Dannevirke rail hub may extend Napier Port's log catchment south

A proposed rail-hub in Dannevirke may be able to take 200,000 tonnes of logs off roads a year. 50,000 tonnes of logs are sent on trucks to Napier Port annually. Photo / File

KiwiRail's proposed freight hub at Dannevirke may extend Napier Port's log catchment further south, but is more likely to put existing trucked freight on to rail, port chief executive Todd Dawson says.

KiwiRail, through its government owner, is investing heavily to improve regional freight services and take more bulk cargo off the roads.

Last month it said a proposed rail-hub southwest of Dannevirke may be able to take 200,000 tonnes off roads a year.

Forests in the area are already sending more than 50,000 tonnes of logs to Napier Port annually by road and those volumes are forecast to increase.

Earlier this year, KiwiRail restored the Napier-Wairoa rail link and is now establishing a log hub in the northern centre.

Logs, wood pulp and timber accounted for 74 per cent of the port's export tonnage last year.

The port moved a record 2.2 million tonnes of logs in the September 2018 year and is expecting that to climb by 13 per cent to around 2.5 million tonnes in the current year.

Dawson said that the bulk of the port's cargo travels less than 100km and trucking accounts for the vast bulk of those deliveries.

The port already receives a daily log train of around 18 wagons from Whanganui.

Whether rail can grab a bigger share of the North Island log trade will depend on KiwiRail's ability to compete with truckers, he said.

Dawson said the port already sources a lot of logs from Wairoa, and while a hub may shift some of that volume on to the tracks, he doubted it would materially add to log volume intake.

Napier Port is offering the public 90 million shares, 45 per cent of the business, in order to raise extra capital to fund its wharf expansion.

It has indicated a price range of $2.27 to $2.60 for the shares – a price to per-share earnings ratio of 22.7 to 26 times more for the 2020 year.

Annual forestry planting in Hawke's Bay peaked at close to 10,000ha in 1996 but was back to half that by 2000.

Napier Port's offer document says pine is typically harvested at 25 to 30 years and that represents an opportunity for the company during the next five to 10 years.

But it also noted that the increased volumes seen in recent years will reduce in line with the expected harvest profile after about five years.

While logs dominate Napier's tonnage, its container trade generates 63 per cent of its revenue. The port, already the country's fourth-largest container terminal, is picking increases in container volumes of 1.2 per cent for the current year and the September 2020 year.

Imported bulk goods are expected to decline this year and next, reflecting lower volumes of fertiliser and fuel.