Full speed ahead for port reform

“There’s definitely a need for speed, not only for the economic efficiency argument – it’s the environmental issues as well,” Money says, citing the growing importance of zero carbon credentials in New Zealand’s export markets.

“Some exporters are already of the view that there’s a risk, particularly in Europe, of informal trade barriers being put in the way of exporters related to the carbon impact of getting their goods to market.  ” he warns.

“If our export customers such as international supermarket chains only take carbon zero goods, then you’ve got issues.

“Whether we can respond faster than the people we trade with is an important thing,” comments Money.

“The OECD estimate New Zealand’s distance to market adds a 10 percent penalty on gross domestic product (GDP), which is substantial.

“Anything we can do to shorten that logistics chain and get our goods faster and more efficiently to market is a good thing,” he continues.

The report, The Question of Bigger Ships: Securing New Zealand’s International Supply Chain (read the PDF version), was commissioned by the New Zealand Shippers’ Council, a body representing large exporters, such as Fonterra, Solid Energy, Zespri, Carter Holt Harvey and the Meat Industry Association.

The report urges swift action by ports in response to the rapidly developing trend in shipping markets to larger vessels, which New Zealand ports are presently incapable of handling without significant infrastructure investment.

By upgrading some ports (the report recommends just two port upgrades in the first instance) to accommodate ships capable of carrying in excess of 7000 containers, net supply chain benefits worth up to $144 million per year from 2015 could be achieved.

By using larger ships, exporters’ carbon footprint could be reduced by approximately 31 percent, they contend. The assumptions are based on Statistics New Zealand detailed database and have been peer reviewed by industry and academic experts.

“If some of New Zealand’s ports are not 7000 [container]-capable within the next five years, there is a risk shipping companies may increasingly hub through Australian ports such as Melbourne, Sydney or Brisbane,” the report authors warn.

As Money notes, Melbourne “can’t dredge fast enough” to accommodate the new vessels and realise their ambition to become one of the world’s 10 largest ports. Melbourne port bosses may even “up sticks and develop a deep water container port from scratch” to accommodate the new super-size ship reality, he reports.

If New Zealand was relegated to a mere spoke on the bigger Australian port hubs, then the cost to New Zealand exporters in terms of increasing supply chain expenses would be $194 million a year from 2015, according to the report.

The longer transit time to market, which would reduce the shelf life of many perishable commodities, was noted but not monetised by the authors. Even so, the total benefit from large ship-capable ports, they say, could be as much as $391 million per year by 2020.

“These estimates are direct benefits only,” the authors note, “and exclude the significant flow-on benefits to the rest of the economy due to the economic multiplier effect.”