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Ports of Auckland could become a make-or-break issue for the Coalition

An artist’s impression of a port-less Auckland. Graphic/Stop Stealing Our Harbour

An artist’s impression of a port-less Auckland. Graphic/Stop Stealing Our Harbour

New Zealand First appears as closed-minded on the Ports of Auckland as the other vested interests, who are either opposing change or advocating for alternatives.However dysfunctional those charged with providing vital transport infrastructure can be, they somehow always manage an instant massed-wagon-circling at the very mention of reform.

The Government is about to receive reports on both the future location of the Ports of Auckland and the feasibility of upgrading Northland’s rail. Labour’s support partner, New Zealand First, is fervently committed to moving some of Auckland’s port business to Northland, saying it will relieve our biggest city of congestion and bring much-needed growth to the north. For the coalition, this could become a make-or-break issue.

Unfortunately, NZ First appears as closed-minded on the issues as the other vested interests, who are either opposing change or advocating for alternatives, such as Tauranga, the Firth of Thames or Manukau Harbour.

Because of the complex governance and ownership issues of Ports of Auckland and other potentially affected ports and public entities, any Government changes will be extremely hard to negotiate. The choices available will also be sandbagged by the virtual impossibility of getting any case for new or restored rail to stack up financially.

However, the biggest hurdle will be patch protection – not just from commercial interests, but also from public agencies who too quickly forget the wider obligation that their state-conferred monopoly status puts on them.

Chief interested party is Auckland Council, which owns 100% of the Ports of Auckland. It has consistently defended its right to the port’s undiminished annual dividend of more than $50 million – to the point of vowing to build a multistorey waterfront car park for more revenue.

Mayor Phil Goff is adamant the port is essential to Auckland’s future. However, this assertion is debatable, given that a city such as Sydney survives very well with its harbour reserved for cruise ships and cargo sent to Port Botany, Wollongong or Newcastle.

Loss of port revenue would, however, doubtless force Aucklanders to pay for the loss with even higher rates, for benefits mostly accruing outside its boundaries. This would be unfair, especially to those on low incomes, and so politically dangerous that no sane administration would cause it to happen.

Perhaps a better starting point would be to regularise, even centralise, the haphazard patchwork of ports ownership. This would inevitably land the Government with a fat compensation bill, but the existing potpourri of local body, port-specific and private shareholders is a barrier to efficiency. Intra-agency competition and multiple interests – Auckland part-owns Tauranga’s and Northland’s port as well – further occlude the picture.

The National Party’s policy of treating the ports as discrete commercial entities immune from state interference is recklessly hands-off. But, by the same token, Aucklanders may be incensed at seeing their port asset commandeered, especially with NZ First so blatantly using Northland as its electoral base.

Yet, Auckland’s port must somehow be restored to being part of the national ports network. Aucklanders, used to the city’s infamous congestion, would be the first to agree it remains an international embarrassment that a prime waterfront site is used to store second-hand cars. Moving the port would unlock 77ha of superb shore land.

Northland’s Marsden Point tempts as an existing deep-water port, which, with a suitable rail spur from the Auckland line, could handle the business. Tourist and even commuter growth could ensue. Yet, there are other considerations, including the likelihood that moving the port to Northland would hugely increase congestion in Auckland, since most goods exported out of it are produced south of the city and would have to pass through it. Even if some of the goods went by train – and the expense of building rail tracks could itself prove prohibitive – the trains would be more frequent and longer, causing frustrating delays at level crossings. There are also the climate-change considerations, with increased emissions from transporting freight over longer distances.

In New Zealand, 99.7% of all imports and exports travel by sea, so the ports issue is not trivial. Any changes to these assets will affect, for better or worse, numerous other sectors and projects, not least the still-uncosted light rail to Auckland Airport. The sheer complexity and political risk may simply end in inertia. But everyone concerned has a duty to approach this debate with the country’s best interests at heart.

Shareholders would solve Ports of Auckland’s problems

New cranes at Ports of Auckland. Photo / Jason Oxenham
New cranes at Ports of Auckland. Photo / Jason Oxenham

NZ Herald Editorial

COMMENT:

Of all the policies the NZ First Party brought into this coalition Government, the wildest and wackiest was to move the entire port of Auckland to Marsden Pt. The Labour Party agreed only to commission a feasibility study the idea of moving the port and left open the choice of alternative sites. Winston Peters, hoping to hold the Northland seat, promised to move the whole operation to Northport, but the coalition agreement merely directed Northport be given “serious consideration”.

The feasibility study led by former Far North District mayor Wayne Brown is reported to have produced an interim report for the Government and its tentative suggestions ought to be interesting. The fact that ministers will receive at the same time a report on upgrading the railway from Auckland the Marsden Pt suggests Northport is the preferred alternative for at least some of Auckland’s imports.

Doubtless there are countless ways that goods shipped to or from New Zealand could be better shared between various ports, not only for more efficient handling and distribution but also to stop the Auckland port encroaching ever further on the Waitematā harbour.

Doubtless too, the companies running ports would quickly find a more efficient use of them — within the constraints on Auckland — if Ports of Auckland Ltd had commercial shareholders.

Its nearest rivals, Port of Tauranga and Northport, are majority owned by their local bodies but also have tradeable shares which has resulted in a degree of cross-ownership. Tauranga has a stake in Northport, as does Ports of Auckland Ltd. But PoAL is entirely owned by the Auckland Council which has been averse to any of its business going to other ports.

Total public ownership has been a mixed blessing for Auckland citizens. While the council collects all the port’s dividends it suffers a conflict of interest when Aucklanders oppose the port’s further expansion. Despite a long campaign to stop the port company extending wharves for the latest cruise ships, the council is allowing moored “dolphins” and walkways to extend Queens Wharf.

Mayor Phil Goff did not exactly welcome news this week that an interim report of the feasibility study has arrived on ministers’ desks. “Any decisions on the future of Ports of Auckland should have the agreement of the council,” he said. “We accept that at some point the growth of freight into Auckland will outgrow the land available…..” Citizens opposed to further harbour reclamation would say that point was reached some time ago. Goff said the same when he stood for election.

“However, the port is also a critical lifeline of freight into our city,” he says now. No it is not. Freight from any other port could reach Auckland, making room for cruise ships within Auckland port’s existing harbour footprint.

Most of Auckland’s port is unlikely to be going anywhere. The feasibility study should be looking at rationalising the use of all New Zealand Ports but it should not suppose politicians can best decide where freight goes. The Hawke’s Bay Regional Council is planning to partially float its port at Napier. If the Auckland Council did likewise it would see the city’s interests more clearly.

Infrastructure Minister Shane Jones launches the New Zealand Infrastructure Commission

The Government has launched a new independent Crown entity tasked with addressing New Zealand’s “unprecedented infrastructure deficit”.

The New Zealand Infrastructure Commission – Te Waihanga – would look at ways of fixing and further funding areas where infrastructure investment is needed.

Transport projects and urban infrastructure issues would likely be the focus of the new commission.

Infrastructure Minister Shane Jones said New Zealand has an “unprecedented infrastructure deficit” and the commission was tasked with addressing that.

He said New Zealand’s transport and urban infrastructure was struggling to keep up with population growth.

“This infrastructure deficit is manifesting in housing unaffordability, congestion, poor-quality drinking water and lost productivity.”

“That’s simply not good enough,” he said.

The Treasury has estimated the total infrastructure spend over the next five years would be $42 billion – more than double that of the past five years.

Jones said this showed why the establishment of the Infrastructure Commission was needed.

Overall strategy and planning would be the focus of the new body.

In a Cabinet paper, Jones said the Infrastructure Commission would also act as a “shop front” for private companies looking to invest in New Zealand.

He pointed the finger at the previous Government, accusing National of focusing on short-term projects and under-investing in infrastructure projects.

Local Government New Zealand president Dave Cull said unprecedented population growth and the need to adapt for climate change, as well as a low-emissions economy, means that New Zealand was “behind the eight ball in terms of infrastructure investment”.

“Having a central agency to act as a shop front that the private sector can interact with, and having an ability to buy goods and services in bulk will be a massive benefit to regional development projects,” he said.

The Cabinet has approved just over $4 million to establish the commission and legislation establishing the body would go before Parliament in April.

The creation of the Infrastructure Commission has been well flagged – in August last year Jones announced work had begun on establishing the body.

He said Treasury had been unable to properly quantify the value of the infrastructure deficit New Zealand was facing which he said “was not good enough”.

The new body would work to quantify the level of the deficit, as well as figuring out how to fix it.

The Government received 130 submissions on what the body should look like.

“We have heard that message, and we have delivered.”

Ministers will retain final decisions on infrastructure investments, but the Commission will have an independent board and the autonomy it needs to provide robust, impartial advice.

“It will help hold this Government, and future governments, to account and we welcome that,” Jones said.

CargoChain – NZ’s blockchain solution for global logistics

18 December 2018 – Jade Logistics Group, New Zealand’s leading port software company today announced a new business called CargoChain that it believes will revolutionise the way that cargo information is shared across the global supply chain.

The CargoChain platform was borne out of witnessing first-hand an inability to share supply chain information amongst multiple interested parties. David Lindsay, CargoChain CEO said “we observed this first with ports and then looked across the entire supply chain, and the problems were the same. Siloed, important information that supply-chain actors didn’t have, but needed, to make better decisions”.

Lindsay adds that following five years of R&D, CargoChain has created a cargo information sharing and innovation platform that supports the distribution of previously unavailable cargo information, as well as the development of third-party applications. “We believe that the collaborative and independent nature of the CargoChain platform is a first for the global industry.”

“The proposition is made even more powerful as today’s consumers are demanding trust while those involved in the supply chain require full transparency and visibility. We saw the need for a digital platform that provides this by sharing trusted information amongst all supply chain actors.

“CargoChain is one of the few supply chain solutions in the world that has blockchain as an integral working part of its platform to provide this trust.”

“Blockchain is currently right at the top of the technology hype cycle and most companies understand its importance but are really struggling to understand how they might use it in their business. CargoChain takes this pain away, as it already delivers a working blockchain solution for our customers”.

While blockchain is an important part of CargoChain, Lindsay notes that the platform itself provides significantly more to supply chain actors.

CargoChain’s ultimate vision is to empower the supply chain by providing its platform to application developer communities globally.

“We want to allow developers to solve the world’s supply chain problems for all logistics players, large or small.”

Initial CargoChain applications are already in development for a number of Australian and New Zealand customers, along with pilots for other significant supply chain projects. In New Zealand there is also significant interest from major food exporters, driven by the need to prove complete provenance with an emphasis on food trust and safety.

“Mediocre” Performance Stifles Global Ports

Global major terminal operators maintained a throughput of 41.69m teus in Q3 2018, but the “growth rate of the global terminal operators fell further to 5.8%, the lowest in the past two years,” a new report shows.

The Shanghai International Shipping Institute’s ‘Global Port Development Report of Q3 2018’ found global terminal operators had a “mediocre” performance in Q3 and Chinese and US ports in particular have suffered as a result of the US-China trade war.

The report confirms that “the escalating Sino-US trade war and shipping alliances’ trim or shutdown of liners and control on shipping space hindered the growth of the container shipping market.”

Container throughout down

Cargo throughput in the world’s major ports in Q3 2018 is up 7.4% year-on-year, but the growth rate of container throughput has declined, showed the report.

Cargo throughput rose to over 3.01bn tonnes in Q3 2018, but container throughout fared less well with 92.57m teus of containers handled, merely increasing 2.7% year-on-year.

Performance in production suffered as the escalating China-US trade friction ripped over to products suitable for container shipping, such as small-sized equipment and white goods.

Among the US ports, the Port of South Louisiana and the Port of Long Beach were most affected. The import and export volumes of major products hit by the tariff all fell to various extents, and the cargo throughput of these two ports dropped 1.9% and 3.4% year-on-year, respectively.

Of the Chinese ports, Shenzhen Port has the highest proportion of container throughput for the China-US shipping routes, which accounts for 27% of its overall container throughput. The trade war will dampen its business related to the international shipping routes by 4.5%, stated the report.

As trade friction continued to escalate, the throughput of Shenzhen Port fell 2.6% year-on-year to 6.9 million teus; with slow growth in exports and a withering container volume transferring to China and exporting to the US, the port saw its container throughput plunge 10.4% year-on-year to 4.82m teus.

Other issues which impacted growth and performance included increasingly strict environmental protection policies and a downward trend in global dry bulk cargo throughput.
Source: Port Strategy

An aerial view of Ports of Auckland from the west.
SUPPLIED
An aerial view of Ports of Auckland from the west.

A rift has opened up between Auckland Council and the Government over how the future of the city’s port will be decided.

Mayor Phil Goff says there’s a risk that a Government-appointed working group looking at the upper North Island ports might have pre-determined whether Auckland’s council-owned port could move, and if so where.

Goff said he put a “robust” view to the working group’s chair, former Far North mayor Wayne Brown, in a private meeting last week.

A council commissioned study found shifting the vehicle import trade, could lose Auckland $1 billion
BEVAN READ/STUFF
A council commissioned study found shifting the vehicle import trade, could lose Auckland $1 billion

He said Brown’s public rejection of two potential locations identified by a council study didn’t give confidence, and the group didn’t appear to have enough time or resources to do a proper job.

The council on Tuesday approved a blunt letter to be sent to Brown, ahead of the council’s first formal meeting with the working group in just over a fortnight.

Goff favoured the eventual shift of the port from its current location on the downtown waterfront, but was unhappy with the approach being taken by the working group.

The council will tell the group that its priorities include protecting the value of Ports of Auckland, which last year paid it a $51.1 million dividend.

It is also telling the working group it wants a transparent, objective and evidence-based approach to reviewing the future of the ports in Auckland, Tauranga and Whangarei.

Auckland Council has conducted the most detailed work so far on the future of its port.

Previous mayor Len Brown funded out of his office budget the Port Future Study, which in 2016 found the port might not outgrow its current site in 50 years, but that work should begin on identifying alternatives, in case it did.

Before the 2017 elections New Zealand First advocated an early shift of the vehicle-import trade from Auckland to Northland’s port.

The coalition government including New Zealand First took a bigger picture approach, setting up the Upper North Island Supply Chain Strategy working group, in line with a request from Auckland Council.

New Zealand First MP and Regional Economic Development Minister Shane Jones who oversees the working group, has since been vocal on matters relating to the future of Auckland’s port.

At the start of November Jones said he would do all he could to head-off a planned multi-storey carpark building planned by Ports of Auckland, to house vehicles arriving in the port.

“Public statements have created the impression of pre-determination,” said the council in a letter to the chair of the working group Wayne Brown.

Brown has made public comment favouring a move to Northland, including an opinion column published in November 2017 before being appointed to chair the group.

“Imagine the Auckland waterfront without used cars getting the best views,” Brown wrote.

“Watch for self-justifying job-saving promises from Ports of Auckland to fend off any sensible moves like Sydney has made keeping the harbour just for cruise liners and sending cargo to Wollongong and Newcastle.”

The council’s letter pointed to comments by Brown.

“Indicating a strong preference for relocation of some or all of POAL activities to Northport prior to any analysis is unhelpful,” said the letter which Goff will sign.

“Any plans to move all or some of the Port’s functions requires the concurrence of its owners, the people of Auckland, through Auckland Council,” said the letter.

“I’ve already said to the chair, we’ve put a lot of work into two future options (Manukau Harbour and Firth of Thames) and you’ve dismissed this out of hand, which gives us no confidence,” Goff told today’s planning committee meeting.

The council has spelled out 10 areas it wants the working group to examine closely.

These include the feasible capacity of all upper North Island ports, as well as the climate change impacts of moving freight to and from the ports.

It wanted work done on the social and community impacts of any change, and how and when a future new port would be funded.

The council will have its first meeting with the government’s working group on December 13.

 

New railway line to Marsden Point being investigated by KiwiRail

KiwiRail to investigate Marsden Point railway – Photo / File

KiwiRail has started work on geotechnical investigations along a section of the new route for the proposed rail-link to the port at Marsden Point in Northland.

KiwiRail Acting Chief Executive Todd Moyle says the scoping work will inform the business case for Northland rail currently being developed by the Ministry of Transport.

“We’ve held a designation for this rail spur for several years, and are very pleased to be now taking steps to determine how the line would be built,” says Moyle.

“These investigations will provide us with more detailed information about the design and potential construction methods for the link, as well as costs and timeframes.

“To begin with, we’ll be working at Mata Hill over the next few weeks, using a drilling rig to take samples from a number of locations,” he says.

These will bore up to 30 metres into the ground to remove samples for analysis.

“We are also investigating what associated works would be needed on the North Auckland Line to allow for more freight to be carried by rail to and from Northland,” says Moyle.

“The Government has indicated its strong support for the value rail delivers in the regions and the benefits it brings for New Zealand by taking trucks off the road, improving safety and reducing carbon emissions.

“The work we are doing in Northland is one of a number of projects underway to ensure we deliver stronger connections for a better New Zealand,” he says.

South Port positioning itself for carbon neutral future

South Port held its 2018 AGM on Thursday.
ROBYN EDIE/STUFF
South Port held its 2018 AGM on Thursday.

South Port is reducing its carbon emissions in a bid to stay competitive as New Zealand moves towards a carbon neutral future.

At it’s annual general meeting, held on Thursday, South Port chairman Rex Chapman said to shareholders the ports geographical position put it closer to other import sources and it could be leveraged in terms of reduced carbon emissions.

Chapman believed the port would be in a good position as the country started to reduce its carbon emissions under the Paris Agreement.

New Zealand has agreed to reduce its carbon emissions by 30 per cent below 2005 levels by 2030.

The company had implemented a number of initiatives to reduce its carbon footprint like putting antifoul on the hull of tugboats and pilot vessels to reduce fuel use.

More cargo was being transported by rail to the intermodal freight centre in Invercargill, instead of on trucks, leading to a reduction in carbon emissions, Chapman said.

This year, South Port had an after-tax profit of $9.66 million, up from $8.45m in 2017.

Cargo flows had increased from roughly 3 million tonnes to more than 3.4 million tonnes, a record level for the port.

Bulk cargo continues to be the mainstay of the business, representing 85 per cent of cargo volumes coming through the port, Chapman said.

This year, logs and woodchips exceeded the one million tonne mark for the first time in the port’s history and is the largest contributor to the volume and profit, he said.

Because of the the drought during the summer, a record volume of stock feed was imported at 212,000 tonnes.

The replacement of ageing infrastructure was expected to make an impact on future profit, as maintenance expenditure has been lifted and will continue to increase over the next five years, Chapman said.

South Port chief executive Nigel Gear said it has been 58 years since Island Harbour was completed and several assets were nearing the end of their useful life.

Work was currently under way to replace some of the piles that supported the rail and road bridges that provide the only land access to the Island Harbour, Gear said

Estimates are that earnings in the next financial year will likely be 10 per cent lower than 2017/18.

South Port is working with Mataura Valley Milk see whether it can provide the purpose-built nutrition plant to see if it can provide a distribution channel for importing an exporting cargoes.

Another potential client was Plaman Global, who is looking to mine more than 30 million tonnes of a rare organic black diatomite near Middlemarch, Central Otago, Chapman said.

The mineral would be used as a natural and organic animal feed additive that could reduce antibiotic usage, stimulate growth and improve both feed quality and gastrointestinal health in animals.

Chapman noted that there was tension in the markets as a result of the tariff war between the United States and China.

However, trade forecasts for the port remain steady with forestry exporters predicting healthy export market conditions in China, India and Japan.

The board has said it plans to keep paying the current dividend of 26 cents.

 

Napier Port share sale a potential catalyst for change

Fund managers say the Napier Port share sale could be a catalyst for a wider shake-up.
Fund managers say the Napier Port share sale could be a catalyst for a wider shake-up.

Hawke’s Bay Regional Council’s proposal to sell and list up to 45 per cent of the port on NZX was an “an interesting and surprising” development, said James Lindsay, senior portfolio manager at Nikko Asset Management.

Listing the firm would help ensure it worked to achieve decent returns by looking after its New Zealand customers and suppliers. Subject to the pricing “we’d be fully supportive of them having something listed on market,” he said.

The council is embarking on a six-week consultation process with its ratepayers and favours selling up to $181 million of shares in the business. That would leave it with a controlling stake in a growing business, sufficient cash to fund environmental projects it plans, and a more diversified investment base.

Other options the council is seeking feedback on include the sale of a minority stake to a partner – which it thinks would raise less money – the sale of a long-term lease to an operator – which could raise the most money – or retaining the current structure and raising rates by 45 per cent to fund the port’s expansion.

Craig Stent, head of equities at Harbour Asset Management, believes there would be good interest if the listing goes ahead.

Port of Tauranga has delivered strong returns over many years and Napier would give investors an exposure to Hawke’s Bay’s agriculture and horticulture industries.

“They are fairly safe, defensive investments with a reasonable amount of growth – although that growth is somewhat linked to local GDP growth.”

New Zealand’s ports, previously run by elected harbour boards, were corporatised in 1988. The history of those that listed is mixed.

In 2010 the New Zealand Institute of Economic Research found the major ports had delivered substantial returns since corporatisation. But it also said they had considerable scope to improve their performance and that council ownership had been an obstacle to rationalisation within the sector.

But Ports of Auckland was delisted in 2005. The regional council, having extracted any surplus capital from the firm during the preceding 12 years, bought out the minority holders citing diminishing returns and the need to rationalise the city’s waterfront.

Talks on a possible merger with Tauranga ended in early 2007.

The port, which has a stake in Northport’s parent company, also built inland freight hubs at Wiri, Mt Maunganui, Longburn and now Horotiu. Longburn is operated in partnership with Napier Port.

In August, the government named a five-member panel to review the freight and logistics system in the upper North Island. Its brief includes assessing the feasibility of relocating the Auckland port business to Northland long-term.

Lyttelton Port Company was delisted in 2014, eight years after Christchurch City Holdings had proposed such a move as part of a plan to appoint Hong Kong-based Hutchison Port Holdings – the world’s biggest operator – to run the business.

That transaction withered after Port Otago bought a 10 percent blocking stake. Otago and Lyttelton investigated a merger in 2008 but that has not proceeded.

Stent said it would be encouraging if other councils – such as Christchurch and Auckland – relooked at a sell-down for their ports. Both cities have needs for capital elsewhere and could still retain a majority interest.

Mark Lister, head of private wealth research at Craigs Investment Partners, said the whole sector would benefit if more ports were subject to the investor scrutiny that comes with listing.

“If you get that across the country you get a much, much more efficient port system everywhere rather than some of them being poorly run because councils aren’t insisting on those commercial drivers.”

While he welcomed Napier Port’s potential listing, Nikko’s Lindsay believed there was still too much duplication in the sector. Running them each as separate businesses, each spending time and money investigating and new technologies like automation, was not efficient for the country.

“I think a consolidation of some of them to optimise the freight network for New Zealand would be a really good thing.”

An option that would encourage that was the operating lease model that Lyttelton and Napier had investigated and which has proven successful in Australia and other parts of the world.

Lindsay said that would leave councils full ownership of the port land and assets, and the operating company could get on and drive efficiencies. Having a single operating company for multiple ports would encourage greater optimisation across the country and further reduce costs.

Hawke’s Bay regional councillors initially favoured a 50-year lease of the Napier Port operation, which it estimates could raise $466m – leaving the council $366m to reinvest. Listing is expected to raise $181m and leave the council with $83m for reinvestment.

But the council was conscious that most of the interest in an operating lease would be from overseas players. Nor was it confident about committing the region to a 50-year partnership and what it would take to maintain that relationship.

The council said it was “concerned around values alignment and the importance of ensuring a clear and direct connection between the port, its staff, the local community and management.”

The option remains among four the council is consulting on.

“There’s huge value being lost in New Zealand Inc. for that model not being instigated,” Lindsay said.

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