9. Ports
This section evaluates New Zealand's ports infrastructure. The principal focus of the work on ports was to evaluate the extent to which existing port capacity is utilised and whether potential constraints on expansion exist. For many port operators, plans for expansion and new business opportunities are commercially confidential and forward-looking information is therefore limited.
9.1 Summary
There is a widespread perception that New Zealand has excess port capacity. On a national level, we agree with this perception. With a few exceptions, most ports have relatively low levels of utilisation and could accommodate higher volumes of goods and vessels (although this might require a change in patterns of vessel movements). However, the sector is extremely diverse, with each port facing specific issues arising from its geography and cargo mix. The experience with container traffic is that it has grown by between two and three times GDP. This is expected to continue. Growth in bulk cargos (particular logs and processed forestry products), depends on relative commodity prices. At present, many of the ports advise that there is great uncertainty over the timing of the "wall of wood" (or indeed whether it will ever occur in a meaningful fashion).
9.1.1 Port Responsiveness
We would expect that the ports will generally have the ability to respond to changing demands. There is capacity at the ports, although that capacity is in no small measure dependent on the types and number of vessels using the ports.
Most ports expect larger container vessels to be used on some international routes within the next five to ten years. Many of the ports face absolute constraints (e.g. length of berths, channel manoeuvring room or depth) in their current configuration that would not enable them to take such vessels. This should not necessarily be a problem as the ports also expect that such large vessels would limit their calls to hub ports.
Ports are also constrained in the long term by the availability of land. At present, ports located on city-centre urban waterfronts (and others) are effectively limited in the land available to them at present. Where commercially feasible, it may be possible to reclaim additional land, although this is a lengthy and expensive process. This limits its commercial feasibility to circumstances where the port's trade is sufficient to support such an expensive project. Any land reclamation is also subject to the Resource Management Act and expansion cannot be guaranteed to be permitted.
A number of ports use inland ports or cargo hubs to ameliorate storage constraints, minimising the time that any cargo absorbs storage capacity on the port itself. This approach relies on good transport links.
Transport links are the third likely constraint on a number of ports. This affects Auckland in particular, but a number of other ports as well, where cargo has to move through residential areas and in situations where particular links do not exist (e.g. the lack of a rail link to Marsden Point). Poor transport links affect the efficiency of New Zealand's trade and are likely to drive up overall costs.
The number of ports allows international shipping lines to get ports to compete for business. A recent investigation into ports undertaken by Charles Rivers Associates for the Ministry of Transport concluded that there were some examples of customers captured by their local port, but also concluded that the limited situations of market power were not sufficient to warrant industry-specific intervention by the Government. The relative pricing of the various land transport modes, and the availability of alternative long-distance services (i.e. rail), drives the extent to which ports are able to "capture" local customers.
Generally, we would expect that the ports sector should be able to accommodate growth in trade, although the considerable uncertainty over the timing and actual volume of forestry products from the "wall of wood" might create localised problems, particularly in the east of the North Island.
It is not certain whether increased hubbing of cargoes is likely. A number of the ports indicate that this is probable. Some international shipping lines indicated that, for containers, the economics of the various transport options favoured international vessels calling at most ports, rather than making just one or two calls at key hub ports. This does have implications for vessel sizes and the efficiency of intercontinental traffic (particularly container vessels). The more ports that a vessel calls at, the more likely it is to be constrained in size by individual port characteristics (berth length, draft at berths, in harbours and channels).
9.2 Port Characteristics
A modern port is a complex facility comprising a large number of different types of infrastructure, from wharves, through cargo handling equipment, storage facilities and interconnecting transport infrastructure. Not all of these types of infrastructure fall strictly within the definition provided by NZIER, particularly cargo handling equipment.
Ports also display the classic infrastructure profile that the capacity of the substantial assets needs to meet demand in peak periods, which can be a multiple of average demand. In the case of storage, some ports also show a strongly cyclical profile, with goods steadily building up to capacity levels, before dropping sharply when a vessel calls.
In this regard, it is also worth noting that a measure of a port's effective capacity is highly variable. It would, in theory, be possible to combine measures of capacity in each key infrastructure type to produce a theoretical measure of an entire port's capacity. But such a measure would be meaningless as operational constraints (on the port or its customers) would be likely to impose significant cost burdens on the users of ports long before a port reached its "full" utilisation. For instance, the optimal level of berth occupancy is critically dependent on the type of trade and whether vessels are operating to fixed, regular schedules or not. The consensus amongst port operators was that the optimal level of berth occupancy for a New Zealand port that primarily services unscheduled services is likely to be roughly 35%; this could go as high as 65% when dealing with scheduled services.
9.2.1 Environmental Effects
Ports can create a number of environmental issues. They create noise. Cargo (particularly bulk cargo) can be spilt and there are environmental hazards arising from accidents to vessels within ports.
Given port's historical locations, seabed contamination from previous use is also likely. This particularly becomes an issue when dredging is required that could disturb contaminants. The environmental impacts of ports need to be weighed against the economic benefits that they provide, as the carriers of approximately 80% by value and over 99% by weight of New Zealand's international trade.
9.3 The Ports Sector
New Zealand has 13 major commercial ports, the location of which are shown in Figure 58
Figure 58: New Zealand Major Commercial Ports
Table 56 below provides some indication of the relative market shares of international trade (by value) of New Zealand ports. It should be noted that this provides only a partial picture of port activity: volumes do not necessarily correspond to values consistently, and the table only shows international trade, not coastal shipping activity.
Table 56: International Trade: Ports| Ports | Year to August 2003
Imports
$m | Year to July 2003
Exports
$m |
| NorthPort | 2,117 | 342 |
| Auckland | 14,239 | 5,675 |
| Tauranga | 2,379 | 6,286 |
| Gisborne | 4 | 114 |
| Westgate Taranaki | 205 | 2,006 |
| Napier | 479 | 2,302 |
| CentrePort | 1,818 | 801 |
| Nelson | 180 | 756 |
| Marlborough | | 26 |
| Lyttelton | 2,043 | 2,293 |
| Timaru | 265 | 831 |
| Otago | 259 | 2,623 |
| Bluff | 391 | 892 |
| 24,380 | 24,951 |
Source: Statistics New Zealand Website
Some of the key issues facing New Zealand's ports are summarised below.
a) Containerisation of Cargos
Cargos are becoming increasingly containerised, for general ease of handling. As export activity moves up the value chain (e.g. processed wood rather than logs), containerisation is also more likely to feature. Over the past decade, container volumes have grown by 6-8% per annum, or between two and three times GDP growth. This growth is expected to continue in the future. Increasing containerisation (particularly of exports and imports, as opposed to coastal shipping) of hitherto bulk cargos requires ports to adapt to container-driven business. It also affects the types of vessels using ports.
b) Vessel Sizes
In order to maximise efficiencies and economies of scale, international shipping lines are increasing the size of vessels. Anecdotal evidence suggests that 90% of container vessels under construction around the world are now over 5,000 TEU (compared to the largest vessels regularly operating in New Zealand of 4,100 TEU). Increasing vessel sizes in the main global markets has two consequences for New Zealand ports:
- Potential displacement of ever-larger vessels from the main global shipping routes to peripheral destinations;
- Increasingly tight schedule timetables for the largest container vessels, requiring very high levels of efficiency in the New Zealand ports that service such vessels.
Larger vessels also potentially create issues for those ports that cannot currently accommodate them (either through lack of available wharves or depth). One factor affecting the introduction of larger container vessels is the relative economics of different transport modes. Commentary from vessel owners indicates that, if seeking to minimise overall freight transport costs, it is more effective to take a large container vessel to many New Zealand ports, rather than use land transport to hub cargo to one or two ports. The size of a vessel that calls at all or most of New Zealand's container ports is therefore determined by the maximum size of vessel in the most restricted port.60 However, whilst international container vessels are growing, bulk vessels are reported to be less subject to this trend.
c) Uncertainty over Forestry Industry Activity
Ports that rely heavily on forestry face considerable difficulties in determining the investment required to meet the predicted "wall of wood". This has been avoided at Northport, through Carter Holt Harvey underwriting a level of throughput. Other ports face greater uncertainty, which is not assisted by the current downturn in commodity prices and the high New Zealand dollar.
9.3.1 Typical Constraints on Port Expansion
Ports' freedom to expand in the face of increased demand can be constrained by:
a) Availability of Land
For historic reasons, New Zealand ports are typically located in central urban waterfront locations (other than Marsden point). They are therefore restricted in their ability to expand through either having:
- no spare land onto which to expand; or
- restrictions placed on the ability to reclaim land (although this is always an expensive option).
Even where it is not urban pressures that place limits on the potential for expansion, simple geography may be a limiting factor (e.g. Lyttleton, Marlborough).
b) Land Transport Links
A number of ports cite restricted land transport links (both road and rail) as a key current or potential constraint on activity. This can take the form of:
- Limited rail services;
- Rail links that cannot accommodate some cargo types (particularly 40 foot and "high cube" containers);
- Road links that are not designed for the weight or volume of traffic that might service the port;
- Road links that suffer congestion, or pass through residential neighbourhoods (thus creating a noise nuisance for local residents);
Conversely, some ports (e.g. Westport) cite poor rail links as a key competitive advantage against alternative transport modes.
c) RMA Processes
Ports cite lengthy and nationally inconsistent RMA processes for approvals to capacity expansion (particularly dredging and land reclamation) as both a significant cost and a severe restriction on ports' ability to respond rapidly to changing markets, where substantial investment is required.
9.4 Asset Condition
Generally, port managers report that assets are in reasonable condition, and are maintained to the level necessary to provide efficient service to port users. There has been significant investment across the sector over the last 10 years in reinforcing berths to take heavier vehicles and in the configuration of ports in general to handle the variety of cargo that each faces. Efficient handling of containers appears to have been a particular priority.
The single largest new port development has been the joint investment by Northland Port Corporation and Port of Tauranga in Marsden Point. This development is primarily intended for export of forestry products from Northland.
There are some instances where specific areas of a port or wharves may have not been maintained as it has not been commercially justified (e.g. Lyttleton, Centreport): there is not enough demand at present to justify their upkeep. Gisborne acknowledges issues of under-maintenance while in direct local authority ownership that it is now working to overcome.
9.5 Port Capacity
Most New Zealand ports have considerable spare capacity, in terms of their ability to service a larger number of vessels. The timing of vessel visits is however a key driver of whether expansion is actually possible. As for airports, where expansion of capacity in busy periods tends to be in taking larger rather than more planes, ports face issues with congestion at times when vessel calls coincide.
However, some ports are facing constraints in terms of whether the entire port's infrastructure is capable of handling expansion. Generally, a shortage of storage space and cargo handling systems are more readily addressed than wharves and berths.
The following graphs provide some indication of the Port sector's current capacity and utilisation:
a) Berth Occupancy
Berth occupancy provides an overall indicator of the extent to which a port is active. However, some caution needs to be used in interpreting figures: optimal levels of berth occupancy will vary from port to port depending on port configuration, cargo mix, volumes of trade and vessel scheduling. Feedback from port operators puts the optimal range of berth occupancy in the range of 30% to 40% for ports servicing primarily unscheduled vessels. With a high proportion of vessel arrivals running to fixed schedules, it is unlikely that occupancy can be higher than 65% on average before congestion starts affecting the economics of vessel operation (increased costs through delays).
Figure 59: New Zealand Ports Average Berth Occupancy
Source: Port companies
Some ports face high seasonal utilisation, leading to peaks that are well above the average. There are also issues of cyclical activity during over a weekly period (a concentration of vessels calling in one half of the week). However most ports report that berth occupancy is not an issue and could be increased.
Auckland expects that berth occupancy would fall in the long term, with a trend towards fewer but larger vessels.
b) Vessel Size
Increased vessel sizes are generally affecting the container trade, rather than bulk vessels. Some New Zealand ports are currently servicing the maximum vessel size that they can take, without major reconfigurations to the port (wharves and turning space).
Note that the maximum size of vessel is not only a function of length and draft, but also tide and vessel loading.
Figure 60: New Zealand Ports: Vessel Lengths (m)
Source: Port Companies (interviews, websites)
Draft is an equally important factor in determining maximum vessel sizes (more important for some ports), but unlike length is not necessarily an absolute restriction, varying with loading and tide. Comparisons can therefore be misleading.
Ports are uncertain of the longer-term impact of larger vessels making fewer calls. Views differ as to whether vessels larger than 4100 TEU (roughly 280m) will enter the New Zealand market in the next 10 years. If the economics of international shipping to and from New Zealand continues to move towards larger vessels, it is likely that shipping lines will steadily consolidate the larger vessels onto relatively few of the ports. The impact on the rest of the ports would depend on the extent to which cargo was diverted onto land transport or coastal shipping.
c) Land Constraints
A number of ports face considerable restrictions on the potential for expansion, simply based on the amount of land available to the Port. This arises from the historic pattern of port development and most port's location in urban areas.
Ports facing serious constraints on their ability to expand due to lack of land include:
- Auckland. Auckland is addressing this through reconfiguration of the port over the last 10 years, development of inland ports to minimise storage at the port itself and a 2 stage land reclamation project. In the very long term, subject to appropriate consents, Auckland has the option of reclaiming all land at its indented berths to create a single (roughly rectangular) dock area with all berths around its edges.
- Gisborne. If more storage area is required, land would probably need to be reclaimed.
- Napier. Napier is highly constrained in its available land area. It too is investing in a nearby cargo hub. New berths would need to be constructed from scratch offshore from the existing set up.
- Lyttleton. Again, some reconfiguration of the port is likely to maximise efficiency of usage and Lyttleton has scope to transfer containers very rapidly to hubs around Christchurch.
Again, land and storage space is not necessarily an absolute constraint. A lack of storage space can be dealt with through a faster cycle of usage of storage space. For many of the smaller ports, storage capacity for some cargos regularly reaches 100%, then drops back to very low levels when a vessel picks up the cargo. As cargo volumes increase, extra storage space can be developed, or vessels make more frequent calls, or through the gradual introduction of larger vessels. That is not to say that this is a simple proposition: in the short term it may not be possible to implement either of these scenarios (or the immediate economics of one option may outweigh a more optimal longer term decision). In the medium to long term however, a solution can be expected.
The ability of space-constrained ports to develop more land through reclamation is essentially a function of the ability to obtain consents to undertake the project and cost. Generally, the larger ports (Auckland is the obvious example) have far greater scale and throughput, providing both the financial resources to undertake and support such a project through development and offering a viable business plan (i.e. sufficient volumes of trade) for the project to be worth undertaking. Smaller ports do not necessarily have this capability, or may be exposed to much greater risk
9.5.1 Integration with Land Transport
The choice of port for a goods shipper is driven by the cost of each components of the transport required to reach the port, and then the cost and availability of appropriate shipping services.
As a general rule, rail is more heavily used in export trade (delivering to ports) than import trade (delivering from ports). This pattern generally arises as exports are more likely to be hubbed from a specific location (a plant producing the goods), whereas imports are more likely to be delivered to a wide range of ultimate destinations. Ports of Auckland noted that the vast majority of import containers were delivered within 30km of the port. Ports have mixed views on the rail system. For some a lack of rail or poor rail links is a source of competitive advantage within a local catchment area. For others, rail links offer better opportunities to effectively expand the catchment area and attract cargo from a much wider area.
Increased volumes of goods are likely to place ever-greater pressure on roads that feed ports.
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