Sabres rattling in Port's engine room

A straddle Carrier lifts shipping containers at the Ports of Auckland. Photo / Richard Robinson

Down at Auckland's Fergusson Wharf, three-storey-high skeletal machines weave through stacks of shipping containers, ferrying thousands of metal boxes filled with exports across the yard. Looming above, screeching cranes snatch this cargo from the dock's edge, hauling the 12m-long containers onto the decks of anchored vessels. At the same time, others unload arriving freight, making room for goods destined for foreign shores.

The system appears a well-rehearsed concert, a symphony of sirens, clashing metal and machinery-in-motion.

But a cog is loose in the engine at Ports of Auckland which threatens the stability of one of the city's most important economic assets.

The Auckland Council-owned 75-hectare dock is in the grip of a bitter industrial dispute - and neither the port nor the Maritime Union appears to be backing down.

The acrimonious stoush follows the loss of business to competitors and a 37 per cent decline in net profit for the year ending June 30, 2011.

Ports of Auckland chief executive Tony Gibson told the Herald yesterday the company's profitability this year would depend on the outcome of industrial negotiations.

"We had a pretty good first quarter, and we had made some process improvements and had seen the revenue line increase.

"We're expecting that we will make budget but that's going to be [hard] given what we're faced with in terms of industrial disruption and the loss of a key customer, Maersk, and of course Fonterra. Yes, there will be pressure on the revenue line and returns," Gibson said.

On Wednesday, Fonterra - the port's biggest export customer - announced it was seeking "certainty of supply" and would move shipments worth $27 million a week to Tauranga and Napier from the end of January. The dairy co-operative's business was worth $100,000 a week to Auckland.

In a similar move last month, shipping giant Maersk said it was switching its Southern Star container service worth $20 million from Auckland to Tauranga.

The loss of the service is believed to amount to 52 ship calls, about 82,500 containers a year and an 11 per cent drop in Ports of Auckland's $177 million revenue.

Despite the knockbacks, Gibson said the company was resolved to meet its budget and improve its productivity.

"What that means in terms of losses is that we will need to resize the organisation, we will need to take costs out. It's not just in labour, it is in support services," he said.

The port boss said the company needed to make changes as it was not meeting its costs of capital and its returns were not satisfactory.

As part of the restructuring, the company has offered union staff a 10 per cent pay increase on existing wages of about $27.40 an hour (with added bonuses) in return for replacing eight-hour duties with shifts ranging from five to 12 hours.

But Maritime Union local and national president Garry Parsloe accused the port of undermining job security and said Gibson needed to do a better job allocating work between permanent, part-time and casual staff.

"What he should do is manage his f***ing business. Smaller ports that only see one ship in a week and four the next week, like Timaru, they manage it. He's got the flexibility in there, of permanents, casuals and part-timers [so] why doesn't he manage his port?"

Yesterday, the union made a counter-offer of a 2.5 per cent pay rise for a six-month period and the rolling over of the terms of workers' collective agreement, including rosters.

Unless the situation can be resolved, about 300 union staff will strike on Monday, the fifth time they have done so since early December.

The wharves are a critical part of Auckland's infrastructure and disruptions to operations have negative impacts for the city's economy.

According to an independent report released last October - albeit one commissioned by the company - Ports of Auckland adds $247.6 million directly and indirectly to the region each year. Although shipping could be redirected to other parts of the country, it estimated Auckland would lose $741 million a year if the port shut down. The report also commented on the wharf's importance to New Zealand's cruise ship industry and said if Auckland was unable to accommodate these vessels, a number of operations could stop coming to New Zealand entirely.

According to the study, the port helped reel in $50.3 million from the cruise industry in 2010.

The port company also pays about $18 million in dividends a year to Auckland Council.

Despite the wealth generated, the port faces sharp competition from its Bay of Plenty counterpart, which moved from strength to strength last year.

The NZX-listed Port of Tauranga reported a record profit of $57.9 million in 2011 - about twice that of Ports of Auckland. Its trade volume in the year to June 2011 was up 12.4 per cent to 15.4 million tonnes and its export volume was more than three times its competitor's in the City of Sails.

Its share price has soared 36 per cent in the past 12 months and closed at $10.12 yesterday.

Although rivalry between Tauranga and Auckland is fierce, the possibility of merging the two ports has been floated numerous times.

In 2006, the two parties worked together on a merger proposal, but this was dropped a year later.

Gibson said yesterday there were no plans for any such deal and keeping the two entities separate encouraged competition.

"I think competition between Auckland and Tauranga is a damn good thing," he said. "Essentially what you're doing is making sure you're keeping your costs under control and investing wisely."

Port of Tauranga chief executive Mark Cairns said there had been no discussion between the parties and a merger was not "on the radar screen".

"[2006] was probably a lost opportunity, but there's been no approach in recent times."