Strikes showed 'Tauranga couldn't cope with Auckland freight'
BUSINESSDESK: Stevedore strikes at Ports of Auckland showed Port of Tauranga couldn't cope with the sudden additional freight volumes sent down the coast, Auckland port’s chief executive Tony Gibson says.
The port in New Zealand’s biggest city is in a protracted dispute with the Maritime Union over plans to introduce flexible shifts, which Tauranga already has up and running.
There were rolling strikes and lockouts, with the parties going back to the bargaining table after Employment Court Judge Barry Travis granted an injunction and port management drew back from hiring external stevedoring contractors.
The dispute cost city-hemmed Auckland contracts with shipping line Maersk and dairy exporter Fonterra, which shifted business to Tauranga. POT has 184ha of what it calls strategic land holdings, of which 44ha is still available for development.
"The customers that we have got say we need both Auckland and Tauranga. It was very clear during the strike period that Tauranga couldn't cope with the additional volume," Mr Gibson told BusinessDesk.
"It's very clear when you model it that you need both ports."
He said customers were surprised at how much the land transport component added to freight costs during the strike. “A lot of importers and exporters actually realised that the land-based costs are significant in the total cost of freight.”
At the height of strike action Tauranga was processing 50,000 containers a month, up from 40,000 before the strike. That has now dropped back to about 45,000.
Chief executive at Port of Tauranga Mark Cairns says his company “coped with the volumes”.
“It challenged a lot of assumptions about how much we can do. We have still retained some of that volume."
In July the world's biggest container shipping line, Maersk, lifted container rates between New Zealand and the US in the first of what may be a series of price increases as it seeks a return to profit.
It increased rates by $US150 per 20-foot container and $US350 per 40-foot container.
The container industry contributes about $US380 billion in freight rates to the global economy or about 5% of total world trade, according to United Nations figures.
The New Zealand Transport Agency's National Freight study forecasts up to a 75% increase in the volume of commodities by 2031, while coastal shipping volumes are predicted to double to nine million tonnes. Tauranga and Auckland currently make up about 70% of New Zealand exports.
Last week, Port of Auckland board members met to review the company's financials for the six months ended June 30.
In April, it flagged a weak second-half result, following on from a flat first-half underlying profit. Net profit was $18.6 million in the six months ended December 31, though $4.8 million of that was a tax gain that is unlikely to recur.
Sales increased by 9% to $96.6 million, though operating costs climbed 12%.
Tauranga posted a record 22% rise in first-half profit to $34.6 million. Sales increased 14% to $105.7 million. The port’s shares fell 0.4% to $11.40 and have soared 14.4% so far this year.
Mr Gibson says Auckland container volumes fell as a result of strike action but he is "very pleased" with the results of its multi-cargo division in the latest six-month period. But he also sees the rival as a benchmark operator.
"You could say the Ports of Auckland and the Port of Tauranga have an underlying basic business philosophy and strategy which is similar – one of them is just a hell of a lot more successful than the other and that's Tauranga," he says. "I believe that's to do with their can-do attitude."
"They're very good competitors, they’re quick on their feet, they run a good shop. We've got to get to that stage on par or better than Tauranga for the good of NZ Inc.
"If we have got a similar cost base to Tauranga and similar productivity – that's going to be really good for New Zealand's supply chain," Mr Gibson says.
Auckland and Tauranga have been unable to forge a direct alliance as they compete for freight but both see strategic value in their partnership at Marsden Point's, Northport.
POA owns 19.9% of Northland Port Corp alongside Northland Regional Council, which in turn owns about 54% of Northport. Northport’s other investor is Port of Tauranga.
Northport has been pushing for a greater share of North Island trade from Auckland and Tauranga. It has about 180ha of land, owned by Northland Port, which is currently only at 50% capacity.
Auckland and Tauranga have previously stated they see Northport as a "long-term investment" and all three ports need to remain open to keep up with growing demand.