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Trans Tasman's Political Pulse 2/11/17: Big Ships, Big Bets

02 November, 2017

Big Ships And Big Bets –
Port Infrastructure Debate Rolls On

INSIGHTS ABOUT THE NEWS - The debate over NZ’s future port infrastructure is continuing in a new context – a new Govt more likely to intervene.

Much of the argument within the sector has been about who can cope with the larger ships being built and whether NZ would be best served in focusing investment on a single container hub port feeding the other ports.

As reported in Trans-Tasman’s sister publication, the NZ Transport Intelligence Business Alert, Rex Chapman, chairman of South Port which runs the Port of Bluff, disagrees with Port of Tauranga chairman David Pilkington. Pilkington says the trend to consolidation and bigger ships will mean more and more of NZ’s trade will be funnelled through Tauranga as a container hub port.

Chapman, noting three global alliances have emerged which now control over 77% of global container shipping capacity, points out the size of new container vessels being built has grown from 10,000 to 14,000 TEU vessels to 18,000 and now 22,000 TEU size.

“However, it has recently been reported in shipping media there is starting to be a difference in opinion between the biggest two shipping lines, MSC and Maersk, whether this trend will continue. Maersk now believes the race for bigger and bigger ships is gone for the foreseeable future.”

The range of ports capable of handling larger vessels is limited and larger ships mean fewer sailings which does not suit customers. The rationale for using larger vessels was to get economies of scale and reduce costs, but these financial benefits are only obtained if the ships are full.

Chapman reckons in NZ strong competition continues among all ports for cargo within their catchment and this should be allowed to play out. He says all ports have a different mix of cargos, revenue streams and in some cases non-port businesses, noting South Port converts 23% of its revenue to net profit after tax.

The change of Govt could bring a change in focus. NZ First Leader Winston Peters is a strong advocate for the Govt to back a port in Northland.

The agreement with Labour says they will commission “a feasibility study on the options for moving the Ports of Auckland, including giving Northport serious consideration.”

If this study was to turn into a reality it would need a great deal of investment not only in the port itself, but the infrastructure to and from it. This investment is unlikely to come from the private sector unless it can show a way of making a profit.

It would therefore require Ministers to back a “winner” and then use taxpayers’ money to fund it. That’s a bet many would be nervous about making.
Trans Tasman’s sister publication, The New Zealand Transport Intelligence Business Alert, is a weekly source providing you with in-depth news, analysis and opinion on NZ’s transport and logistics sectors.

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