Competition, not co-operation, vital for ports, says Tauranga CEO

Competition, rather than co-operation, is vital for New Zealand's ports, says the chief executive of the country's biggest container and export port.

Competition has lifted the country's ports from a very poor standard of productivity to world-class, says Port of Tauranga boss Mark Cairns. That's despite claims that upper North Island ports are working against each other, to the detriment of NZ Inc.

That concern has been raised by some groups in the freight business, says the interim progress report of the Upper North Island Supply Chain Strategy working group, released at the end of last month.

The report says a common view in the sector is that ports are competing, not co-operating.

But Cairns says he's a "staunch advocate" of competition.

"Fundamentally I definitely disagree with the notion of co-operation. I would argue competition has been a very good thing ... if you look at where ports were in the 70s, there was a very, very low standard of productivity, whereas [now] we have world-class productivity across all of our ports.

"And if you look at the Australian Productivity Commission's reports, their measurements show our container handling rates are 50 per cent ahead of our Australian peers."

In its first report, the working group says it will be "considering the current ownership structure of ports and whether a change may be needed to ensure interests are aligned to deliver the best outcome for New Zealand".

The group is undertaking the review for the Government, looking at ports, land transport and coastal shipping to find an efficient strategy for the next 30 years.

Any notion that the three upper North Island ports - Tauranga, Auckland and Northland - should be working together is not Cairns' only challenge to the report.

There's also the matter of the report saying Port of Tauranga (PoT) is New Zealand's most significant port by volume, accounting for 35 per cent of the country's total export volume in the last financial year.

Port of Tauranga says the correct figure is 42 per cent. Its calculation comes from the Ministry of Transport, the secretariat for the review. Working group chairman Wayne Brown stands by 35 per cent, saying the figure was from Statistics NZ.

Another reason for questioning the working group's grasp of facts is the statement in the original report, when discussing ownership of the three ports, that "Marsden Maritime Holdings owns the Northport facility ..."

Northport is in fact jointly owned by Northport Ltd, which is 50 per cent owned by PoT and 50 per cent by Marsden Maritime, a listed company like PoT.

The statement was corrected, without acknowledgement, after Cairns and Northport's chairman urgently contacted the Beehive and the working group.

Cairns says PoT is "disappointed" that as such a big stakeholder in the study, it was not given the opportunity to comment on the draft of the first report to check for accuracy before it was released by Associate Transport Minister Shane Jones.

Another headscratcher is the report's statement that it used Marsden Maritime's financial information in its tables "due to insufficient information being available for Northport". Northport's financial information is available in PoT's financial statements.

Cairns has also taken issue with the report's statement that the Bay of Plenty and Waikato have benefited from rail infrastructure and investment provided by the Government at no capital cost to the end user.

"This ignores the $267 million in rail costs paid by Port of Tauranga since 2010," he says.

The review working group began formal engagement with sector stakeholders in December.

It has yet to visit PoT, though the group chairman Brown has paid a visit and Cairns and PoT chairman David Pilkington, who is also chairman of Northport, have presented to the working group in Auckland.

The group is due to deliver another report next month on its evaluation of different options for a strategy, with a final report with its recommendations due in September .

Cairns says he welcomes the upper North Island study "if it is evidence-based" in its search for improvements to the supply chain. He's also pleased the group has highlighted some issues he's been "harping on about for a while - poor commercial discipline by some ports and inter-group tax subsidies in Auckland".

On speculation that ports could be nationalised as a result of the review findings, Cairns says that would not be good for New Zealand.

"Shane Jones has said it couldn't happen without new legislation like DIRA (the Dairy Industry Restructuring Act). And what are the benefits in having essentially a monopoly?

"PoT and Ports of Auckland together handle 63 per cent of the country's containers, so a dominant monopoly I can't see being a good thing."

Cairns says the first report, in discussing the import-export imbalance between PoT and Ports of Auckland - which results in empty containers - misses the point that New Zealand as a whole has an export/import imbalance.

"We have 49 per cent more export trade than import cargo, so we're always going to have empty containers moving around. And if you talk about containers it's more than that - we export 65 per cent more containers than we do import containers so that is something we will certainly be taking up with the group."

Ports of Auckland's import volumes are about twice as large as its export volumes, while at PoT, import volumes are almost two-thirds of its export volumes, the report says.

Nationalising ports won't solve the export/import imbalance, Cairns says.

Port of Tauranga had managed to get trains to and from the port "running virtually balanced import and export".

"We've actually managed to fill those trains in both directions and managed to minimise the number of empty containers. We've got data I will present to the group that shows that."

Cairns says PoT would be "absolutely goosed" without a rail service.

He wants to see a strong focus on rail development and double tracking between Hamilton and Tauranga.

"And either the road or the rail to Northland has to be improved. There's crap rail to Northland and a crap road, so we have to get at least one of them sorted."

The working group has already concluded that "there is no point making further investment in Northport without investment in, and development of, the train line to Auckland".

Its report says there are a large number of infrastructure options it will consider that may have a role in changes to the upper North Island supply chain, including the option of moving some of Ports of Auckland's work to Northport.

Those options include:
• A rail spur connecting the North Auckland line to Northport (soil testing is under way for this now)
• A second rail route between Auckland and Tauranga
• A West Auckland inland port
• A new mega-port in the Firth of Thames
• A vehicle servicing and import facility at Northport
• Inland hubs for logs and exports within Northland, with refurbished local rail lines
• A four-lane highway between Auckland and Whangārei

Cairns also takes issue with the group's conclusion that the Bay of Plenty's horticulture sector faces similar constraints to Waikato's relatively mature dairy industry, which it says will grow "much more slowly than it has in the past".

He says you only have to look at the jump in kiwifruit growing licences at the last Zespri auction to conclude that there will be significant horticulture growth in the region.

But Cairns says his major concern about the first report is the suggestion that competition between ports hasn't been a good thing.

"I strongly disagree with that."

He believes New Zealand will need all of its ports, including the three in the upper North Island. And he believes a lot more bulk cargoes and car handling will migrate to Northport.

"They [ports] will have a different form if they price to [reflect] what trade demand is in a particular part of the country. So again, that's what I'm looking for in the second part of the study."

But if port locations are linked to where the biggest volumes of export and imports are, then New Zealand doesn't need more than two or maybe three major international hub container ports, he says.

"Ports spending hundreds of millions of dollars to dredge are just not going to attract the big vessels because they don't have enough trade in their regions."

Port of Tauranga
• Owned 54 per cent by Bay of Plenty Regional Council; 46 per cent by public
• 50 per cent owner of Northport
• Share price $6.12
• 2019 half-year net profit after tax up 4 per cent to $49m
• Exports up 11 per cent to 8.6m tonnes
• Imports up 5.7 per cent to 5m tonnes
• Container volume up 8.8 per cent to 621,000