Editorial: Merger of ports may be best option

At a first glance, the prospect of the ports of Auckland and Tauranga working together, and perhaps merging, appears unwelcome. Traders have a right to question the benefit when the country's two biggest ports stop competing. What will that mean for efficiencies and pricing and, indeed, the likes of Ports of Auckland's plan to spend $100 million on new equipment to ensure better service and the maintenance of ship turnaround times?

This is an occasion, however, when first impressions are deceiving. At present, New Zealand, with a population of 4 million, has 10 ports with container cranes competing for trade. Australia has just five. Vast sums of money are being invested speculatively to attract new business in a sector that is already under-utilised. Rationalisation is inevitable. The only questions are who will shape it, and who will seize the benefits. Auckland and Tauranga want to ensure it is them.

Their hands have, to a large degree, been forced. Acknowledgment of their negotiations was timed to head off an announcement by Maersk, the world's biggest shipping line, on which of them would become its main port in the North Island. Maersk, which has 40 per cent of the New Zealand market, was thought to be about to cut its ports of call to avoid duplication and the underuse of vessel capacity.

As it happened, the Danish shipper subsequently released a somewhat coy statement, the nub of which was that it had still to decide which of Auckland or Tauranga would lose significant services. It has been playing them off against each other, and would have been content for that to continue until, at some stage, it declared its preferred hub and seriously disadvantaged one of them.

The two have been strong rivals for a number of years, with Tauranga, the upstart, making impressive inroads into Auckland's business. The degree of competition was illustrated in 1999 when Tauranga set up the country's first inland port in South Auckland. It has made light of Auckland's natural advantage, in transport terms, of being easily the more populous centre. Indeed, many analysts have picked Tauranga to be Maersk's port of choice.

The Bay of Plenty port has impressive productivity, transport links and expansion plans. There are, however, questions about the turning circle of its shipping lane, given the imminent arrival of larger ships. Auckland, for its part, boasts location. Indeed, in terms of national efficiency, it seems logical for the status quo to be retained, with Tauranga being the major export port and Auckland taking the bulk of imports. Thus, it makes much sense for the pair to get together to use their capacity and skills rationally, rather than duplicate facilities.

It is even more in the national interest in that they, not foreign shipping lines, should call the shots. Indeed, the added international competitiveness inherent in their proposal should ensure the Government shepherds any merger through potential Commerce Act obstacles.

There is an added benefit in that a merger would see Ports of Auckland again subject to the disciplines of a listed company. The company's takeover by the Auckland Regional Council's infrastructure holding company always contained the risk that it would be used as a cash cow for other developments. Now, its operation will be more focused and more transparent.

The gains are, therefore, not confined to two port companies working together. In sum, they certainly outweigh the competition concerns for traders, and suggest this is an initiative that deserves to succeed. Corporate New Zealand is often caught on the back foot, its destiny determined by overseas interests. This time, things seem encouragingly different.