P&O Maersk merger may foil ports' bids

Ports of Auckland and Tauranga's bids for a lucrative international shipping service may come to nothing if a proposed merger of the world's biggest and fourth biggest shipping lines goes ahead.

A well-placed industry source said a merger of Maersk and P&O Nedlloyd (PONL) could see the prize the rival ports are hunting, the PONL Eastabout 70-day around-the-world service, replaced by a European service with a hub in Singapore, for example.

The two shipping lines competed for product for the Asian market, so it was logical there would be rationalisation if they merged. "But that doesn't mean it won't go to Tauranga or stay in Auckland. Everything is up in the air," the source said.

Auckland, which has a strong relationship with Maersk, the world's number one line, has the Eastabout service. The agreement expires in December.

Analysts say the service is about 20 per cent of the Auckland port's container volume.

Tauranga has been bidding for the service. Dairy giant Fonterra, a major customer of PONL, is understood to be a key influence in the shipping line's decisions.

In 2004 PONL switched its Asian service from Auckland to Tauranga, a move influenced by Fonterra, the country's biggest exporter with sales of $11.8 billion last year.

The move cost Auckland about 45,000 containers a year, or 8 per cent of its container volume.

Fonterra will only say it spends "hundreds of millions" of dollars each year on export freight.

An announcement about the Eastabout service has been expected for many weeks, but the merger plan put all decisions on hold.

A PONL spokesman said Maersk's formal offer to PONL shareholders would close on August 4.

Fonterra's decision to invest up to $15 million in a new logistics hub at Hamilton, half way between the two ports, would have figured largely in PONL planning - at least until the merger was announced. Rail operator Toll is investing $11 million in the big freight village.

But merger or no merger, Fonterra has to make a decision by August on which port gets the bulk of the 600,000 tonnes of product the Hamilton hub will shift a year from Fonterra's dairy heartland, the Waikato. The new dairy season gets under way from August.

Fonterra logistics chief Nigel Jones said the decision had to be made by then to enable planning for next year.

The industry source said Fonterra's choice of main export port for the Hamilton hub would indicate what its medium and long term port preference was.

"Once this shipping line thing is sorted, I would expect Fonterra to indicate to the shipping lines this is where we intend to be putting the majority of our product and we want you to call at this port.

"No-one knows what is going to happen. No one can second guess what Fonterra or Maersk are going to do. Auckland felt with the merger being announced that they had won some breathing space ... It has given them breathing space but it may not be in the medium to long term desire of any party to focus on one port more than the other."

Auckland is the country's largest volume port, and its biggest import port. Tauranga is the biggest export port, already handling 750,000 tonnes of dairy exports a year.

Up for grabs

* Ports of Auckland and Tauranga want the P&O Nedlloyd round the world container service, which uses the giant ships capable of carrying 4,100 20-foot containers, to call.
* Ports of Auckland has the service, which represents about 20 per cent of its volume. But the contract expires in December.
* A merger between P&O, the world's fourth biggest shipping line, and rival Maersk, the world's largest line, however could lead to a reorganisation of the companies' shipping services worldwide.