Red flag over port charges among multiple challenges raised in latest Auckland port shift report

Container ship arrives at Ports of Auckland. Photo / Michael Craig

Auckland port users could face charge increases of up to 32 per cent if market power is shifted to Northport and the Port of Tauranga, says a new report backing Manukau as the best location for a new port.

The report by consultancy Sapere, for which the Government paid $2 million, says competition effects are important to think about in the debate over Ports of Auckland's future on the Waitemata harbour, and the alternatives, to switch cargoes to Port of Tauranga, Northport or share them between both, would reduce or eliminate port competition unless there were changes in ownership.

"Increased port charges due to increased market power might range between 6 to 32 per cent relative to current Ports of Auckland port charges and 5 to 24 per cent relative to current Port of Tauranga port charges.

"Our view is that exporters and importers might face price increases at the higher end of the range," said the report, commissioned by Cabinet to review another Government-commissioned report - that of the Upper North Island Supply Chain Strategy (UNISCS) working group, on a potential future long term alternative for the Ports of Auckland.

But Sapere hedged its bets on the competitive influence of a new port, saying it could increase or decrease competition, depending on ownership ("eg. independent or merged with existing ports") and regulatory settings ("eg. forced de-merger").

Northport is 50 per cent owned by the Port of Tauranga.

Sapere's is thought to be at least the 23rd report on upper North Island ports and freight logistics in 15 years. Auckland mayor Phil Goff, pleased with Sapere's recommendation the port stays within Auckland, said he expected another study to be started immediately by the Government on the feasibility of Manukau and the Firth of Thames as new ports.

The UNISCS report dismissed Manukau as a potential option, recommending an immediate start to shifting cargoes to Northport and concluding the current Auckland port was no longer environmentally or economically viable.

The 2017 Coalition Agreement between New Zealand First and Labour agreed to
"commission a feasibility study on the options for moving the Ports of Auckland,
including giving Northport serious consideration".

A 2016 Auckland Council-commissioned study preferred Manukau.

Sapere's study took a 60 year view. The UNISCS group looked out 30 years.

New report says Ports of Auckland at critical disadvantage over container ship size. Photo / File

UNISCS independent chairman Wayne Brown dismissed the Manukau recommendation, saying its harbour was very shallow with a dangerous shifting sand bar at the entrance.
He said maritime insurers wouldn't insure ships going in there.

Insurance Council chief executive Tim Grafton told the Herald "insurers rely on government and local government to carry out the appropriate process for choosing a new port".

"Insurers of the larger vessels that carry New Zealand trade are not insured in New Zealand. For the ship owners' liabilities each insurer will decide their own appetite for risk and how they price that."

The Sapere report quoted port planning expert Black Quay, which said shipping access to Manukau harbour was "a sound concept", taking into account modern vessels were significantly more advanced and manoeuvrable than those in the past.

However, the Herald notes Ports of Auckland chief executive Tony Gibson said in a media statement in November 2015 that the Auckland council-owned company was negotiating to sell the Port of Onehunga "because Manukau harbour is too shallow for modern shipping, making the port at Onehunga unsuitable for freight operations ..."

The Onehunga port was bought by Auckland Council in 2018.

The Sapere report also challenged several other assumptions in the UNISCS report - and other recent commentary on Auckland's port current location.

"Traffic congestion on Auckland roads is not a key factor in a decision to relocate ... modelling shows that average speeds in the city centre are likely to decrease over time, with port-related traffic being a minor contributor."

Future congestion in the CBD was unlikely to improve if the port was shifted, allowing for resulting redevelopment of the waterfront land for residential, business and public use.

Northport was championed by the UNISCS report and NZ First for its potential to spur the Northland economy.

But regional economies were unlikely to be substantially altered by a relocation of port activity on its own, said Sapere.

Literature showed port investments had lower economic impacts than other transport-related investments such as airport, road and rail infrastructure.

"The economic stimulus in Northland, under the Northport option, would likely be larger than that for the Bay of Plenty, under the Port of Tauranga option. This reflects the relative size of their economies when faced with a similar impulse from a port relocation.

"However most of the gains would be felt in regions outside where the rise in activity takes place. Thus an impulse felt in Northland would likely result in greater impacts in Auckland.

"If the freight operations were relocated to the Bay of Plenty, the impacts would be felt in Waikato and Auckland. Ultimately the potential for regional economic impacts is a subsidiary consideration relative to the gateway test of an option providing sufficient long-term capacity and the consideration of the long-run economic cost implications from a national perspective."

Whangarei Heads and Northport. Photo / File

Manukau and the Firth of Thames were the only two options to meet the gateway test of ensuring sufficient long-term capacity, said Sapere.

Supply chain players approached in the study said Northport was generally considered too far from main markets to be a primary import port, given current industrial activities, warehousing and distribution hubs in south Auckland, Waikato and Bay of Plenty.

Manukau harbour was right beside industrial activities at south Auckland.

Shipping lines preferred a new port at the Firth of Thames but a container port at Manukau could work well for shipping from Australia and Asia.

Manukau was the least costly option at $1.98 billion in upfront capital expenditure and ongoing supply chain operating costs on a net present value basis. A major reason for this was its proximity to south Auckland freight destinations.

Port of Tauranga was second at $3.7b, followed by Northport at $6.2b and the option of a shared increase at Northport and Tauranga $6.8b.

Sapere's port planning advisor Black Quay had some bad news for Ports of Auckland's future at Waitemata however.

Black Quay said the port company was at "a critical disadvantage" compared to Tauranga in accommodating larger container ships. Its 30-year plan for the construction of a third berth and for the entrance channel to be dredged in two phases were contingent on obtaining resource consents.

"If both stages of ... dredging are consented then visits of some 11,000 TEU (containers) vessels would become possible, however it is Black Quay's view that access would be significantly limited in terms of specific vessel dimensions and operating parameters - ie. weight limits and a limited tidal window."

The port would still be at a disadvantage compared to Tauranga in future in terms of channel depth.

Should container ships increase to 13,000-14,000 containers, and up to 380m long and a 15.5m draft, access to the current port would not be possible without sizeable increases in channel depth and berth length - beyond that allowed for in the current 30-year plan and resource consent applications.

Port relocation was likely to increase the pressure for outstanding Treaty and Marine and Coastal Area Act claims over Auckland port/Waitemata Harbour and whatever area was proposed, said Sapere.

Sapere put several "important caveats" on its work due to time constraints and "rapid" duration of the project.

Elements absent from, or unresolved in, its analysis included: port charges, with supply chain costs likely to be underestimated due to lack of data; transhipment costs at alternative ports; traffic costs potentially understated due to time/resource constraints; destination of freight in Auckland estimated due to lack of precise data; and impact on consumers unresolved.