Newcastle may become a container port after all

Newcastle may become a container port after all

There could be 2 million containers passing through the port of Newcastle each year.

Following years of sitting in the ACCC’s too-hard basket, industry sources say there has now been enough confirmation of wrong-doing by successive NSW Governments for the ACCC to take action.

The Newcastle Herald quotes an ACCC spokesperson saying: “We have considered these issues over time, however, there are some recent developments that have renewed our interest.”

The news of course comes as great relief and justification for their decades of perseverance for the small group of battle-weary former BHP Steelworks executives and the current management of the Port of Newcastle, who have been told many times to give up any hope of ever seeing the port as anything more than a coaldust gatherer.

Former BHP executive and the driving force behind the container port movement Greg Cameron explains the details:

There is movement on Newcastle at last

The ACCC’s decision to at last investigate arrangements that “may limit or prevent the development of a container terminal at the Port of Newcastle”, is welcome news.

The ACCC chooses its words carefully. It says of “relevance” to its concerns is section 45 of the “Commonwealth Competition and Consumer Act 2010” (Competition Act), that “prohibits contracts, arrangements or understandings which have the purpose or effect of substantially lessening competition”.

A container terminal is a near certainty, if the NSW government removes the fee it charges. This fee is paid to the lessee of Port Botany and Port Kembla (NSW Ports) as compensation for loss of container shipping business to Newcastle.

A world-class container terminal built on the former Newcastle steelworks site would be able to move two million TEU containers a year. At this volume, the NSW government will be required to pay NSW Ports $8 billion between 2023 and 2063. NSW Ports paid $5.1 billion for a 99-year lease in 2013.

The government was authorised by the “Ports Assets (Authorised Transactions) Act 2012” to lease Port Botany, Port Kembla and Port of Newcastle. But this Act did not authorise the government to pay the lessee of Botany/Kembla for containers shipped through Newcastle.

Paying NSW Ports anything defeats the purpose of leasing Botany/Kembla, which was to release capital value. However, by artificially inflating the lease value of Botany/Kembla – by promising payment of compensation – the government got a false valuation.

Competition from Newcastle would have made the lease value of Botany/Kembla less than the retention value, whereby these ports would not have been leased in the first place.

The government concealed its decision to pay the lessee when the “Ports Assets (Authorised Transactions) Bill 2012” was being considered by Parliament. The government also concealed its source of funds to pay the lessee. The government decided in 2012 that a private company, Newcastle Stevedores Consortium (Consortium), would be the source of those funds.

A negotiation by the government to lease Newcastle’s container terminal site to the Consortium, for development of a container terminal, commenced in 2010. A key lease condition was that the Consortium should build and operate a container terminal with minimum capacity for one million TEU containers a year.

Since a lease contract with a condition requiring the Consortium to pay a fee for containers was likely to breach the Competition Act, the government terminated the negotiation, in November 2013.

In November 2013, the government decided to lease the Port of Newcastle to give it a source of funds to pay NSW Ports outside the operation of the Competition Act. Government policy, as confirmed by the Hon Gladys Berejiklian MP on 29 September 2015, is that the port lessee (Port of Newcastle Investments) “could develop a container terminal if it wished to do so”.

A Newcastle container terminal will generate base load cargo to pay for a rail freight bypass of Sydney – from Newcastle to Port Kembla via outer western Sydney.

A sensible solution is for an orderly transfer of container terminal operations from Port Botany to Newcastle and Port Kembla. NSW Ports, which is 80 per cent owned by industry super funds, can have its investment protected if it participates in the rail freight bypass.

There is enough money to be made in railing containers from Newcastle, rather than trucking containers from Port Botany, to protect the interests of all investors, by taking a common-sense approach in the interests of fund members and the NSW community.

Greg Cameron

Why stop there?

If of course container movement was discontinued at Port Botany, to the great relief of local residents and road users, the land and airspace at Port Botany could be used for an additional runway at Sydney Airport. This would negate the need for a new airport at Badgery’s Creek – especially if a fast train were to commence operations between Brisbane, Sydney and Melbourne, which routes account for over 30% of Sydney Airport’s traffic.

The freight rail line duplication could also be avoided, saving several more billions. There would be an immediate ease of the traffic chaos along the M5 and M7, which currently see trucks carrying the hundreds of thousands of containers between Port Botany and the new industrial mega-developments around Eastern Creek each year. It could actually be faster to rail a container from Newcastle to Eastern Creek and surrounds than to move it from Port Botany.

Mr Cameron said Port Botany container truck movements are currently more than 1 million a year. “Deloitte Access Economics estimates they will increase to 4.9 million a year by 2040. However, if the Moorebank Intermodal Terminal does not proceed, Port Botany container truck movements will be 6 million a year.

“WestConnex is essential if container truck movements are to increase five fold because the current capacity of the M5 East is exceeded, even without container trucks. A rail freight bypass would make the Moorebank intermodal redundant because all containers would be railed using the bypass line. Sydney’s existing rail freight capacity is more profitably used for more passenger services.”

Let’s see what happens with the Port of Newcastle first.

Charles Pauka – Editor

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