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  • Writer's pictureFirst Port Global (FPG)

Ports of Auckland declared “no longer economically or environmentally viable”.

The NZ Government has decided that cargo handling must be moved out of Auckland city.

The long running saga over the future of Ports of Auckland as an inner city cargo port has reached an important point with NZ’s coalition government agreeing “that freight operations on prime land in downtown Auckland are no longer viable”. Ministry officials have been instructed to prepare plans to facilitate moving cargo operations elsewhere for the government to consider in early 2020. The decision was made after considering the final report of the Upper North Island Supply Chain Strategy Working Group.

The Associate Minister of Transport Shane Jones has been a proponent of moving Auckland’s cargo handling operations to Northport, which is around 145km north of Auckland near the city of Whangarei. It is the location of NZ’s Marsden Point refinery, which has a deep water harbour and is around 15km from the rail line to Auckland.

While it has one mobile harbour crane, Northport currently handles almost no container traffic. Auckland has lost its mantle as NZ’s largest box port to Tauranga in recent years, but it handled around 900,000 TEU in FY2019. Auckland serves NZ’s largest metropolitan area and its business is heavily weighted towards import cargo and automobiles for the Auckland market.

The big problems for Auckland are its location, water depth and urban encroachment. As Auckland has grown, the port, and its auto imports in particular, have come to be regarded as a low value business, producing insufficient economic return on the “prime” waterfront land it occupies, while being responsible for road congestion. There is very little sense that the port is an economic generator in the same way Los Angeles, Hamburg and Rotterdam, for example, regard their ports.

Auckland’s population is also growing strongly, putting more pressure on the road network that serves the port. “Freight companies advised us that the number of daily trips, between the port and distribution centres, their container trucks can make is falling to just two, requiring them to invest in more trucks, further clogging the already gridlocked motorway system,” the report noted.

Source: The final report of the Upper North Island Supply Chain Strategy Working Group.
Source: The final report of the Upper North Island Supply Chain Strategy Working Group.

Ports of Auckland has long maintained that moving its cargo operations out of the city, only to have to spend heavily on road and rail links to get the same cargo back into Auckland where it is consumed, is not sound policy from a cost or environmental perspective. The port calculates that the extra land transport would increase the cost of the imports it handles today by between NZ$533 -$626M a year. From an emissions perspective the port says moving all its cargo through North Port will increase emissions by 700%.

In its analysis the Working Group focussed on concerns about traffic congestion and the return the port generates on the value of its land, compared to their potential as an urban zone. it also considered the port’s small footprint, which it cannot expand, and the cost and environmental impact of dredging to accommodate bigger vessels before concluding that a port in the current location is no longer economical or environmentally viable.

Port’s of Auckland CEO Tony Gibson has slammed the report as a “jumble of made up facts”, in particular with regard to its its valuation of the port’s property. “This is the fifth port study in my eight years as CEO of Ports of Auckland, and, well, let’s say it’s not the best,” he said. The Associate Minister disagreed. “I’m pleased my Cabinet colleagues have recognised the merit of this report and have agreed move forward with this work,” Jones said.

Source: The final report of the Upper North Island Supply Chain Strategy Working Group.
Source: The final report of the Upper North Island Supply Chain Strategy Working Group.

When it comes to taking the next step, the problem for the central government is that it has a very limited ability to compel Port of Auckland and its owner the Auckland City Council to move the operation. Furthermore, the idea that Auckland, Tauranga and Northport, which are all owned (or majority owned in the case of Tauranga) by regional Council holding companies, will come together and work out a deal is unrealistic.

In 2006 when Maersk was playing Tauranga and Auckland off against each other as it selected a hub port the ports got together and discussed a merger. As soon as Maersk made up its mind the ports dropped the idea of merging and went back to competing. Over time some of the port companies in NZ have invested in others as a blocking move to protect their own business. Northport is 50% owned by the Port of Tauranga, Auckland’s main competitor today.

The Working Group acknowledged there may be “entrenched behavioural and legal barriers” to the port companies cooperating. It recommended the Government take a leadership role and set clear deadlines, including that the transition should begin immediately and be fully completed by no later than 2034, with a “stretch target” of 2029.

As a first step the Working Group recommended the Government give the ports and their owners until 1 December 2020 to “reach commercial agreement on how the strategy is to be implemented”. If this was not achieved it called for new legislation to reform the Port Companies Act 1988 to achieve the goal of moving Ports of Auckland.

The government has opted for a more conciliatory process, with no fixed deadline at this point. “Ministers have instructed the Ministry of Transport to undertake further work on funding and financing options, governance and commercial considerations, land use planning, legislative and regulatory considerations as well as some additional transport and logistics analysis, said Jones.

“I expect this analysis to consider environmental effects, including on New Zealand’s overall greenhouse gas emissions, and consideration of Government infrastructure investments in roads and rail, for example, building a rail spur to Marsden Point. The Government also wants officials working on the project to collaborate with its new Infrastructure Commission “to ensure we’re taking a holistic view of our logistics network and the major infrastructure needs of New Zealand”.

“Shifting Auckland’s Port will be a huge undertaking and, if done right, will have benefits for all of New Zealand, not just Auckland and Northland”, said Minister Jones. “Nobody is keen on spending too much longer developing lengthy reports but this is a once-in-a-generation project and widespread buy-in is important, as is the need to make the best decisions for the long-term prosperity of our supply chain”.

Jones wants officials to report back to Cabinet with plans in May 2020.

It is not clear what Ports of Auckland will do now. At the moment it is part way through a complex project to implement automated straddle carriers in its yard for managing stacking and road truck handling. Last week it released two consultant studies that rebut the facts and figures the Government’s Working Group used in its analysis, but these look like closing the gate after the horse has bolted.

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