Ports will vie for dairy trade as board tries to cut its costs

By Yoke Har Lee

North Island ports Westgate (New Plymouth) and Tauranga are likely winners from the Dairy Board's move to concentrate exports through selected ports in a bid to save costs.

Although no formal nominations have been made, the two ports are widely tipped to benefit when the board completes its review for the North Island.

A formal study has already been done in the South Island on how the board can rationalise the way it exports its products, leading to a proposal that its dairy exports go through just three main ports: Timaru, Lyttelton and Port Chalmers.

Steve Espie, the board's global supply chain manager said the board was constantly reviewing its options and would be looking more closely at its North Island operations.

He declined to comment on the possibility of more dairy exports being allocated to Tauranga, saying talks were under way with shipping lines and other transport providers.

One port's senior official said the Dairy Board was keen to see more products moved out of Westgate.

"The Dairy Board is encouraging Kiwi [Co-op Dairy] to put volumes through Westgate. They have encouraged the port to build a new crane, put in a new dry store for the products.

But these endeavours would not necessarily make sense to the shipping lines. "It is not on a direct route to anywhere, meaning considerable cost for the line to go there to pick the products up.

Shipping industry officials said pressure would be on Auckland which has the lion's share of dairy volumes among North Island ports.

At least one other port, Wellington, hopes it will be able to offer an attractive deal during negotiations.

Port of Wellington's chief executive, Ken Harris, said: "We look forward to the opportunity to evaluate what savings we can take to the industry. It is a good opportunity and good timing for us to be able to do that. On balance, we are confident we can offer a very attractive arrangement for the Dairy Board.

Meanwhile, a major change in Dairy Board policy will force dairy companies to send their products to the nearest port. From June 1, the board will end what is known as its freight equalisation scheme, which allowed dairy companies to claim inland transport costs.

Mr Espie said the supply chain - from factories, to shores, to ships and ports - was complex. "We don't want every vessel to call at every port. There are costs associated with that.
"Then there's the process of working out which ships call at which port, what is the best product to make at each manufacturing location, and the nearest port from which a ship serves the appropriate market for the product.

"There is a complex trade-off between vessels calling at ports and, internally, products getting from factories to ports. It is that combination that we are working on at the moment.

In the South Island study, some options yielded more favourable outcomes than others.

Lyttelton is expected to lose some trade, but a spokeswoman, Erin Jamieson, said the port understood the desire to cut costs and had provided excellent service to the board for many years. "We are confident, that between the shipping line and the port, we can provide a cost-competitive service and maintain the trade to Lyttelton.