Sea change expected for New Zealand ports

Fierce competition between New Zealand ports and “raids” on neighbours’ export cargoes are expected to prevail as the new era of larger container ships takes hold in New Zealand.

Despite an expected drop in the number of working ports around the country – at present 13 – the establishment of inland ports and distribution centres is under way, as are emerging alliances between ports and with key customers.

The “Transport, logistics and distribution” report by Westpac’s industry economist, David Norman, predicts “dramatic changes” nationwide for the six subsectors involved in coming years.

“We expect that within the next 10 to 20 years the number of international ports will fall, as the move to larger ships will mean expensive infrastructure upgrades will not make make [economic] sense for some ports,” he said.

In the short term, China’s weaker economy meant there was an oversupply of shipping capacity, which would accelerate the move to more efficient, larger ships.

Within the next five to 10 years, the “normal” capacity of container ships visiting New Zealand was expected to move from the present 2500-4000 TEU (twenty foot equivalent units) to 5000-8000 TEUs.

“It’s inevitable that a handful of ports will continue to serve the increasingly large vessels in a hubbing model, where the large ships dock at just a few ports and smaller ships provide coastal shipping connections to the smaller ports,” Norman said.

While consolidation of New Zealand’s port sector has been talked about for more than a decade, Norman’s analysis recaps more recent events in the otherwise glacial sector, showing changes are actually taking shape.

“Ports will need to compete fiercely to remain viable,” he said.

He expected more “tie-ups” and inland port development in an attempt to secure greater cargo throughput.

“Several industry sources suggested that competition between ports to grow throughput was fierce, with regular raids on customers in neighbouring catchments,” he said.

The use of inland ports, connected by rail to a port, enabled ports to expand their area of service, he said.

A recent example was Port of Tauranga’s purchase of a share in Timaru’s PrimePort.

By using coastal shipping, Tauranga is able to funnel more containers through its port while accessing the large hinterland served by Primeport.

Through a separate alliance between Port of Tauranga and the freight company owned by Fonterra and Silver Fern Farms, Primeport has re-secured freight movements from Fonterra’s Clandeboye plant.

“We expect to see further alliances or cross-owner-ship structures emerge as the larger ports seek to ensure growth in throughput, particularly of containerised freight,” Norman said.

Port Otago is rated by Mr Norman as the sixth-largest port, by export-only volumes, while its combination of import/export has Port Chalmers ranked seventh.

Ranked first to sixth by export/import volumes are Tauranga, Whangarei, Auckland, Lyttelton, Napier and Wellington, with the remaining “all other ports” otherwise second only to Tauranga.

Auckland and Whangarei were predominantly import centres, while Tauranga, Lyttelton, Napier and Port Chalmers were export centres, he said.

Norman did not go into details of Port Otago’s performance but it had bought, and since sold, a controlling blocking stake in formerly listed Lyttelton Port of Christchurch, and maintains a foothold in Timaru, where it rails a small number of containers annually to Port Chalmers.

While not having developed a full “inland port” facility, it has a rail yard and storage area in Mosgiel and is expanding its warehousing facilities at both Port Chalmers and Sawyers Bay.

Also, Port Otago and Tauranga are the only major ports with channel widening and deepening programmes under way, in anticipation of larger vessels calling, albeit there is no indication yet when they will arrive.

“A potential outcome is four to six ports in New Zealand being able to handle larger vessels, with the rest being served by coastal shipping and other means of bringing products to and from ports,” he said.

Norman said with the smaller ports unlikely to be served by the larger vessels, coastal shipping, road and rail would become more important in delivering products.

Another issue for Norman is that council ownership of ports may act as a “roadblock to rationalisation” that would otherwise take place.

The Christchurch City Council recently bought all the shares of listed Lyttelton Port of Christchurch and removed it from the stock exchange, while Port Otago has since 1988 been 100% owned by the Otago Regional Council.

“The question may become how much councils are willing for their ratepayers to lose before acknowledging that a port is no longer viable, should the switch to the hubbing model not be accompanied by a step up in coastal shipping,” Mr Norman said.

The NZTA estimates that in the year to June, 29% of imported containers were empty, along with 15% of exported containers.

“Inland ports will also be used more to bring product to the container, rather than the opposite, in an effort to minimise the kilometres travelled by empty containers,” he said.

There was a hypothetical benefit that with more containers being full in both directions, there would be a corresponding reduction in the cost of freight services, he said.

Inland ports already established include at Palmerston North, Rolleston, Wiri and Mt Maunganui.

“This effort [by port companies] to increase their presence beyond the chain-link fence will see ports continue to look at acquisitions at other ports, and at developing inland ports that will not only grow capacity, but will create links closer to areas they seek to target for growth,” he said.



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