitiveness is defined as the ability to confront competition and be successful in the business in the face of the competition. The competitiveness plays a very important part in correcting in efficiencies in the industry. It can be seen that due to intense competition, the wastages are reduced, modern and innovative methods are implemented so that the business can stay ahead in the competition than the others in the industry.  The completion faced can be of two type domestic competition and international competition. Therefore, it can be seen that the competition is a relative factor. It is a very broad concept so there is no definitive agreement on the method of measuring the competition. However, there are certain based on which the competition is generally measured (Brooks, 2014). The highly competitive industry have easy entry and exit procedures for the business. In addition to this, the competitive industry provides equal opportunity to both the domestic and the international participant in the industry. The barrier to entry for the international companies are regarded as a hindrance in the competitiveness of the industry. Therefore, it can be said that an important method in determining the competitiveness of the industry is the analysis of the barriers to the industry and their significance. The significance of the barrier can be analyzed after evaluating the existing regulations and the result it has on the costal shipping industry in Australia.

The common wealth and the state government govern the costal shipping industry. The vessels that are engaged in the interstate shipping are subject to the state regulations however it is seen that the ships generally conforms to the guideline of the commonwealth. The main legislations that governs the costal shipping is the Navigation Act 1912 and it states that the interstate shipping should be licensed. The International ships can also apply for the license but there are certain regulation that should be followed:

• The crews need to be paid in Australia when the vessels are engaged in the costal shipping;
• The foreign vessel should not have the subsidy of the foreign government;

The foreign vessels are allowed to carry cargo under single voyage permits (SVP’s) if the licensed ships are not available or the service provided is adequate. The analysis of the Navigation Act shows that the intention of the legislation is to protect the shipping companies of Australia from the unfair competition of the foreign companies. The decision of allowing the foreign vessels to operate in the costal shipping by obtaining license shows that a need is felt to induce more competition in the industry so that overall service could be improved. The decision of allowing foreign vessels to operate in the costal shipping was to eliminate the ill effect of the cartelization that was prominent in the year 1990’s. The regulation of the Navigation Act are so strict that no foreign vessels have prepared to meet the requirements (Power & Callaghan, 2016). Therefore, it can be said that the strict regulations of the Navigation Act has successfully ensured that the costal trade is effectively reserved for the Australian companies. In the costal trade, the Australian company historically has not faced significant competition from the foreign vessels. Many other countries reserve the costal trade for the domestic vessels. This country includes Canada, Japan, France, Germany and others. The countries that have selected not to reserve the costal shipping are UK, Ireland, Belgium and others. It is sometimes said that in Australia the reservations are more because it has large geographical areas and resources are widely spread.

The Australia Sea Freight 2012-13 report highlights that the 99.5% of the international trade of the country is through the sea route. The number of ships carrying cargos back and forth from the Australian port is ever increasing. The international shipping is in good state however, the costal shipping is not in a much bright state. In 2012-13, the costal freight handled by the Australian port is 97.4 million tones. It has almost decreased by 2% from the figures of 2011-12. Therefore, it can be seen that the long-term trend of the costal trade is in decline. The protectionism of the Navigation Act has discouraged the foreign vessels to enter in the costal shipping. The treading fleet of Australia engaged in the costal shipping has also shown a decline by 13% from the 2006-07 to 2012-13. In an overall analysis, it can be said that in Australia the costal shipping should rather than decreasing.  The figures above shows that the right policy is not being followed. The Navigation Act has caused barrier of entry for foreign vessels and this has resulted in increased cost in the costal trading. The protection to the competition has reduced the efficiency of the industry as a whole and the cost of operation has increased. The increased cost of costal shipping has increased the cost of other resources and goods (Porter, 2015).

The analysis above shows that the barrier that is faced by the international shipping companies is due to the regulations provided in the Navigation Act. The significance of the barrier can be analyzed from the benefit that has been obtained by the industry and the economy as a whole. The analysis of the data above shows that the barrier has reduced efficiency and promoted inefficiency in the industry operation. Therefore, it can be concluded that the entry barrier of the international shipping company in the costal shipping has no positive significance so immediate reform is recommended.

Brooks, M. R. (2014). The Changing Regulation of Coastal Shipping in Australia. Ocean Development & International Law, 45(1), 67-83.

Porter, J. (2015). Australian Coastal Shipping: Navigating Regulatory Reform. Austl. & NZ Mar. LJ, 29, 8.

Power, S. B., & Callaghan, J. (2016). The frequency of major flooding in coastal southeast Australia has significantly increased since the late 19th century. JOurnal Of Southern Hemisphere Earth Systems Science, 66(1), 2-11.

Vallely, G., & Brown, C. (2015). Troubled Waters Ahead? Australia To Open Up Coastal Trades To International Shipping. Ausmarine, 37(8), 22.

Venkatesh, V. G., Zhang, A., Luthra, S., Dubey, R., Subramanian, N., & Mangla, S. (2017). Barriers to coastal shipping development: An Indian perspective. Transportation Research Part D: Transport and Environment, 52, 362-378.