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Lyttelton Port and Port Otago have begun discussions about merging into a single South Island super-port company to create a more efficient trading system.
The Business Herald understands the management of both ports have had regular meetings to discuss the possibility of a merger, but have not reached a decision about the potential stakeholding or structure of a merged entity.
It is expected that a merged port would act as a hub, drawing coastal feeder services from regional ports around the South Island.
The two ports are watching with interest to see how Port of Tauranga and Ports of Auckland - which announced they were in merger discussions in October - navigated competition and regulatory concerns.
The plan does not involve Hong Kong port giant Hutchison Holdings, whose attempt to take a 50 per cent stake in Lyttelton Port sparked talk of consolidation in the industry last year.
Lyttelton Port chairman Barney Sundstrum yesterday refused to comment on whether it was holding talks with the Port of Otago but said the rationalisation of port capital and cargoes would not occur unless there was some rationalisation of ownership.
Sundstrum has said the push to consolidate container trade was urgent as shipping companies were bringing in larger vessels.
"They are costly to operate and shipping companies will be reluctant to let them traipse along the coast loading and off-loading freight when they could be turned around quickly if the freight was consolidated into bigger lots for transfer between ship and shore."
Otago chairman John Gilks said its board had not conducted any work on a merger plan but said it was watching the North Island mega-port proposal with interest.
Early last year, the country got its first taste of global consolidation in the port sector when Christchurch City Holdings linked with Hong Kong giant Hutchison Port Holdings and made a failed bid to take a 50 per cent stake in Lyttelton Port.
But Port of Otago's purchase of a 15 per cent stake in Lyttelton Port upset that plan.
Christchurch City Holdings chief executive Bob Lineham said yesterday it had had no further contact with Hutchison Port Holdings.
First New Zealand Capital analyst Rob Bode said yesterday it made sense that Lyttelton Port and Port Otago were exploring the possibility of a merger.
"They would do some ground work to see how Tauranga and Auckland fit together. There is a lot of unnecessary investment in ports that are chasing the same business and getting sub-optimal returns.
"It's obvious to try and rationalise the movement of cargo and the way they manage the infrastructure."
Christchurch City Holdings has a 68 per cent stake in Lyttelton Port and Port of Otago is wholly owned by the Otago Regional Council.
Lyttelton Port shares were un-changed yesterday at $2.20.
