Ships filling their holds to the brim with stacked timber and pulp are disappearing from Napier Port, thanks to record-low shipping rates.

Companies are instead filling shipping containers, with Napier Port stepping up by providing one of the busiest container-packing facilities in the country.

Port Pack mainly puts timber and wood pulp into shipping containers. The port's general cargo manager Mark Babbington said he likes it that way.

"They have packed squash but it's difficult to manage and plan for because it's seasonal. With pulp and timber you know what you were doing every day," he said.


Green timber is packed outside and dried timber inside, offloaded by truck and trailer units alongside 2m tall packets of tissue-like pulp.

Port Pack's output accounts for a third of Napier Port's volume, increasing from 15,000 20ft container equivalents (TEUs) two years ago to 48,000 TEUs to the year ended May. In that time staff rose from six to 25, working an extra shift plus weekend work from a shed the size of several rugby fields.

Following the Kaikoura earthquake Port Pack, along with the rest of the port, picked up extra work because of damage at other ports, especially Wellington's Centreport.

Unpacking is less than 2 per cent of Port Pack volume with incoming freight consisting mainly of machinery, steel and cars. The cars usually arrive in refrigerated containers, a way for shipping companies to avoid sending empty containers on the long leg to New Zealand.

Napier Port chief executive Garth Cowie said he was proud of the way the Port Pack team handled growth.

"They look after our customers' products as if they're their own, with care and safety top of mind, he said.

"We are one of the largest and most successful packing operations in New Zealand because of the dedication of our people. This work ethic will hold us in good stead as we continue to grow."

Mr Babbington said most ports had some kind of packing facility which is a Customs regulated area and subject to MPI rules. By packing containers itself Napier Port cut down on double handling.

"It's also good for us because with a general cargo ship you need a lot of people for just two days to fill it up. Here we can spread the workload over a week."

Two customers are the lion's share of Port Pack's business, nearby Pan Pac - Napier Port's biggest single customer which exports both timber and pulp - and Winstone Pulp in Central North Island near Ohakune.

"Port Pack is an important part of our integrated service offering and enables us to attract business we might otherwise secure," Mr Babbington said.

"For example, last year we retained the significant WPI contact, which was aggressively contested by other ports. WPI attributed their decision to stay with Napier Port largely to the quality service offered by Port Pack staff."

Pulp is stored at the other side of the port from the Port Pack building - Shed Four - and transferred when needed. Pan Pac leases a shed and the port provides the service for Winstone.

He said before the swing to containerisation a ship's hold would be stacked with timber or pulp. He remembers loading 10,000 tonnes to 15,000 tonnes in one ship's hold "whereas here we are loading 25 tonne into every container and we store it up until the next ship arrives".

"Container freight rates have bottomed out. They have gone so ridiculously low that it is cheaper for exporters to containerise, whereas traditionally it was always cheaper to breakbulk [ship en masse in a ship's hold].

Mr Babbington said over capacity would continue because shipping lines were building bigger and bigger ships for the world's main trade routes, seeking efficiencies, which was making older/smaller ships available for routes such as the South Pacific.

"The bigger ships can't come to New Zealand - they can't even come to Australia."

Napier Port is preparing for the migration of bigger ships bumped into New Zealand trade routes by the new behemoths. It is planning a 350m wharf which would be needed even without bigger ships because of ongoing growth.

Port cargo was been projected to increase 49 per cent by 2026 but thanks to the Kaikoura earthquake it is six years ahead of schedule. Cruise lines have indicated ships of more than 360m will visit Napier in the next five years.

With the new wharf comes a need to dredge a new pocket of harbour. It is estimated to cost $100 million and is the biggest single investment since the port was established in 1886.

While there has been speculation the cost of the development would require a partial sale of the port, Mr Cowie was confident it could be paid for through debt and a reduced dividend to its owner, the Hawke's Bay Regional Investment Company which is owned by Hawke's Bay Regional Council.

Mr Babbington said customers preferred containerisation because it allowed quicker access to boutique markets once landed and if rates changed in favour of breakbulk many would likely stick with containers.

Customs broker, shipping agent and GoGroup chief executive Murray Painter said predicting medium to long-term shipping rates was as difficult as predicting currency exchange rates "but what we are seeing now is there is surplus shipping - particularly in the container side of things - so therefore there are very low rates because competition amongst carriers is great.

"We have seen a couple of carriers fall over and other companies bought them up. All of that creates pressure on the shipping industry to keep filling their ships up - so the rates get lower."

He said there were container ships sitting idle in different parts of the world for the want of cargo and ships sent to the scrap heap early.

At some stage there would be a consolidation of the industry "but at the moment it is pretty good for shippers".