Port of Napier should continue its strong growth thanks to big investments by Hawke's Bay businesses, says Port of Napier chief executive Garth Cowie.
He was speaking at an Institute of Directors breakfast last Wednesday at Napier's War Memorial Conference Centre.
On Tuesday the port announced another record year. It has increased total throughput by 6.6 per cent to a record 3.6 million tonnes and exports have risen by nearly 10 per cent, reaching 2.865 million tonnes.
A tax profit of $10.86 million is up $2.17 million on the previous financial year's normalised result, resulting in a $5.71 million paid to the port's owner, the Hawke's Bay Regional Council.
The growth has not come without substantial capital investment. Three years ago $47 million was spent on a new wharf and this year a $13 million tug arrived from Vietnam.
Mr Cowie cited Pan Pac's $70 million upgrade to make higher grade products, the Heinz move of 35,000 tonnes of production from Australia to Hastings, McCain's $19 million processing upgrade, the new Etika UHT plant in Whakatu and Ravensdown's upgraded fertiliser acid plant.
"Those investments alone over the next two or three years will see our growth continue," he said.
February, March and April continue to present a challenge, when freight more than doubles.
"Space will become an issue and our planning has been around moving part of our operations off port. We have a 7ha site at the bottom end of Thames St that will progressively be brought into operation."
The port also has plans for its site in Whakatu.
Port chairman Jim Scotland said a metro-port development may require a capital injection from the regional council.
Mr Cowie said the port was not the only one to have problems with capacity due to increased port traffic.
"We handled 48 cruise vessels last year and we are on track to handle 72 in the current year. Last year we handled around 100,000 passengers and crew and we are currently looking at handling around 150,000. So again that puts stress on the infrastructure for regional tourism but there are a lot of initiatives to cater for that."
Despite predictions that larger ships would call only at major hub ports, Napier is well positioned to attract ships because of its central North Island dominance.
"We are essentially two hours deviation off the sea lanes relative to cost. So long as we can handle that vessel and get it back out with minimal delays then the extra cost of moving all the containers to an adjacent port are prohibitive.
Bay business backing
grows port profits
"So certainly we see this as a key advantage to us."
The port intends to dredge the sea floor so all vessels can be handled over 90 per cent of all tides.
The administration and port operations building are earmarked for demolition for a rebuilding programme.
Mr Cowie said the port had a good mix of business, with containers making up 40 per cent of business and bulk 60 per cent.
"We are not totally reliant on any one trade, we have a good mix across a good range of cargoes which stands the port well in case of downturns in the market. It does highlight that more than 50 per cent of our exports are forestry or fibre related.
"In terms of containerised imports they are not as diversified. There are a few larger imports but there is a multitude of smaller imports - one/two man businesses importing one or two containers a year."
He said the biggest risk to the container side of port business was the business cycle. The biggest risk for bulk was biosecurity risk.
The port was already bearing the cost of natural disasters.
"One of the negatives in the year ahead is our insurance premiums for earthquake and tsunami went from $300,000 to $1.5 million per annum. The deductible went from $500,000 to $20 million."
He said New Zealand freight rates were producing some of the highest yields in the world.
"Despite those freight rates globally plummeting because of oversupply that is not happening in New Zealand.
"The supply and demand is probably the other way.
"Part of that is New Zealand and Australian exporters have been able to refocus a lot of their marketing into Asia.
He said there would be a shortage of space for exporters during the peak season, especially for refrigerated cargo.
"If you haven't locked in space or negotiating for allocations then I suggest you do so."