Pulling New Zealand’s port family together

The Port of Napier is seeking capital to expand
The Port of Napier is seeking capital to expand
There's a desire to move Auckland away from its city location. Credit: Michael Coghlan, Flickr, CC BY-SA 2.0
There's a desire to move Auckland away from its city location. Credit: Michael Coghlan, Flickr, CC BY-SA 2.0
Northport is looking to diversify beyond timber handling
Northport is looking to diversify beyond timber handling
Industry Database

Dave MacIntyre examines how a government review might bring the country’s ports closer

As New Zealand headed into 2019, the question consuming the ports industry was how the country's northern ports — including the two biggest, Tauranga and Auckland — will be shaped by the Government's Upper North Island Supply Chain Strategy review.

The review has the brief to be “a comprehensive ... logistics and freight review to ensure New Zealand's supply chain is fit for purpose in the longer-term” and it appears to be all-embracing.

Its genesis was the desire by Aucklanders and their city council to move the Ports of Auckland away from its current location, thereby … delivering valuable downtown waterfront back to the city.

Ironically, while it wants the port to move, Auckland Council is concerned that it retains control over the revenue streams it receives from the port – a NZ$51.1m (US$34.5m) dividend last year. Just before Christmas, Mayor Phil Goff wrote to the chair of the review, concerned that there might be pre-determination in the review panel to favour a move to Northport, which is in another regional authority's jurisdiction.

Question of location

However, the question of where a new port could be situated has become only one part of the equation.

If it moves east, closer to its big rival Tauranga, is there sense in combining the two into a super-port in the Firth of Thames? Or should the focus be to the north, with the emerging Northport becoming part of the solution for container and car traffic in addition to its current bulk focus?

If that is to be the case, there needs to be serious investment in the rail and road links that connect Northport to Auckland, as well as development of inland ports and distribution centres.

With about 55% of New Zealand's freight originating in or destined for the Northland, Auckland, Waikato and Bay of Plenty regions, an agreed investment strategy is crucial.

This review needs to provide clear recommendations for the Government to take action, in order to give a way forward for the manner in which the ports, rail and roads in the upper North Island will develop over the next 30 years.

The ports industry will be awaiting a Government announcement for the review to report back, with great interest.

Automation project

Meanwhile Ports of Auckland is not standing still. Whatever the review recommends, it knows it has to make the best out of its current footprint for a generation or more to come, while a new port is built.

It is undertaking a massive automation project to become the first in New Zealand to use automated straddle carriers to load and unload trucks and to operate the container yard.

There is also a “world first” element to the project as this is the first time a hybrid operation has been planned where manually-driven straddles are retained and have to interface with automated straddles.

The port believes productivity would be lost if transfers between the yard and ship-to-shore cranes were handled by automation.

The project team is having to make do with tiny pockets of space to erect and trial the auto strads because Fergusson Terminal is a major working area which is already under space pressure.

Despite these challenges, the project is on target to go live late 2019 and deliver immediate benefits.

It must also fit in with the Fergusson Container Terminal Extension Project that has been underway since the early 2000s. A reclamation will increase the yard area by several hectares. The project also includes a 50-metre extension northward of the main terminal wharf and the creation of a new Fergusson North Wharf, giving the container terminal a much-needed deepwater third berth.

Auckland's smaller northern neighbour, Northport, is also expanding, irrespective of the Upper North Island Review.

In the last couple of years, it has built on its steady growth in logs, gained a foothold in ISO tank container traffic and a new liner container shipping service is being provided by MSC, with kiwifruit exports being one of the core export cargoes.

Northport is looking to the future with its own strategic planning document, A Vision for Growth. The vision explores possible expansion options, including the ability to more than double the port's linear berthage to 1,390 metres and expand its footprint from 48 hectares to 75 hectares.

Charge confusion

In Australia, the most contentious issue in the port sector is the infrastructure charges imposed by stevedoring companies, who argue that increasing land and rental costs are forcing them to pass on the cost burden to landside operators (road and rail), and in turn on to Australian importers and exporters.

The fight against the charges is being led by the Container Transport Alliance Australia, the Australian Peak Shippers' Association and the Freight Trade Alliance, who say the charges are being applied with no negotiation, and in most jurisdictions, with no independent monitoring of efficiency and supply chain performance outcomes.

The critics are having some success in their efforts. In October the Victorian Minister for Ports, Luke Donnellan, said the Government was “bringing forward a review into regulating pricing and charges ... following recently announced increases in stevedore infrastructure charges.”

CTAA, APSA and FTA have continued to urge the NSW Government to establish an investigation into the nature of the infrastructure charges and their impact on container trades through Port Botany.

They argue the Government has powers under the Ports and Maritime Administration Amendment (Port Botany Landside Improvement Strategy) Regulation 2010 to “regulate the charges that may be imposed by the stevedore ... for or in connection with the operation or provision of facilities or services of the port-related supply chain at Port Botany”.

Pressure is also being applied to the Queensland Government after DP World Australia announced increases at Brisbane of 68% from A$38.75 per full container to A$65.15.

Competition calls

Above all, the critics do not understand why competition watchdog the Australian Competition and Consumer Commission has not acted. They have now received a response from the ACCC chairman, Rod Sims, confirming that an assessment is ongoing into whether the stevedore contracts contain unfair contract terms. It is expected the assessment will conclude soon.

Neil Chambers, director of the CTAA, told Port Strategy that a “price war” to win shipping line contracts is behind the whole issue.

“[There is] a 'rebalancing' away from quayside revenue (the stevedores just can't negotiate higher rates for stevedore services from the shipping lines due to higher levels of stevedoring competition on the east coast of Australia) to landside revenue collection.

“It is far less about rising stevedoring costs. Those initial statements from stevedores have been largely debunked. Hence the call on the Federal and/or State Governments to intervene to regulate this pricing behaviour.”

Meanwhile the call for ACCC action continues. The CTAA's ideal negotiated outcome with the stevedores would be service level agreements, with undertakings on both sides regarding levels of performance, and monetary compensation for poor performance.



NAPIER CONSIDERS SHARE PLACEMENT

The North Island New Zealand port of Napier is looking at expansion via a capital-raising route through a possible share float.

Owner Hawke's Bay Regional Council is canvassing the idea of floating just less than half of the Port of Napier on the NZX stock market - raising in the region of NZ$181m, to give it the capital backing to build a new wharf and undertake other works.

In December the council voted to continue work on a minority share float on the condition that any float provided for local participation, and that an initial sale of between 33%-45% of the port would be floated.

This was the preferred option compared with raising money from rates, selling a minority stake to a partner or sale of a long-term lease to an operator.

At the moment, the port cannot take on more debt to fund its own development. It needs access to new capital to fund an investment programme of NZ$320m-$350m over the next ten years.

If it floats enough shares to raise about NZ$181m, it can pay off much of the port's existing debt, provide a fund to kickstart the investment programme, and then leave the port to self-fund its growth. Forecasts indicate the cargo volume is likely to increase by 26% by 2028.

Staff are to deliver an initial public offering plan by April for approval by council with the object of completing the offer by the September quarter.

The port has been 100% publicly owned through the Hawke's Bay regional investment company, a subsidiary of the regional council, since 1989.

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