Kiwi exporters enter 10-year agreement with port company

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Port of Tauranga is working with Zespri International and Tauranga Kiwifruit Logistics (TKL) under a new 10-year freight agreement to develop additional infrastructure to handle the surge in kiwifruit exports.

The agreement was disclosed in the Port of Tauranga's recently released six-month results, which showed kiwifruit exports handled by the port increased 22.9 per cent to 413,102 tonnes for the six months to December 2015, compared with the previous corresponding period.

"The port has agreed a 10-year freight deal with kiwifruit exporters Zespri International and Tauranga Kiwifruit Logistics, which will see a long-term approach taken to investing in cool storage and port operations to cope with the expected growth in the kiwifruit industry," the results commentary noted.

Port chief executive Mark Cairns said, in an interview, the agreement had been reached last year, but hadn't been publicised at the time as it was planned to announce it with the six-month results.

"Our style of doing business is to negotiate long-term partnerships with the shippers that mean we can take a proper planning perspective on when we put the infrastructure in," he said.

"With the kiwifruit, it's about where we put the cool storage - we have to make multimillion investments and, in this case, it is over a 10-year agreement."

Port of Tauranga established a precedent for such agreements in 2014 when it struck a ground-breaking 10-year freight deal with Maersk Lines and Fonterra-controlled freight and logistics company Kotahi.

The alliance will deliver up to a total of 1.8 million export TEUs to the port and its subsidiary Timaru Container Terminal by 2024.

Early last year, the port followed that up by forming a new freight logistics joint venture, combining its subsidiaries Tapper Transport and MetroPack and its shareholding in empty container repair and storage business MetroBox, with Kotahi's Dairy Transport Logistics.

The parties in the new partnership are kiwifruit exporting entity Zespri, and TKL, the freight logistics company controlled by the major Bay of Plenty post-harvest operators including Seeka, East Pack, Apata, DMS and Trevelyan's, which is based at the port.

TKL chief executive Ian Mearns said the agreement had been reached to respond to the significant increase in kiwifruit export volumes expected in the coming years.

"We need to make sure we work with our business partners to make sure we are fit for purpose," he said.

"We thought it was ideal to enter into some long-term agreements with the port just so we all worked as a partnership through the whole supply chain."

Mr Mearns said the agreement so far was at the first stage of discussion on what was required to upgrade on-wharf infrastructure.

"We currently have a cool store that we use on the port during the season, which is right next to our berth, and we use that cool store to facilitate the loading of charter vessels," he said.

They would be aiming to begin upgrading the cool store facilities this year, and were looking at a series of other developments, which could not be disclosed at this stage for reasons of commercial confidentiality, he said.

"It's all about making sure we are engaging with the port and letting them know what is happening from the kiwifruit industry side and giving them the opportunity to prepare and be ready for those increased volumes."

The key Zespri senior executives involved in the agreement were all out of the country and could not be reached for comment on he new agreement.

Port commercial manager Leonard Sampson said the details of the new agreement remained commercially sensitive.

"At a broad level, there's definite growth in terms of the kiwifruit harvest profile - in particular with the new variety of Gold," he said.

"You give each party the comfort through the partnership that we can invest in the necessary infrastructure, whether it be for conventional reefer vessels or containerised vessels."

Kiwifruit growth - Zespri's five-year projections
Gross supply has increased by a record amount, rising from 94 million trays in 2014 to 121 million trays in 2015.
New Zealand volumes are expected to reach about 150 million trays in 2020.
The drivers are productivity improvements, vines coming into full production and potential new greenfield plantings of Green.
Above all, the growth is driven by the new Gold3 variety, with New Zealand volumes projected to increase from 27.5 million trays in 2015 to more than 60 million trays in 2020.
Zespri's non-New Zealand supply is also growing, supporting its year-round supply strategy.