NZ First sponsored port study deserves rigorous scrutiny

The proposal all of Ports of Auckland’s (POAL) freight operations move to Northport, adjacent to the Marsden Point refinery, should be taken seriously and rigorously scrutinised.

The Wayne Brown led working group report resulted from an agreement between NZ First and the Labour Party as part of their coalition agreement.  NZ First proposed in 2017 the cars be moved to Northport by the end of 2019, and the rest of the freight by 2027.  This is a politically driven proposition, not one arising from a neutral study required to properly assess all the options.  A final report is expected before Christmas and at some point the Labour Party will have to determine its view.

The essence of the Brown team’s proposal is: (1) the rail line from Auckland north be upgraded to take high cube containers and a lot more rail traffic; (2) there be a spur rail line to Northport at Marsden Point; (3) a new inland road/rail port in north-west Auckland; (4) a four-lane highway from Auckland to Whangarei; and, (5) a major expansion of Northport to accommodate the extra containers, cars and other freight.

Their seven-page report is accompanied by an 88-page EY analysis, which claims there is a net national economic gain from the proposal.   This claim should be subject to rigorous scrutiny by people with no vested interest in the outcome.

It’s interesting EY’s support for the move contrasts with their report to the Auckland City in 2016 which said: “Relocating multi-cargo to Northport would have a considerable impact on the supply chain for these goods, and associated negative costs for suppliers and freight operators, as most of would have to be transported back to the Auckland region and further south”.

Shifting port locations is not revolutionary and clearly technically it could be done.  Northport has the land and if need be it could buy more, but it should be noted it does not have compulsory acquiring authority as do major airports.   The harbour has reasonable depth but its likely more capital dredging would be required along with somewhat more berthage.

The key questions are:

Will exporters get a better deal in terms of price and service?

Very doubtful unless the government is prepared to subsidise the rail, which raises other issues.   The reality is land transport in NZ costs more than the cheaper sea journeys, which is why low value products such as logs typically go out through their closest port.

Will importers, including motor vehicle importers, get better prices and service?

For general importers the rail option is impossible until the line is upgraded and the spur to Northport built.   Given how long it takes New Zealand to get these projects designed, consented and built, we are looking at around 10 years.  Without a government subsidy it is very hard to see how freight import costs would be cheaper than the POAL, because of the greater land freight distance.

Car importers prefer road because there is less damage to the cars and is more cost effective than rail.

Importing POAL’s 300,000 motor vehicles through Northport would create major challenges.  It would mean more than 800 vehicle trucks going south a week, assuming they have six vehicles each.  Double that for the return journey empty.   Road works presently make the journey slow – so what would more than 1600 car trucks do every week of the year.  Clearly the four-lane motorway would have to be built before that could be contemplated.

Industry estimates are that the Northport option would add anything from $260 to $500 per motor vehicle onto import costs, significant for used car imports, whose buyers typically don’t have much money.

The EY report appears to be silent on how 500,000 tonnes of cement imports would be handled.  Auckland is a major user of cement.  It appears to be largely silent also on other bulk, heavy vehicle imports, project cargo and break-bulk.

Will the Auckland traffic problems be eased?

Port trucks are a small percentage of traffic, which is mostly private vehicles.  Port trucks are estimated to be 7% of all traffic up Grafton Valley.  Pressure would be eased around the port area if it was closed.  However with a massively enlarged Northport sending 30% (EY estimate) of its freight down route one, even with a four-lane highway, there would be congestion issues on route one.  Truck movements in Auckland would not be reduced – they would shift to other areas west and south.

Auckland’s road traffic problems are the result of growth and the modern practice of parents driving their children to school.  The remedy is going to be a mix of more roads, more rail and congestion charging.  The CO2 issue can be set aside because by 2050 very few if any motor vehicles will be powered by oil.

Will the alternative uses for the POAL land produce a higher dividend than POAL or will the people of Auckland discount money for better access to the port area as has been done with Wynyard wharf?

There will be a 1001 ideas on what to do with the freed up POAL land and in good Kiwi style this is likely to create major controversy.  Clearly a high rate of return would be achievable but that might involve structures somewhat higher than POAL’s cranes.

Other issues include the net greenhouse gases impact? – higher because rail and road emit more than ships.  Not a great green solution to a vexing problem.

Also, will the Commerce Commission have a view on the concentration of market power given that Port of Tauranga (POT) owns 50% of Northport and POAL has a smaller indirect holding.

The report rather blithely says the cruise vessel business would remain in Auckland.  As with many ports, cruise visits are seen as marginal extra business, made viable only by the fact that other trades cover the fixed costs including wharf maintenance, dredging, pilotage and tugs etc.  Without the mainstream trades, the cruise vessels would have to cover all costs, unless the Auckland City Council wants to use ratepayers’ money to subsidise them.

There are some other options.   POAL could in conjunction with others work harder to reduce the road traffic congestion outside the port and the Grafton Valley area by making more use of the nighttime.   It could also move more containers faster by rail down to its inland ports at Wiri and the Waikato.  The port is constructing a building to temporarily accommodate the “on wharf” cars, which seem to upset some Aucklanders in the wealthy suburbs.  It could also move faster to free up the wharfs closer to the CBD area, which is included in its plans.

Clearly for so long as it operates from the current site POAL will be space constrained, but that’s not the end of the world.  In the very long run, say 50-100 years, it may be determined that POAL should be in another place.  In the meantime the well managed and successful POT has significant room for growth.

It would be very unfortunate if a quick decision was driven by the political requirements of NZ First, which wants to secure its position in the far north.   That would be “pork on steroids”.

 

 

 

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