Getting car imports off the Auckland city waterfront and into Whangārei could be done quickly but don't underestimate the "huge" vested interests involved, says Northport chairman David Pilkington.
Asked about the appetite in the upper North Island supply chain for Ports of Auckland's container and car import operations to be shut down and moved to the northern port, as a study is suggesting, Pilkington said cars could be shifted very quickly. "But they're only going to move when someone says 'you can't bring cars into Auckland anymore'.
"Why haven't cars moved to Northport? Why does Auckland city tolerate having that valuable land at the bottom of Queen St occupied by cars? The reason is huge vested interests.
"Ports of Auckland would lose a lot if they lost their car volumes. Car handlers and car distribution companies have established structures configured around that Auckland model.
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"Are they going to move without being induced or presented with a lower cost option?
Pilkington, who also chairs listed Port of Tauranga, which owns half of Northport, said the Whangārei port could take on car imports with little fuss.
"Cars could move very quickly. There is very little required by way of infrastructure on our part. The issue then would be the car importers, who would have to determine how those cars would move from Northport back to Auckland and beyond. That could happen now by road."
Pilkington, who will stand aside at Northport this year to make way for the chairman of the port's other 50 per cent owner, Marsden Maritime Holdings, under a rotational arrangement, said immediate upgrading of SH1 was not a pressing issue because cars could be moved off-peak.
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Ideally, cars would be moved entirely by rail if and when the Auckland-Northland rail line was upgraded.
The second report of an independent study group deciding a strategy for the future of the upper North Island freight and logistics supply chain has recommended the managed closure of the Ports of Auckland freight activities and development of Northport into a major import and export handler.
A final report to the Government, expected before Christmas, will reveal how the transition could be made.
Ports of Auckland Ltd (POAL) is New Zealand's largest container importer and the point of entry for 67 per cent of the country's vehicle imports. The report puts the capital cost of closing the ports - except to cruise ships - at $10.3 billion. But working group chairman Wayne Brown, who has called POAL "a failing business in the wrong place", says it is sitting on $6 billion worth of valuable real estate that could fund city transport solutions if it was put on the balance sheet of its owner, the Auckland Council.
The $850,000 study, being driven by Associate Transport and Regional Economic Development Minister Shane Jones, is the 24th study to focus on ports.
Pilkington said this one was getting public attention.
"I think the political pressures will certainly encourage an outcome, and unlike the other 23 studies which have generally been produced by one or another party, this one being politically driven will at least force a wider consideration of the issues."
Pilkington had yet to digest the numbers in an Ernst & Young economic analysis of supply chain scenarios which accompanies the second report, but said the big questions involved the infrastructure investment needed to support moving containers to Northport
"The investment on-port is probably the smaller and manageable part of it. The big investment is in the decision around would there be widespread use of rail?
"The announcement by the Government ($1.3b funding) goes some way to upgrading that line (Auckland-Northland) but still leaves a lot of work to do to be able to take high-cube containers from Northport to a distribution point somewhere near Auckland city."
A long-mooted spur rail line out to Marsden Point was also in the cost mix, as was a proposed inland distribution port in northwest Auckland to complement Port of Tauranga's Metroport inland hub in south Auckland.
The EY report estimates that the capital investment in port and transport infrastructure for a full move to Northport would cost more than $3.5b over 30 years "with significant implications for heavy and engineering construction firms".
It estimates that developing Northport container facilities would cost around $1.3b over 30 years for berth expansion to accommodate container growth, expected to swell to 1.6 million TEUs (twenty-foot equivalent units) a year.
"In terms of infrastructure on-port, I would clearly expect shareholders of Northport to fund that. But that's not the big piece. The big piece is the supply chain infrastructure whereby cargo would move from Northport to customers and vice-versa - that would certainly be beyond the capability of Northport shareholders because they would struggle to get a return on that," said Pilkington.
He said developing a big port was not just about bigger wharves and bigger cranes. It was about reconfiguring the supply chain.
"When we built Northport, the average size of a container vessel was about 1700 TEUs. Now we're dealing with vessels carrying many times that.
"The problem is accumulation of cargo. On those big vessels we get into Tauranga on a weekly service we sometimes do a container exchange of up to 4000.
"Accumulating that cargo requires a reconfiguration of the supply chain. All of a sudden you've got to deal with the positioning of empties. What people don't appreciate is that New Zealand imports more dry containers than we export and we export more refrigerated containers than we import.
"So a lot of these ships calling at New Zealand are not only dealing with pick-up and delivery of full cargo but they're dealing with repositioning empty boxes.
"So when you start to build a large port you not only need systems that will accumulate that volume of cargo over a short time ... but you need to deal with all the logistics as well."
Pilkington said moving large volumes and repositioning of containers was complex.
It would require freight forwarders and exporters to almost reconfigure their supply chains.
"It may require relocation, it may require some investment on their part.
"But once you're got the facility set up you can rely on them to quite quickly realign their supply chain to the lowest cost. Just what that means will vary significantly across shippers and the sector."
Pilkington did not believe the complex shareholding structure of Northport - 20 per cent of Marsden Maritime is owned by POAL and the balance by Northland Regional Council - would make port expansion more difficult.
"I've always believed that structure follows strategy. Once it's clear what the interested parties want to achieve, that's the time to sit down and look at the structure."