Coronavirus brings Gisborne Port to its knees

Gisborne's port is a major log exporter. Photo / Grant Bradley

The outbreak of coronavirus has brought New Zealand's second biggest log-exporting port to its knees today, with the shock news from its export customers that no more logs can be loaded for China.

Chief operating officer Andrew Gaddum at Gisborne's Eastland Port said log exports are the port's main source of revenue and the notice, while hopefully temporary, is "hugely significant".

The Eastland Wood Council said in a statement on Monday that it was meeting with members and contractors to discuss temporarily "halting harvesting and cartage operations", with one major log export buyers signalling it would take no more product from Wednesday.

Gaddum said the port company received the news "out of the blue" on Sunday night though there had been forecasts last week that log exports may be affected by delays in businesses reopening in China after Lunar New Year due to the novel coronavirus.

One log ship is in port at Gisborne and will be loaded, but two others at anchor would not be, he said.

The advice from logging exporters had been that factories in China could not take any more wood, Gaddum said.

However, the Herald has been told only one log export company, one of the country's biggest, had advised its suppliers it was putting the hold on exports.

A sector insider who declined to be named said the other major log exporters were continuing to accept log supply and would continue to send them to New Zealand ports that handle log ships. He conceded however that harvesting would slowdown as a result of the China situation.
His claim of a limited stop on logs was supported by another company. But that company said the situation was changing so fast this might not remain the case.

In an update on Monday night Eastland Port said it now understood several companies in the region would soon temporarily stop all log exports. But it said several others were planning to keep sending product through Eastland Port, to markets including Korea.

"There may also be some product going to China, although at significantly reduced volumes. This will depend on the restrictions being placed on movement between China and New Zealand, which are being strictly adhered to.

"Eastland Port remains open, and we continue to work closely with our customers."

The port is owned by the Tairawhiti Trust, sole shareholder of Eastland Group which operates the port.

Eastland Port's revenue last year was $97 million, most of it from log exports.

Gaddum said between port employees and contractors, about 100 people work at the port. There would be no lay-offs because the situation was considered temporary.

While logs are its main business, the port is also an export gateway for squash and also gets cruise ship business.

Tauranga also faces hit

The coronavirus scare will hit Port of Tauranga export volumes "no question", but the fallout will be short-term, says chief executive Mark Cairns.

The international hub port is New Zealand's largest export port and its share price is already feeling the bite of investor jitters over the China-origin virus, closing on Friday at $7.58 after an $8 high in early January.

Cairns expects exports for China from the forestry sector to slow and meat and dairy outbound volumes to potentially also be affected as parts of China continue to be locked down and quarantined with subsequent impacts on Chinese industry and business sectors.

He said PoT expected to learn more this week about the situation at Chinese ports.

"We're keeping a close eye on it, but it will have an impact on our exports, no question. But it's short term."

Port of Tauranga. Photo / George Novak

The company would give more guidance to the market in its interim 2020 financial year results announcement on February 28.

Cairns noted PoT had weathered the impacts of other global virus emergencies and economic crises and they had proved to be short term.

Log exports were last year already reflecting a sharp decrease in international prices and demand. The port company in late October reported a drop of 5.2 per cent in log export volumes to just over 1.7 million tonnes in the first quarter of the 2020 financial year.

Dairy product exports also decreased - by 1.7 per cent, compared to the corresponding July 1 to September 30 period in 2019. Container volumes, however, rose by 5.8 per cent.

At the company's annual meeting in October, Cairns told shareholders that based on the first-quarter performance and notwithstanding any significant market changes, full-year earnings were expected to be between $96m and $101m - the same guidance range given for the 2019 year record result.

Cairns' prediction that the coronavirus impact on the port would be shortlived is supported by Craigs Investment Partners head of private wealth research Mark Lister.

"It's a blue-chip structure asset. Its share price was over $8 and exports still need to move around the world. This is not going to be a showstopper by any means but will it have a short-term impact? Yes. To what degree we don't know."

Lister said the port, with its national economic infrastructure component, was "a bit more resilient" than other businesses affected by international events.

The spike to $8-plus in its share price had been driven by expectations of politically driven change in the ports sector and questions over the future of Auckland's port.

This, plus the Government's recently announced multi-billion-dollar infrastructure funding package, was "still going on in the background".

"This is all a potentially bigger medium-term driver of the share price than what we are seeing with coronavirus.

"At this stage I'm on the same page as Mark [Cairns] in terms of overall impact. Based on what we've seen in the past with events like this, they do blow over.

"But having said that, how does anyone predict a medical situation like this? Usually markets stop panicking when it becomes clear the number of new cases is peaking and stabilising. But we're probably not there yet.

"The market shoots first and asks questions later."

Other major New Zealand ports say they're watching developments closely.

Lyttelton Port company expects some short-term impact on export volumes, particularly for meat, dairy and logs.

Marketing manager Simon Munt said there will also be some import impact driven by a fall in productivity in China.

"Our experience from the past is that the impact will probably be relatively short-term, but we hope to develop a clearer picture as we learn more this week."

Major imports gateway Ports of Auckland said no impact had been felt as yet but it was making preparations in case any action was required to protect the health and safety of its staff. Regular assessment meetings were being held and the port company was keeping in close contact with authorities.

"As we are an import dominant port this is already a quiet time of year for us - post-Christmas and after Chinese New Year -so we're not expecting any major impact on volumes," said spokesman Matt Ball.

The company did not expect any impact on cruise ship visit numbers. Nor did Port of Tauranga.