Newcastle looks beyond bulk horizon
The world's foremost coal export port is targeting business diversification initiatives, but its plans are being stymied, writes Iain MacIntyre.
A pending Australian Competition and Consumer Commission (ACCC) determination as to whether terms of the Port Commitment Deeds in New South Wales (NSW) are anti-competitive will prove pivotal to the business diversification plans of the Port of Newcastle.
Shrouded in secrecy until recently, the deeds were drawn up earlier this decade when the NSW State Government privatised several of its ports. Essentially, the deeds require the Port of Newcastle to pay NSW Ports - the owner of Port Botany and Port Kembla - A$100 per container it handles over a 30,000-teu per year threshold. The Port of Newcastle currently only has a nominal, self-geared vessel container trade.
The world's largest coal export port - handling 167m tonnes of predominantly high-quality thermal coal in the last financial year - the Port of Newcastle has drawn up concept plans for a container terminal as the major thrust of its future diversification strategy.
Capable of hosting 10,000-teu vessels, the Mayfield site terminal would present “enormous opportunities” for the port, local supply chain and economy by lowering transport costs and speeding delivery times, says Port of Newcastle chairperson Professor Roy Green.
“We have to look at a future beyond coal, so in conjunction with maintaining our coal trade, we want to diversify and in particular develop a container terminal operation on an existing site,” Prof Green told Port Strategy.
“Right now, the port is only operating at 50% capacity - we do 4,500 vessel movements a year and could double that. The container terminal could handle 2m teu; we have a staged plan for that and a business model.
“About 40% of NSW container exports originate from the Hunter Region and they go straight past the Port of Newcastle and at great cost to Port Botany. We can show the cost savings for exporters and importers in the Hunter Region and northern NSW, and can demonstrate the benefits to the NSW economy, through lower congestion and less need for infrastructure spending in Sydney.
He says that if the Port of Newcastle is allowed to build a viable and competitive large-scale container terminal on a level playing field, then the NSW Government can avoid spending billions of dollars reducing congestion around the Port of Botany. Sydney road users will share their roads with a lot less trucks and Newcastle manufacturers and farmers in the upper Hunter will get a big boost from lower transport costs. “How good is that,” he asks.
Confirming that potential investors have shown interest in developing the container terminal, Prof Green nonetheless says no sod will be turned until the port's current 30,000-teu restriction is lifted. He estimates an annual container throughput of about 250,000 teu-270,000 teu would be required to make such a development viable.
While the potential container terminal is clearly a focal point of the port's diversification from dependence on coal - which currently represents about 95% of its total commodity trade - the Port of Newcastle does have other irons in the fire.
One of which is an A$13.5m investment in infrastructure to support the growth of its cruise shipping trade. In addition to upgrading mooring bollards to accommodate 3,900-passenger cruise ships, the development includes a new 3,000-square-metre cruise terminal building and other facilities which are expected to be completed next year.
“We are exploring all sorts of new business opportunities,” continues Prof Green.
“For example, in recent years we have become a major destination for the enormous wind turbine blades that are being installed in record numbers across the East Coast. Because we don't have a congested city behind our port, it is much easier for such large objects to be landed here in Newcastle.
“The port has also made an A$33m investment into new bulk handling equipment, making us the best bulk import facility on the east coast of Australia.”
Prof Green says as his port has progressed its diversification strategy, one of the main learnings has been to “talk to all affected communities”.
“We have not yet reached out to those who want to create jobs in Newcastle, but have to those who want to reduce congestion in Sydney.
“While it's obvious why the Port of Botany might like to double the number of containers moving through Sydney, it's just as obvious why residents and road users around Sydney's only port might prefer that the Port of Newcastle is allowed to expand instead.”
Although sensibly having an eye to the future, the Port of Newcastle is not expecting its coal trade to disappear imminently. Prof Green notes the port's coal throughput has remained consistent over the past few years, while prices being paid for the commodity have been “strong”.
“Leaving aside the stated intention of most countries to reduce their coal use, the cost of renewable energy is falling far more rapidly than was expected. We have a 98-year lease on the Port of Newcastle and no one thinks that the world will be consuming vast amounts of coal in 90 years' time.
“That said, because the coal mines in the Hunter Valley produce the highest-quality coal at some of the lowest prices in the world, the Port of Newcastle will almost certainly be the port of departure for the last shipment of coal exports in the world.
“What is uncertain is how far away that day will be, which is why we are so keen to begin to diversify not just the Port of Newcastle, but the entire Hunter economy. A port is only as strong as the region it serves.”
The ACCC is expected to complete its investigation into the Port Commitment Deeds before the end of the year.
DIVERSITY KEY FOR BRISBANE
Port of Brisbane chief operating officer Peter Keyte speaks positively to Port Strategy about the future outlook for his business, which he describes as “the most diverse capital city port in the country”, handling about 450 different products and commodities annually.
“This diversity is a key strength and is a direct result of the needs of the catchment we serve and the visionary planning of the port precinct over 40 years ago,” he says.
“By positioning the Port of Brisbane at the mouth of the Brisbane River, we have the space to incorporate multiple bulk precincts, including bulk liquids, resources and grains. We also have 29 cargo wharves covering all commodities with 12 allocated for general cargo and container handling.”
Crucially, says Mr Keyte, the Port of Brisbane has capacity to grow even further - an attribute observed to be unique among ports in capital cities.
“We are not constrained by suburban areas and new land development is a direct result of our shipping channel management activities.
“The Port of Brisbane is uniquely placed to sustainably grow well into the future, locking in our diverse product base and protecting against disruption in individual markets.”
Said to be the sixth-ranked Australian coal-handling port in terms of volume, the Port of Brisbane's Queensland Bulk Handling (QBH) terminal exports between seven million to eight million tonnes of coal each year across a dedicated berth.
“This number is relatively stable, largely because throughput is dictated by allocated and capped rail freight capacity in the Brisbane network.
“If Brisbane's passenger and rail freight networks were separated and a dedicated freight rail connection from Acacia Ridge to the port was built, throughput could potentially be higher.”
Other Australian coal handling ports approached by Port Strategy declined the opportunity to share their viewpoints and strategies on the issue of diversification.
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