What lies ahead: Transport

Builders are not the only ones with more work on while the economy does better than expected.

The transport industry outpaced a buoyant economy in 2004 and that is not expected to change next year. After analysing road user charges and the use of diesel, Tony Friedlander of the Road Transport Forum estimates freight is growing 7 per cent a year - or at 1 1/2 times the rate of growth in the overall economy. And that is with a downturn in the forestry sector.

The freight task - the volume to be moved - is expected to grow between 80 per cent and 100 per cent in the next 10 years.

This is one of the reasons Australian transport company Toll Holdings took control of Tranz Rail in October 2003. It is also the reason the road transport industry is not too worried if there is a renaissance in rail.

Friedlander expects growth of the total transport market to outpace growth in rail.

He thinks capacity constraints such as the availability of labour and equipment as well as the capacity of the network will limit rail's market share.

In a bid to revive rail, Toll NZ has done deals with Solid Energy and Fonterra and is talking about expanding the rail-engineering unit.

"The interesting thing to watch in the next few years is how much of Toll's increased business is carted by rail and how much by truck," said Friedlander.

Mainfreight, the biggest operator in the so-called less-than-a-container-full part of the transport market, has merged with Owens Group and formed an alliance with Freightways.

The feelings of nationalism are strong and there is a New Zealand determination to "beat the Aussies" in business as well as sport.

Toll has been rebuffed by Peter Baker Transport and its attempts to buy log transport company Lambert Group were scuttled by its biggest customer, Carter Holt Harvey. But Toll has formed a joint venture with Port of Tauranga's log-handling business, Owens Logistics, and plans to make more acquisitions.

No one doubts that the transport sector is being shaken up and not just by the Australians.

Fonterra, the country's biggest exporter, has the hundreds of millions of dollars it spends a year on ocean freight under review.

The deal it does with P&O Nedlloyd New Zealand and other shipping companies could move shipping services from one port to another. Construction on a new hub for Fonterra's dry goods exports from the Waikato begins this year, giving the dairy giant flexibility between ports and much more efficient movement of empty containers. The venture has major ramifications for North Island ports and Fonterra will use rail, which is seen as only good for bulk commodities.