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Submission: Upper North Island Supply Chain Strategy Working Group

21 December 2018

Working Group on Upper North Island Supply Chain Strategy

c/- Ministry of Transport

By email

Info@transport.govt.nz

Sent by email:

Submission to Working Group on Upper North Island Supply Chain Strategy

Thank you for the opportunity to make an oral submission to the Working Group on 14 December 2018 in Auckland and for the opportunity to follow up with this written submission.

Background

Coastal shipping is a vital part of New Zealand’s transport infrastructure.Recent events have shown that the coastal network is important for New Zealand economic, environmental and social welfare and vital during emergencies when road links are disabled.

New Zealand depends on coastal ships.For example:

Central and local government decisions as well as port decisions affect the performance of the coastal network.

In the last 24 months, 4 new ships have joined the coastal fleet reflecting investments of over $150million in the New Zealand economy.

The Federation is committed to working with decision-makers to ensure that the best policy settings are in place for the benefit of all New Zealanders.We are happy to work proactively to bring sector knowledge to support the policy-making process.

The Federation remains committed to safe, secure and clean shipping.


The New Zealand Shipping Federation began in 1906 and is the key representative body for New Zealand’s coastal shippers.

Members of the Federation are:

Coastal Bulk Shipping

www.coastalbulkshipping.co.nz

Anatoki

Bulk cargo

Coastal Oil Logistics (COLL)

www.coll.co.nz



Holcim

www.holcim.co.nz

Buffalo

Cement

InterIslander

www.interislander.co.nz

Aratere

Cook Strait ferry


Kaiarahi

Cook Strait ferry


Kaitaki

Cook Strait ferry

NIWA

www.niwa.co.nz

Tangaroa

Research


Kaharoa

Research

China Navigation

www.pacship.co.nz

Aotearoa Chief

Cement


Spirit of Canterbury

Container cargo

Silver Fern Shipping

www.sfsl.co.nz

Kokako

Fuel


Matuku

Fuel

StraitNZ- Bluebridge Cook Strait Ferries

www Straitnz.co.nz

Straitsman

Cook Strait ferry

Strait Feronia

Cook Strait ferry

Ships go where the cargo is

As a preliminary point it is worth noting that some of the elements of design of a unified port system across Auckland, Tauranga and Whangarei are impossible to achieve in a liberal western economy.

Ships go where there is cargo.Once this is recognised, it is obvious that the growth, development and even the existence of a port is entirely dependent on the cargo flows, inwards and outwards.Questions about port locations and viability are inevitably questions about cargo movements.For that reason, the inquiry into the three northern ports needs to first address cargo flows that are naturally occurring.

Thus, any attempt to force cargo to, from or via a particular port must lead to questions about whether this is to be mandatory or subsidy-driven.If neither is intended, the focus has to return to what the natural cargo flows are.These will inevitably be based on population and production.

If the Auckland port on the Waitemata is taken out of the mix, consideration needs to be given to how the natural flows of cargo would respond.The Auckland Future Port study found that 70% of the cargo coming into the Waitemata port were bound for Auckland, usually south Auckland.Distance from point of origin to port (or from port to point of sale) is just one factor in choosing the port but it is a very important factor. It is entirely possible that the natural flow of cargo displaced from Auckland would be to move via Port of Tauranga.That is, it should not be assumed that Auckland cargo moves via Whangarei.This is the case even if there is a rail and road link.

The growth in passenger numbers on cruise ships is a separate case, dependant on the tourism attractions of each port.Again, ports are not equally attractive to tourists so it should not be assumed that if you close one port, the passenger numbers will move to another designated port.

Port ownership and investment

The Federation is concerned that the structure of port ownership and investment is not optimal.While the Working Group has asked questions about how the system of northern ports works (that is, Auckland, Tauranga and Whangarei), we believe that no actual system exists.What we have is not a system as such, but is instead the natural development of separate port sites, competing for cargo and in some cases passengers.It cannot be assumed that cargo or passengers can be directed or incentivised to substitute one port for another.

One of the effects of the site specific nature of ports is that the port owners can easily come to see the port as a cash cow, available to subsidise shareholders or ratepayers with little risk of losing business.Cost borne by ship operators inevitably make their way through the whole supply chain and end up being costs on the whole country.

We believe that there is an approach to investment in ports that encourages capital expenditure without necessarily strong support from a robust business case.This can lead to orphan investments with the cost passed onto the cost of cargo movements.There is only so much cargo in New Zealand and in any region of New Zealand.Port expansion based on the idea that another port will lose business is especially problematic when adjacent ports are all after the same trade and similar growth plans.

We are also concerned that there is a lack of timely maintenance at the ports and an erosion of skills.

This leads us to the question of the role for central government in the oversight of ports to ensure that they are fit for the purpose of being a strong link in the New Zealand strategic supply chain.

Dry Dock

There is an urgent need for a dry dock in New Zealand that is large enough to fit the coastal shipping fleet and also meet the needs of smaller visiting ships, say up to 240 metres in length.The Auckland Devonport Dry Dock can only take vessels up to 170 metres in length and 22.5 metres beam.

Lack of such a dry dock is a significant gap in our infrastructure, impacting directly on transport, defence and biosecurity.

There are two locations in New Zealand that are technically feasible for this, Shakespeare Bay in the Marlborough Sounds or Whangarei.We believe that any consideration of the future of Whangarei needs to include this opportunity to become a significant engineering hub, based on a dry dock.

The absence of a suitable dry dock means that NZ coastal ships are forced to go to dry docks in Sydney or Singapore for their mandatory out of water inspections and routine maintenance.Obtaining confirmed bookings in the Sydney dock is problematic due to the dock being primarily a defence installation with Australian Navy needs always being given priority, even over a firm booking.In addition to that issue, travelling offshore:

The absence of a dry dock limits the suite of options available to Biosecurity NZ when dealing with vessels that need cleaning of either their hulls or their interior cavities prior to being allowed to come into port.Currently, ships with unacceptable levels of biofouling are required to clean their hulls in the open ocean using divers.This is dangerous.It also imposes long delays on the discharge of cargo.

Federation members believe that a dry dock would attract significant expertise, in addition to whatever light engineering was already in place.It would also be a significant opportunity for apprenticeships and on the job education.

Emissions Trading Scheme (ETS)

At the Federation’s meeting with the Working Group, the chair asked what the government could do to put coastal shipping on an even and fair playing field with international ships.

The imposition of the ETS on New Zealand coastal ships is an anomaly.New Zealand coastal vessels are paying for ETS credits when they purchase bunker fuel.International ships are exempt.This is unfair.As the price of the credits has risen, it has become more unfair.

It is hard to see how the imposition of ETS on New Zealand coastal shipping is supposed to achieve anything that addresses climate issues.

Again, thank you for the opportunity to make a submission.

Annabel Young

Executive Director

P O Box 10739, The Terrace, Wellington 6143

021 429 216

Email annabel.young@shipfed.co.nz

www.nzsf.org.nz