Australia: ABB announces changes to charge structure

A third poor season in four years, entry into a reformed marketing environment and the demand by customers for additional services, has led to ABB Grain announcing an amended storage and handling charge structure for the current harvest, in a press release, October 15.

Executive manager group operations, John Warda, said ABB needed to pass costs on to marketers following a number of years of absorbing elements of service provision costs. However, any increase would be dependant on services required by individual marketers.

“The harsh reality is that at some point charges for services need to be realistically priced to reflect costs,” he said.

ABB will pass on the full CPI price rise to users of its infrastructure, following several years of not passing on the full measure.

CPI reflects a basket of goods, however some components of the CPI basket affect ABB’s operations more significantly such as fuel, which has increased significantly and is a major input cost for ABB.

“We’re also facing far greater costs to hire and retain sufficient staff to get through the harvest and, of course, we’re competing with other sectors offering very attractive wage rates to recruit employees.”

ABB will also introduce a volume based component to the charge structure. In below average years an extra charge will be introduced to assist with maintaining infrastructure, but in high volume years customers will see a reduction in charges.

“ABB, as owner and manager of an extensive network of reliable and flexible storage and handling facilities and export terminals, recognises the need for ongoing maintenance of this investment,” he said. “Even in years of low harvest production we must maintain this network, so these volume variation charges take account of that.”

Next year ABB’s new world-class deep sea grain terminal at Outer Harbor will be completed. This facility was very much driven by marketers and the wider industry that stand to benefit by the larger ships that will call there and the efficiencies that will generate.

“At over $100m Outer Harbor is a major investment by the company and represents a significant commitment to the industry. ABB has always indicated that it needs to recover a commercial rate of return from this investment, however the sea-freight cost savings and loading efficiencies derived from an efficient Outer Harbor will deliver a net benefit to growers.”

Under ABB’s new charging structure, incentives would be offered to large volume users of its facilities, in line with efficiencies achieved across services ABB provided.

“Large volume users of ABB’s services will be rewarded with a scaled option of fees, reflecting efficiencies they present to the business in stock management and accumulation,” Mr Warda said.

Being a service provider in a fully deregulated barley market, ABB now dealt with a far greater number of customers than previously and faced increasing administration and service costs.

In summary this years charges will include a CPI increase and an Outer Harbour charge, with the volume variation component taking effect due to a below average season.

17 October, 2007