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UPDATED: Big deals bring big ships to New Zealand at last

UPDATEDA rare 10-year shipping contract will pave the way for global shipping line Maersk to bring 6,500 TEU container ships to New Zealand by the end of 2016, but they will initially call only in Tauranga.

Kotahi, the logistic company led by Fonterra Cooperative Group [NZX: FCG] and Silver Fern Farms which has 30 other exporter customers, has done a 10-year deal with Port of Tauranga [NZX: POT] under which it will provide 1.8 million containers to the port and will put cargo through Port of Tauranga’s Timaru Container Terminal in return for 1.5 percent equity stake in the port and 49.9 per cent ownership of its Timaru terminal.

The agreement replaces existing rebates Kotahi has, the size of which it would not comment on.

It has done a separate 10-year deal with Maersk Line which provides 2.5 million of export containers to Maersk over ten years.

Maersk Line managing director Gerard Morrison told a briefing in Auckland the 10-year deal was a first for Maersk in New Zealand, and “it is not something we have been able to do elsewhere in the world either”. It provided certainty so the shipping line could plan to bring bigger ships to New Zealand.

“We’ve been looking for ways to evolve from the traditional 12 month contract cycle that exists in this country,” Morrison said.

Maersk is introducing a new 4,500 TEU service to Tanjung Pelepas in Malaysia in October and will work on bringing the larger ships.

Port of Tauranga chief executive Mark Cairns said the agreement it had with Kotahi required Port of Tauranga to be ready to handle 6,500 TEU ships by 2016. The port will use a “big vacuum cleaner” to hoover up sand in its channel.

He said the volume the 10-year deal delivered to Tauranga “was a $5 to $6 billion deal to put some context around it”.

The agreements announced today ensured that New Zealand retained direct shipping calls and did not become a branch of Australian services, media were told.

The bigger ships will be 22 per cent more carbon efficient.

At this stage there isn’t a port in the South Island that can handle the 6,500 TEU ships.

Talks will be held with South Island ports but when the larger ships call it will initially only be a Tauranga, media were told. The growth of cargo in the South Island is large enough for a possible big ship port. It is also very unlikely that vessels larger than 6,500 TEU will call in New Zealand due to the depth of the ports.

Port of Tauranga will dredge its harbour more to accommodate the 6,500 TEU ships by the end of 2016. Its Timaru terminal gets an additional 52 vessel calls a year from this deal.

The port operator's shares gained 4.4 percent to $15.

(BusinessDesk)

Comments and questions
8

Your article doesnt highlight the TImaru connection, currently managed by POT, with Kotachi going to end up with 50% of Primeport. This is probably the biggest twist and must be considered a serious threat for Lyttelton in the medium term. Any comment from LPC ?

50% of the container terminal..... not prime port.

It would be nice to know what TEU stands for. Totally Enormous Underwater?

Hi Nicholas,
I am told that it’s a container – 20ft something unit.
NBR Publisher

Apologies, I should have consulted Wikipedia. It stands for "Twenty foot equivalent". See http://en.wikipedia.org/wiki/Twenty-foot_equivalent_unit
Thanks for your reply.

TEU may refer to:

Twenty-foot equivalent unit, a measure used for capacity in container transportation

- Twenty foot Equivalent Unit... i.e. 1 x 40' container is 2 x TEU.
Larger vessels would have called Tauranga as a result of the trickle down effect to whats happening in the wider global shipping market.
Kotahi (Fonterra+SFF) will be going public with their tender shortly, big chunky piece of the pie to Maersk, and significant reductions to the other shipping lines.
Some lines may pull services completely from NZ. Others will stay and fight for the remaining pieces of the market. But will be costly. New lines will be discouraged from entering into the NZ market.
Probable result will be fewer options and services to NZ exporters outside of Kotahi...
NZ is well on track to becoming Fonterra Inc.

What are they going to fill these 6500 teu vessels with in the off season-- and what service frequency will they offer to the swing port of T.P. ie the merchants in the northern hemisphere dont want their chilled meat with its limited shelf life arriving all at once with the associated cold storage costs et al.
I would like to see the cost matrix associated with getting the mtys(both reefer and dry) into the mainland for the load outs if they are going to bring them in from Au or tranship them down coastwise ex Tga.