Port of Tauranga is poised to defend its turf as NZL tries to reincarnate its former container handling aspirations.The competition at Sulphur Point should provide shipping lines more choice, and hopefully savings for exporters.
BY YOKE HAR LEE
The key question for shipping lines wanting to use Port of Tauranga’s (POT) Sulphur Point container terminal operated by NZL Group will be: ‘What is the level of cost savings? How efficient will NZL be? And how will my logistics be improved if I should switch operators?”
These are hard questions any exporter or businessman would ponder before deciding on a supplier. These are also matters for hard negotiations done in private under the toughest, most calculative way between container operators and their customers.
It is interesting therefore that Ports of Auckland has stuck its neck out to support NZL, which in effect makes Ports of Auckland the “first” big customer that has gone on record for putting its weight behind NZL for a “container terminal operator” that has yet to materialise because NZL’s “right” to operate as a full container operator at Sulphur Point is a matter of contention.
Mike Pohio, significant stakeholder in NZL Group, who is also a former manager at Port of Tauranga, is sanguine about the whole thing: “For the shipping companies, it boils down to whether, if we become the “port” of choice, what benefits will come from that choice.” According to Pohio, “we have had a level of enquiries from shipping lines interested to make that choice.”
Ports of Auckland chief executive Jens Madsen sees NZL’s offer at POT as an opportunity not to be refused. “NZL is a very professional logistics provider. From what Ken’s (chief executive of NZL) sketched out, from a customer perspective, it gives us the opportunity to offer customers the choice of two ports.” Madsen adds there is ample opportunity to reduce “fat” from the supply chain, with better positioning of the movement of empty containers between Auckland and Bay of Plenty region and vice versa.
ANNOYED
Mark Cairns, chief executive officer at POT is no doubt a bit annoyed by all this. His main contention is that it is a bit “misleading” for NZL to say it has the right to set up container operations because all this is a bit “too premature”. “It is still a matter of contractual interpretation, a matter yet to be decided by the legal teams.”
As far as he is concerned, the old deal limits NZL to stevedoring and marshalling services in the port’s common user area. Without the benefit of scrutinizing the contract, it is anybody’s guess whether it will be NZL or POT who would walk away from the negotiating table with their tail behind their leg.
But if NZL gets to have a crack at operating as a container operator, customers would want to know whether it has the requisite capital, requisite experience and ability to pull it all off – and be better than POT – as well as more cost efficient.
Businesses surveyed by exporter magazine who have used both ports were mixed in their views on their preferred port. One said Tauranga has had an inland port in Auckland for years, so it was a matter of time before Auckland copied the move. Another commented: “Fix your own backyard first, Auckland.”
Others see the added competition as a welcomed move and good opportunity to gain better rates from their shipping companies. Mike Pohio is convinced that NZL has the requisite and residual services to provide its future customers a competitive choice as a terminal operator against POT.
Port owners in New Zealand are all keen to get a slice of the container terminal business. The question is will NZL slice a bit of POT’s margins as it offers competition on POT’s own turf.
OPERATION COSTS
One estimate puts crane and wharf/ berth cost at close to 60% of a shipping line’s costs at ports. Pillage, towage,stevedoring and marshalling and other services make up the rest. If this structure is reflective current market, POT will certainly be a hard negotiator with NZL for use of its crane/straddles. NZL advantage is its extensive road link, are housing, its stevedoring, and marshalling strength. One source cites stevedoring cost at 25% at the container terminal, which would give NZL some upside on pricing. The question for exporters/shipping lines would be: Does NZL still have advantage in providing a leaner, cheaper supply chain, to shipping companies, compared to POT after having paid port charges, berthing costs, and use of the port’s cranes/straddles?
Cairns of POT is of the view that his port is a competitive provider of service and he is not worried about NZL’s competition. “We have always said we encourage inter port competition. The container terminal is a strong operating part of our business and we’re comfortable with where we sit.
We are happy to compete.” He is also confident of POT’s productivity rates echoing this: “We rank top 10 in the world in terms of productivity.”
LINKS
Ken Harris, chief executive of NZL Group, who formerly ran Wellington Port, says NZL will be a strong rival service provider. “I have no doubt in my mind that we will be more oriented towards exporters’ needs.” NZL, he says, will be a strong player as it already has links to interisland transport, planning service, yard placement, ship placement and marshalling of cargo. “We are a brand that has been around for 60 years.”
Pohio also notes that NZL which employs about 300 people in New Zealand is already the supplier for Fonterra’s road transport and Carter Holt’s solutions through its joint ventures. Fonterra last year awarded DTL (which is owned by NZL) the contract to manage its domestic road transport networks. He was emphatic that NZL was active as a container terminal operator prior to 2003, when it received containers by rail and road, hold containers at the terminal and marshalled containers with contracts from shipping lines. He cited JIL Cosco and JKCS as client examples.“
It all boils down to our ability to provide a competitive service. Shipping lines are ready to make that choice. We will have to perform in a way that is competitive or customers will change from the choice they made,” Pohio adds.
KEY TAKEAWAYS
Shipping lines should want to know if NZL can offer a better deal than Port of Tauranga.
- Exporters would want to know if they benefit at all from any passing down of cost savings shipping lines may have for using a different container operator.
- Port of Tauranga has the advantage of being a tough negotiator as it owns the cranes and straddles which NZL will rely on.
- Ports of Auckland is keen to offer the Tauranga link to its shipping clients.
