Wrightson Accuses Ports Of Exploiting Log Exporter
Wrightson Forestry Services Accuses Ports Of Exploiting Log Exporters
Leading forest services company Wrightson Forestry Services claims some port companies are exploiting exporters by charging unreasonable penalty storage fees for logs stored on port premises. In particular, the Port of Tauranga and Northport have been singled out for unfair charges – accusations that have been flatly denied by these two port companies.
Wrightson Forestry Services’ export manager Phil Melhopt, of Christchurch, describes the port companies’ behaviour as exploitative and damaging to the forest industry.
“The penalties are hitting forest and woodlot owners at a time when they’re already struggling to deal with losses as a result of high shipping costs, increasingly disadvantageous exchange rates and depressed export markets,” he says.
“These are simply ‘kick you when you’re down’ charges that monopolistic port companies impose on exporters to maintain or even increase revenues while the forestry sector faces a difficult export environment. The end result will be bad for all forest owners and suppliers to the forest industry. Some service providers could be forced out of business.”
Melhopt says long-term effects could see reduced forestry activity and lower revenues to the port companies. He points the finger squarely at Port of Tauranga and Northport although is quick to point out they are not alone.
“The standard log storage rate at Port of Tauranga is 80c per JASm for the first six weeks. After 10 weeks, the rate increases by 94c per week. Only recently, we paid $4.71 per JASm for storage on consignment to Korea ex-Tauranga. This was $3.91 or 480 per cent more than was budgeted.
“The penalty rates at Northport are even higher. That port company recently refused to discount penalty rates in order to ease the burden on exporters.”
Melhopt points out that suppliers still incur high penalty charges on their inventory while the ports have space available and they (the port companies) are not being disadvantaged through logs not moving within six weeks.
“Margins on export logs are low and any cost increases have a significant impact. Wrightson Forestry Services and others have been forced to reduce export prices to growers as a result. Some operations may be forced to close.”
Port of Tauranga CEO Jon Mayson says the structure of charges at Tauranga has not changed and exporters are creating their own problem leaving logs sitting, taking up space and penalising other exporters.
“It should be remembered we don’t make money out of storage, only out of throughput,” he says. “And it’s misleading to say our log storage rate increases by 94c after 10 weeks. In fact the increase is gradual, increasing in small increments weekly after six weeks.”
Mayson says he’s surprised by Wrightson Forestry Services’ criticism of the Port of Tauranga.
“Firstly, they’re not our client. The logs are booked in the name of the export company Trans Pacific Trading (TPT). Secondly, in a downturn, port operators need to increase their storage charges when logs are left lying around. Like any port, we only have a finite amount of land. Penalties encourage exporters to keep the logs moving.”
This is endorsed by Northport general manager Ken Crean who says, as at Tauranga, Wrightson Forestry Services has never been a client of Northport.
“Our contract is with TPT and, as such, it’s simply not in our power to offer discounts to Wrightson Forestry Services,” says Crean.
“More importantly, Northport provides land recently reclaimed at a very substantial cost, for the assembly of export logs awaiting shipment. We are not a provider of long-term storage for logs. At the end of the day, log exporters are best placed to manage their own costs.
“A number of our customers clearly demonstrate an ability to effectively achieve this by ensuring their harvesting (of logs) accurately matches sales and by not having old logs sitting around on high cost port land.”
Wrightson Forestry Services’ Phil Melhopt argues that most exporters have been caught with inventory in recent times. “The ports’ comments indicate they don’t understand the challenges facing the forest industry.”
He also argues the reality is that ports are a storage facility and are first stop for logs after the forestry skid site.
“Port operators are overlooking the fact that exporters are highly motivated to move inventory. Most exporters agree a penalty rate is necessary, but the huge penalties are inequitable and beyond comprehension.”
Melhopt says he’d like to ask the port companies if they have alternative users lining up. If not, he says, they may need to consider price decreases.
“I’d also dispute that the weekly log storage rate increases are small. After six weeks the Port of Tauranga applies a 29 per cent increase and after seven weeks an 88 per cent increase.
“As for claiming Wrightson Forestry Services is not a client of Tauranga or Northport, this is irrelevant. It’s well known in the industry that TPT acts as agent for several exporters, including Wrightsons. Direct costs are borne by Wrightsons and forest owners”