Fonterra in watershed rail deal

By PAM GRAHAM

Dairy giant Fonterra has signed a 20-year deal with Toll NZ that will see one-third of its exports put through a freight hub in Hamilton.

The agreement is a watershed in logistics in New Zealand. It takes 45,000 truck trips a year from roads between Hamilton, Auckland and Tauranga by moving goods from road to rail.

This deal is likely to be replicated in other regions.

Fonterra said it was made possible by the Government's agreement to invest $200 million in upgrading the rail network. That deal, struck as part of Toll Holdings takeover of the rail operator, will also see the Australian company invest more than $100 million in rolling stock and locomotives.

Still to come is a shake-up of the region's major ports. If the new supply route is put through the Port of Tauranga, it will become the biggest port in the country, knocking Ports of Auckland from its pedestal, say analysts.

Fonterra said yesterday it was indifferent as to which port was used.

But the dairy giant's general manager logistics, Nigel Jones, said P&O Nedlloyd was looking at its options between Auckland and Tauranga.

The shipping line brings a fleet of the biggest container ships that call in this country into Auckland.

"We're going to be sitting down with our ocean-freight carriers on what is best from a total supply chain cost perspective," said Jones.

"If that creates an opportunity for them to change port calls and save money ... then that is something we would look at working on them with." He could not put a time on the decision.

Fonterra, which produces a fifth of New Zealand's exports, has been refining logistics since it was created from a merger of Kiwi Co-operative Dairies, the New Zealand Co-operative Dairy Co and the New Zealand Dairy Board in 2001.

The new freight village will service manufacturing sites at Te Awamutu, Morrinsville, Waitoa, Hautapu, Waharoa, Lichfield and Tirau.

Dry store sheds will be built at a site in Crawford St in Hamilton capable of storing 50,000 tonnes of goods.

Toll will manage the freight village and have its own freight operation there, but Fonterra will operate the dry stores. There will also be a container handling facility for cleaning containers and moving empties.

The site is adjacent to rail and a line between Morrinsville and Waitoa is being recommissioned.

Toll NZ chief executive David Jackson said the deal was an opportunity for the partners to invest in a long-term project that delivered for both.

"It will also have a significant influence on the efficiency and growth of rail in New Zealand," he said.

Neither company was disclosing the amount being invested. Jones declined to say what jobs would be lost at other sites, or what costs would be saved.

Fonterra, which uses Toll Holdings in Australia, had not proceeded earlier because of uncertainties about the rail network and operator in New Zealand.

The Hamilton site is on Crown land.