Lyttelton suffers in new port deal

By PAM GRAHAM

Lyttelton Port had 7 per cent shaved from its share price yesterday when P&O Nedlloyd said its weekly "supership" container service to Europe would stop only at Auckland, Napier and Dunedin.

Lyttelton would lose 10 per cent of its container business, reducing annual profits by as much as $3 million a year, analysts said. Wellington's Centreport loses a similar amount of business and Port of Tauranga missed a chance to add to its revenue. It was not on the old route but bid to be included in the new one.

P&O Nedlloyd managing director Tony Gibson and analysts disputed the proposition that the move to superships was as historic as the advent of containerisation. It was, rather, a way of pleasing customers and cutting costs at a time when it was hard to put up freight rates.

"These are hard decisions. It's just as difficult for us because these are big decisions which ultimately could, and we hope not, affect people's livelihoods," Gibson said.

P&O Nedlloyd will run 10 ships that can carry 4100 ordinary-sized containers - 64 per cent more than some older ships - on its eastabout loop that travels through the Panama Canal, the east coast of North America, Europe and back through the Suez Canal and Australia, taking about 14 days less than the old service.

The westabout service on the same route the other way around will have 12 ships than can carry 2200 ordinary-sized containers.

"Vessels of this size you can't have calling at six ports in New Zealand," Gibson said.

The company will decide "shortly" on how to feed cargo to three chosen ports.

P&O Nedlloyd's Japan-Korea service calls at Auckland one day after the Europe service and can take boxes to Wellington. Rail is an option between Napier and Wellington.

In the South Island, P&O Nedlloyd's Southeast Asian service goes between Lyttelton and Port Chalmers. Canterbury-based businesses can also use a slower service to Europe through Lyttelton.

Tranz Rail said the P&O Nedlloyd decision and other moves by shipping companies since July would bring 30,000 ordinary-sized containers annually to rail.

In July, Maersk moved to Timaru from Lyttelton, increasing freight volume between Christchurch and Timaru by 40 per cent.

Gibson said Lyttelton's inability to offer 24-hour service because of its labour force was only one factor in the decision, though it needed to be addressed.

"These vessels have a very high refrigerated component and many of the meat companies have a large presence in the lower part of the South Island," he said. The Albatross class vessels are 281m long.

Port of Tauranga was a very strong contender but the company felt that imports in Auckland were a large portion of the business that had to be protected.

Ports of Auckland shares fell 5c to $6.15. Chief executive Geoff Vazey said the company was pleased with the decision and the port had prepared for the new era of bigger container ships.

Port of Napier chief executive Garth Cowie said the deal would boost transport in the region.

AMP Henderson's Nat Vallabh said the void at the losing ports could be filled by other shipping companies.

"How that transpires remains to be seen," he said.

"Lyttelton had profits of $16 million in the 2002 year. It's more than likely to drop to about $13 million - $12 million for the 03-04 year," he said.

"The question is how they mitigate that with cost reductions. They will have to look at costs," he said.

Lyttelton Port managing director David Viles said the port had a broad customer base and was retaining 65 per cent of P&O Nedlloyd's total business with the port.

Lyttelton Port shares fell 11c yesterday to close at $1.45.

New Zealand ports aren't alone in facing uncertainty. Bloomberg reported last month that UK-based Peninsular & Oriental Steam Navigation, one of P&O Nedlloyd's two parents, will "unquestionably lessen" its involvement in the venture. P&O posted a net loss of £55.6 million ($186 million) in the six months to June and its share of P&O Nedlloyd's loss in the period was £47.9 million. Dutch company Royal Nedlloyd is the other partner.