Botany Bays future under scrutiny

Last October, the New South Wales government announced a major port development plan for the state saying the general cargo and container berths in Sydney Harbour’s Port Jackson would close by 2006, opening up more iconic Sydney waterfront for mass leisure and leaving only car carriers and tankers still using Sydney’s original port.

The displaced general cargo and regional container services are to be lured to a new facility at Port Kembla, south of Sydney, though most of the potential customers are yet to be convinced. Sydney’s main container port on Botany Bay will then continue on to around 2025 when its capacity will reach exhaustion at a projected 3-3.3mTEUs. Beyond 2025, Sydney’s growth is to move north to Newcastle, which by then should have built the A$700m worth of road and rail upgrades the northern port now lacks if it is to serve Sydney with containers.

That’s the plan. But first, government and SPC has to get the new Port Botany expansion over the line.

Without it, Sydney fears it will hit the capacity buffers as early as 2010, even with a major upgrade of the Patrick terminal in the meantime.

The government’s final move in its October announcement was to hand the Botany decision over to an independent commission of inquiry, in the earnest hope that the project will withstand the scrutiny and convince noisy public opponents that the terminal should go ahead. There are plenty who think that expanding a port now surrounded by miles of suburbs should just be forgotten, and expansion moved immediately to Newcastle or Port Kembla were the growth would be welcome.

The environmental lobby fears that reclamation will disturb old industrial sediments in Botany Bay, worst of all, the plume of toxic waste creeping through the subsoil towards the Bay shore from under the nearby Orica (formerly ICI) explosives factory. Then there the neighbouring residents who believe that even if SPC succeeds in getting its planned 40% of urban box movements onto rail, rising volumes will still double the congestion of local roads.

Sydney Ports Corp chief executive Greg Martin has in effect argued that growth will do the opposite: that the pressure of higher throughputs will force greater efficiency in the whole chain, with the rather conservative local trucking industry finally put on a proper 24/7 basis that will spread out the present traffic peaks.

Before the NSW Parliament’s upper house, major stevedore P&O Ports last month threw in the bombshell of an alternative design to the SPC’s proposal.

P&O Ports main argument against the main SPC proposal is commercial. Its rival Patrick already has options for 400 metres of quay and 18 hectares of space on the new land as a result of earlier giving up berths in Darling Harbour. The rest will be tendered out, going to either P&O Ports or any other third operator that wants to bid.

P&O Ports’ local managing director Tim Blood says that at best (that is, assuming P&O Ports wins the rest of the facility), the SPC’s single extension will leave its Port Botany operations split. But Blood also raised eyebrows by stating explicitly to the parliamentary inquiry that the SPC plan to bid out some of the space threatened to upset the “balanced duopoly” in Australian box stevedoring.

The long-standing duopoly argument assumes that the two stevedores both have roughly equal space in all the major Australian ports with which to compete in offering all-port stevedoring contracts to the liner consortia. Putting all the new space in Sydney either in the hands of Patrick, or split with a third party would upset that equation.

The perception of a carve-up is highly unpopular with shipping lines and exporters. It is also the target of state governments who reckon they can win a few points by inviting in third competitors to make their ports more competitive.

Patrick managing director Chris Corrigan points out that scale is now massively important, especially contiguous berth lengths in the P&O plan that allow the optimum deployment of cranes.

This is also exactly the kind of advantage that Melbourne could have if Victoria had encouraged the two stevedores to consolidate and optimise their Swanson Dock facilities, says Corrigan, instead of inhibiting new investment with politically popular (and so far markedly unsuccessful) contests to get in a third stevedore to break the duopoly.

Fragmentation is to be avoided, says Corrigan, who suggests the P&O Ports alternative should be studied carefully.

P&O Ports alternative design shows instead an extension each for the existing Patrick and P&O Ports facilities.

The company says that it can get the same working space out of a smaller area than the SPC design (41 hectares against 56 hectares) and would need 20% less dredging.

The shipping industry has already panned the P&O plan, saying the SPC plan has an extra 20 hectares back-up space which is needed to handle growth. There are also fears that the alternative hands more ammunition to those who want no terminal at all, and could set back a badly needed facility.

STOP PRESS:

The commission of independent inquiry into Port Botany expansion was adjourned for four months just minutes after starting on May 31.

This is to allow the commission to look at the late-entry P&O Ports alternative proposal, alongside the principal Sydney Ports Corporation plan.