Larger ships calling at New Zealand ports means bigger export returns with nearly $400 million worth of supply chain benefits in 10 years.
Today the New Zealand Shippers’ Council, whose members are New Zealand’s major exporters and importers, released a comprehensive analysis of shipping trends and port use and called for the government to ensure legislative framework is not a barrier to bigger ships and takes steps to prevent anti-competitive behaviour.
However, it warns that unless quick decisions are made to develop ports to cope with ships nearly triple the average size calling at New Zealand today supply chain costs will rise nearly $200 million within five years.
The council also recommended shipping companies further consider combing capacity on some services.
The report goes a step further and recommends a focus on two ports – one in both the North and South Islands – which should be developed to receive ships up to 7000 TEU (20ft container equivalent unit) within five years.
It then suggests Tauranga in the North Island and Lyttelton in the South Island as being the logical candidates for bigger ships, at least at first.
The council said the Port of Tauranga has already costed plans to develop at between $50-$80 million, significantly cheaper than an estimated $200 million for Auckland to achieve the same capacity.
Lyttelton was recommended over Otago because it was already the largest container port in the South Island and preliminary cost analysis suggested it would cost $40-80 million against $100 million.
“Furthermore, because Tauranga and Lyttelton are also the largest bulk ports in New Zealand, there is an opportunity for these cargo owners to leverage off investments at these ports.”
Bigger is better
Currently, the average-sized contained ship calling at New Zealand ports has a capacity of 2700 TEU, with the largest ship regularly visiting at 4100 TEU.
As ships servicing major international routes increase in size, up to 14,000 TEU, the council anticipated that more ships with a 4000-7000 TEU capacity will be redirected to smaller trade routes, including New Zealand.
“This is an opportunity for New Zealand to increase the efficiency, reliability and cost-effectiveness of its supply chain infrastructure through the introduction of larger container ships,” the council said.
The supply chain benefits include lower voyage operating costs, reduced exposure to volatility in oil prices and a reduced carbon footprint.
For exporters and importers, the council said benefits include a reduction in the fuel component of ocean freight charges and a reduction in freight base rates because of lower operating costs.
Beyond the direct savings, the council said a key benefit of bigger ships was assisting in production and enhancing the efficiency of shipping services between New Zealand and international hubs by reducing the risk being relegated to “boutique” services using small and old ships with higher costs.
If this is not done within five years, the council warned that shipping companies could choose to use Australian ports such as Melbourne, Sydney or Brisbane as a hub for the region, which would be detrimental to New Zealand’s trade performance.
More than 99% of New Zealand’s exports and imports used shipping services in 2008.
Nearly half (48%) of that was on the Southeast Asia route, New Zealand’s most important link with the outside world. In 2008, nearly 300,000 TEU of exports, an average of 5800 TEU a week, and 309,000 imports, an average of 4000 TEU a week, were shipped between New Zealand and Southeast Asia.
Cargo on this route either came from or was destined for Southeast Asia, central Asia, the Middle East, Africa, Europe and North Asia.
Statistics New Zealand data showed that for the year to June, 2009, 25.3 million tonnes of exports worth $37.6 billion left New Zealand through its ports. More than half the volume of exports was moved through Auckland, Tauranga, Lyttelton or Otago.
For the same period 17.3 million tonnes of imports arrived worth $35.9 billion.
Getting cargo to the ports and moving it around on arrival has mostly been the job of trucks, with about 92% of total freight ending up on roads and just 6% by rail.
However, the government has committed $750 million over the next three years to KiwiRail’s “Turnaround Plan,” which aims to turn the company into a sustainable business inside 10 years.
The Shippers’ Council has advised the funding should be targeted at parts of the network that will support bigger ships in the future but has highlighted a number of constraints on the rail system.
“In terms of road and coastal shipping, the Shippers’ Council is not aware of any infrastructure constrains that may impede bigger ships calling at New Zealand.”
This article is tagged with the following keywords. Find out more about MyNBR Tags
Most listened to
- Tim Hunter on why Veritas is doing it the hard way
- Matthew Hooton on whether Steven Joyce will be the next national leader
- Rodney Hide on why all city planners should be fired
- Nevil Gibson discusses his latest Editor's Insight on films
- The NBR crew throw around some of the week's top stories
- Rob Hosking breaks down the political and economic week that was
- "A tragedy" - David Farrar on his disappointment with Simon Bridges
- New F&P product pipeline exciting, says Macquarie senior investment adviser Brad Gordon
- Taupo Motorsport Park executive director Tony Walker on the park's rebranding
- NZIER senior economist Christina Leung on why she does not think the OCR will hit 2%
- NBR's Cameron Officer talks about the NBR Car of the Year 2015
- John Barnett on Brewer: ‘Boy, has he got a bit to learn’