Port firms rebuff fees flak

By DANIEL RIORDAN

Port companies are defending their charges despite a recommendation from a Government-instigated review that the Commerce Commission investigate alleged monopoly pricing.

The report of the Shipping Industry Review, released last week, says port companies have a prima facie case to answer on accusations that they are behaving like virtual monopolies in many areas, with non-contestable pricing making them cash cows for their shareholders.

Lack of any detailed information disclosure prevents users from accurately assessing the fairness of pricing, says the report.

The Government is now considering the findings.

Ports of Auckland chief executive Geoff Vazey said the shipping industry lobbying the Government to "reregulate" ports was nothing new, and had been notable for its "lack of reasoned argument backed by objective evidence."

Auckland's revenue per unit of cargo (a measure of cost to users) had more than halved since the Government deregulated the industry in 1988, and other port companies would have experienced similar reductions, he said.

To go back to some form of regulation would be a retrograde step.

"I don't believe we have a case to answer, but proving that to an investigation would be a lengthy and costly process."

Mr Vazey said all ports, with the possible exception of Nelson, faced significant competition from neighbouring ports, as past industry reviews had determined.

"I don't believe they [shippers] have proved a prima facie case. They're reacting emotionally to port companies making a profit and not them."

Port of Tauranga chief executive Jon Mayson said his company had nothing to hide from a commission investigation. He also claimed any move towards pricing control would be retrograde.

Port companies were returning only about 6 to 8 per cent on their assets, valued on an ODV (optimal deprival valuation) basis, he said.

However, any third-party moves to value returns is sure to generate the same debate as airlines are having with airports - an issue the commission is preparing to investigate.

NZ Shipping Federation manager Paul Nicholas said that while container traffic was contestable and charges had come down in that segment of the industry, the commodity shippers and dedicated users who made up his organisation had little choice in what ports they used.

"They feel they're being ripped off by port companies."

He cited court cases in recent years involving Port Nelson, New Plymouth port company Westgate and Wellington's CentrePort, which had resulted in judicial criticism of the port companies' misuse of their dominant market positions.

Talk by the port companies of reregulation were disingenuous, said Mr Nicholas.

"All we're talking about are controls on pricing, not labour hiring or any of the other reforms."

Some of the strongest criticism of the port companies is coming from the big oil companies: BHP, Shell, Caltex and Mobil. The four own Silver Fern Shipping, which moves oil around the coastline from the Marsden Point refinery.

The general manager of Silver Fern, Frank Wall, welcomed the review's recommendation, but said he would prefer a ministerial inquiry, given that the commission might have its hands full with the airport review.

He estimated that port companies overcharged his firm by 50 per cent.

Port charges, which made up 25 per cent of Silver Fern's total costs four years ago, now constituted 50 per cent, and in a few years would be 70 per cent.

While the industry had been lowering its costs, port companies had not, said Mr Wall.

One of the review team was Shippers' Council chairman Trevor Smith, a former Dairy Board shipping manager, who has been consistent in his criticism of the port companies.

Mr Smith, who now works for the board in Germany, said last year that non-contestable pricing and monopolistic tendencies would continue to be a thorn in the side of shippers until the Government took action.

He said port companies had not passed on enough of their savings, which was reflected in their profits at a time when shipping generally was struggling.

Port companies have countered that big shippers such as the board have influenced cargo flows and port calls, thereby encouraging over-capitalisation in the industry, which has hurt profits.