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Newcastle Port says the South Pacific is its playground

The Port of Newcastle will set up an eight-person project team this month to do initial designs for a proposed $1.8 billion container terminal with the aim of becoming a trans-shipment hub for the east coast and Asia-Pacific.

The design could reflect the desire of major operators for automated facilities capable of handling much larger ships, as the Port of Newcastle seeks to become a hub that distributes goods to other ports on Australia’s east coast, locations via rail, and to other ports in the Pacific, including New Zealand.

The port has met with four of the world’s six biggest global shipping lines since December and all are keen on using a container terminal in Newcastle, said chief executive Craig Carmody, who is a former political advisor.

“What they’ve said is: ‘You build an ultra-large container vessel terminal and we are absolutely interested in having a chat with you’,” Mr Carmody told The Australian Financial Review.

The shift towards ultra-large ships is similar to the emergence of A380s in the aviation industry, which forced airports to build new facilities, Mr Carmody said.

“The airports had no choice – they had to build the infrastructure because that’s where the airlines went. My view is that’s exactly the same situation in ports.”

Shipping companies are increasingly using ultra-large vessels – which can carry more than 10,000 20-foot equivalent units (TEUs) – because they can move more containers at a lower price, helping boost profits.

Australia needs to start building ports big enough to accommodate them, Mr Carmody said. “As the world moves to bigger and bigger ships, Australian ports are going to be left behind.”

Australian stevedores typically handle ships carrying about 7000 TEUs and most ports do not have the facilities to handle large ships carrying over 10,000 TEUs.

But the International Transport Forum forecasts the average vessel travelling between Europe and Asia will carrying around 16,700 TEUs by 2020 and Hyundai Merchant Marine said last year it was ordering 12 ships with a capacity of 20,000 TEUs.

The Port of Newcastle wants ultra-large vessels to drop boxes off at its port, with the port then assuming responsibility for moving the boxes to other parts of Australia using railways and coastal shipping.

“You drop them off in Newcastle, and I’ll coastal ship them up to Brisbane, down to Botany, around the Melbourne – or if Inland Rail has been built, I can use the rail line,” Mr Carmody said.

Newcastle is the only Australian port that will be directly connected to the proposed Inland Rail line.

“The model that we’re going steal is a very Chinese model and you actually put your warehouse distribution inside your port boundary,” Mr Carmody said.

The port also wants to compete with New Zealand, which already receives ultra-large vessels.

“What I’m saying to the shipping lines is, you come to us and we’ll trans ship it to New Zealand, we’ll trans ship it to Fiji … as far a we’re concerned, the South Pacific is our playground.”

But Mr Carmody stressed the port’s ambitions would only be realised if it was able to build a port capable of receiving ships carrying between 12,000 and 15,000 TEUs, thereby guaranteeing “a trans shipment opportunity”.

NSW action needed
While the port has received permission from its owners, China Merchants and The Infrastructure Fund (which since last month has been managed by Macquarie despite concerns over potential conflicts of interest) to proceed with initial design, it will not be allowed to develop a detailed design unless the NSW government scraps controversial deeds contained in its 2013 sale agreement for Port Botany and Port Kembla, Mr Carmody said.

The deeds were designed to protect the owners of Port Botany and Port Kembla – AustralianSuper, IFM and Tawreed Investments – against the development of a competing container terminal by obliging the NSW government to pay a $100 fee on every container moved in and out though Newcastle once the port grew big enough to handle 30,000 TEUs annually.

But the competition watchdog has intervened, declaring the deeds “illegal,” and has sought injunctions restraining Port Botany and Port Kembla from seeking compensation.

The Port of Newcastle, which is obliged to reimburse the government for any fees paid, met with the government in early December to discuss getting rid of the deeds.

The port is open to a “negotiated settlement” but does not want to pay any compensation to Port Botany’s owners for scrapping the deeds until its own container terminal is operating and making money, Mr Carmody said.

If the government does agree to get rid of the deeds this year, the port expects to proceed to a detail design for container terminal and start construction on the first stage in late 2022.

The Port of Newcastle, which is the world’s biggest coal port, is also considering what businesses could operate on its 1000 hectares of land, including property and retail developments, to diversify away from coal.

While coal exports are currently steady, they will “inevitably decline” in the future, Mr Carmody said.

“Kingsford Smith Airport is the best run, most profitable car park in Australia. Planes just happen to land there. Why can’t the Port of Newcastle be the same? We’ve got all this land and maybe the answer is why don’t we convince an Aldi to set up their distribution centre at the Port of Newcastle.”

A dispute over the fees the port can charge coal miners for using its shipping channels has made it harder to make money from the channels, Mr Carmody said.

The Port of Newcastle last month became the first Australian port to join the international EcoPorts network. It wants reassure potential future investors in a container port that it is committed to global environmental standards.
Source: Australian Financial Review

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