Flexibility, capability key for Fonterra

Port Lyttelton will get a boost of up to 10 per cent in container traffic as a result of Fonterra's switch. Photo / Christchurch Star

The nation's freight sector should focus on building ocean cargo capacity and flexibility in making connections to key shipping routes, rather than rivalry between ports, says a Fonterra manager.

"That's a bigger issue for New Zealand to focus on," said Nigel Jones, Fonterra's general manager of supply chain strategy.

The nation's international competitiveness depended on its ability to connect directly with the large consumption markets in the United States and Europe through Asia, he said.

On Thursday Fonterra announced it would switch shipment of product made at its Clandeboye plant from Timaru to the container terminal at Port Lyttelton for the next five years.

It would also drop the port at New Plymouth to ship production from its Whareroa plant near Hawera through Auckland, Tauranga and Napier.

The Timaru and Taranaki ports will each lose about a third of their cargo volumes while Lyttelton will get a boost of up to 10 per cent in container traffic.

The 65 per cent reduction in Fonterra's sendings of Whareroa product through Port Taranaki will result in about 22,000 containers being cut from the record 65,000 containers the port handled last year.

Port Taranaki spent $20 million in 2007 on dredging so it could handle the big ships that call at Auckland and Tauranga, but the port's chief executive, Roy Weaver, said Fonterra pointed to a 20 per cent reduction in container slot capacity on shipping services to Asia, when it needed more options than the one service through New Plymouth.

By sending product to Auckland, Tauranga and Napier via rail, Fonterra could connect with up to a dozen shipping lines, Jones said.

"Rather than being limited to one sailing per week out of these ports we have now got a multitude of sailings per week out of these ports.

"When you've got big operations like Whareroa in Taranaki and Clandeboye in South Canterbury, having only one sailing a week to handle that volume creates a very fragile supply chain," he said.

A delayed or missed loading could mean a failure to make the connection for trans-shipment at a bigger port and that was not helpful when the company was trying to run to increasingly fine supply demands from customers.

There had been phenomenal capacity reductions in shipping space out of New Zealand in the past year, Jones said. Shipping lines had merged and the numbers of vessel-sharing arrangements between shipping companies had increased. As well, freight space had been reduced.

"As you get tighter on capacity, you've got to manage that capacity far more efficiently."

Most of the volume shifted from Port Taranaki will be moved to Auckland, Tauranga or Napier ports.

Pressed on the comparative advantages of Auckland and Tauranga, Jones said there was a fine balance in the way Fonterra managed its carrier shares, how the shipping capacity fluctuated, and where customer demand lay.

Rather than focusing on the specific port, the exporter's key driver was which shipping services suited its needs.

"This is about building flexibility, particularly given the current capacity constraints."

Down the track the company would need to consider the next generation of bigger container vessels, which would be important to Fonterra's plans for reducing the carbon footprint of its product.

The latest changes were unrelated to the carbon footprint work, but Mr Jones said New Zealand needed to encourage bigger ships to call at its ports.

It had been sad that the nation's biggest exporter had not been the biggest user of the rail network, but now there was scope for high volumes of Fonterra freight to underpin some rail services, providing service regularity that would attract other exporters.

Jones emphasised Fonterra did not see a case of road versus rail.

"When we're moving large volumes of finished goods, rail is a logical provider," he said. "It's large volumes, we can move it in big trains, and it goes from a single point to a single point; it's more environmentally friendly and it's sustainable".

The Government is providing a $90 million subsidy of KiwiRail and Jones said the return of the rail system to New Zealand ownership had helped Fonterra rely on it more.

"We didn't have a lack of confidence in [Australian-owned] Toll, but there was significant uncertainty as to the ownership issues and sustainability of the ownership model - that hampered us being able to do anything long term, because we didn't know what environment we were operating in."

He noted that planning was still necessary to move a manufactured product from Whareroa across the North Island to Napier's port, over the same rail line already carrying significant quantities of raw milk from Hawkes Bay and long trainloads of empty tankers going back the other way.

- NZPA