NSW Ports has announced that the current Chairman of the Board will step down next month.
‘When competition gets too close, release a report’ seems to be the tactic adopted by the current leaseholders/operators of Port Botany and Port Kembla, following a run of successes by the Port of Newcastle with the ACCC and in the media.
The report, by KPMG, on the “long-term container needs of NSW has confirmed Port Botany is the State’s key container port, and a new container terminal will not be needed until the mid-2040s”, they say.
The report claims the NSW Government’s container port strategy, which would see Port Kembla developed as the next container port in NSW to augment capacity at Port Botany, still stands as the most efficient and effective way of meeting the State’s container export and import demands.
The KPMG report, titled Quay conclusions: Finding the best choices for additional port capacity in NSW finds:
- Premature port investments will result in higher costs for NSW businesses and families;
- Port Kembla makes the most sense for containers, but only once Botany nears capacity; and,
- Containers at the Port of Newcastle makes the least sense for NSW and would impose the highest overall costs and offer the lowest overall benefit.
NSW Ports CEO, Marika Calfas, said Port Botany will remain the first choice in container freight. “Port Botany is closer, better and cheaper for most container freight in NSW.
“Port Botany is less than half full, is directly connected to dedicated freight rail, road and intermodal infrastructure and is supported by modern warehousing and logistics facilities in Sydney’s west and south west.
“The KPMG modelling shows Port Kembla is the obvious next choice for the state’s next container port, once Port Botany nears capacity.
“It is less than half the distance to Sydney’s booming west and south west and has better existing and planned freight infrastructure connections than a container terminal at Newcastle.
“It’s the population and business needs of NSW that determine the most efficient container terminal locations.
“NSW container ports are most efficient when close to consumers and connected to the market by good rail, road and intermodal infrastructure.
“Sydney and the south west population is set to grow from 5 million now to 6.5 million by 2036. Port Botany then Port Kembla makes sense as the ports to service this growth and is the right decision for the people and businesses of NSW,” Ms Calfas said.
The report found that 80 per cent of containers are consumed within 40 km of Port Botany, with massive Commonwealth, state and port investments made over the past 10 years to develop a major freight and logistics sector in Sydney’s west and south west growth areas.
According to KPMG’s research, the current proposal for a container port in Newcastle had significant issues including being furthest away from the freight consumption and employment growth in western Sydney and the most expensive to develop, connect and use for containers.
Even with massive taxpayer investments in rail and road projects, a container port at Newcastle would introduce thousands of heavy vehicles onto Newcastle’s streets, the F3 motorway and across Sydney, the report found.
Or does it?
The report is also notable for what it doesn’t reveal, although it is hardly surprising considering NSW Ports paid over $5 billion to the NSW Government for the pleasure of operating the two ports.
A joint study by the state and federal governments into a rail freight bypass of Sydney was reported in February 2012 (page 37). A container terminal at the Port of Newcastle would provide the container cargo to pay for the new line.
Long-time Port of Newcastle proponent Greg Cameron said: “The [KPMG] report says it was commissioned in August 2018. The purpose of the report is to justify government policy that sees Port Botany as the state’s only port for container ships.
“Port of Newcastle Investments has been making the point that a container terminal will be built if the infamous fee is removed. There is plenty of demand from northern NSW to support a Newcastle container terminal.”
Mr Cameron further said: “ ‘Determining an estimate of public expenditure required to overcome rail constraints between Sydney and Newcastle is difficult, given that transport agencies have not released their estimates,’ KPMG says. Presumably, the studies are confidential because they relate to the commercial viability of building a rail freight bypass of Sydney.
“A container terminal at the Port of Newcastle would provide the base load cargo for privately building and operating a rail freight line to serve all of NSW, not just Sydney.
“Port Botany is the state’s only port with the dedicated facilities required by container ships. Every container ship that visits NSW must use Port Botany. At present, container transportation requires one million truck trips a year at Port Botany. By 2040, the estimated number of container truck trips will be 5 million a year.
“The reason why 85 per cent of containers are delivered within 50 km of Port Botany is because trucking is the highest cost method of transporting containers. The lowest cost method of container transportation is by rail.
“A rail freight bypass line would enable a container terminal established at the Port of Newcastle to operate interchangeably with a container terminal established at Port Kembla. Every container would be railed.
“Intermodal terminals would be established along the rail freight bypass line to maximise logistics efficiency.
“Intermodal terminals established in regional areas would enable very long term planning of the state’s future economic development based on rail transportation of containerised goods,” Mr Cameron said.
The ACCC has instituted proceedings in the Federal Court against NSW Ports Operations Hold Co Pty Ltd and its subsidiaries Port Botany Operations Pty Ltd and Port Kembla Operations Pty Ltd for making agreements with the State of New South Wales that the ACCC alleges had an anti-competitive purpose and effect.
“We are alleging that making these agreements containing provisions that would effectively compensate Port Kembla and Port Botany if the Port of Newcastle developed a container terminal, is anti-competitive and illegal,” ACCC Chair Rod Sims said.
The NSW Government privatised Port Botany and Port Kembla in May 2013 and the agreements, known as Port Commitment Deeds, were entered into as part of the privatisation process, for a term of 50 years.
The Botany and Kembla Port Commitment Deeds oblige the State of NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a minimal specified cap.
The ACCC alleges that entering into each of the Botany and Kembla Port Commitment Deeds was likely to prevent or hinder the development of a container terminal at the Port of Newcastle, and had the purpose, or was likely to have the effect of, substantially lessening competition.
Another 50-year deed, signed in May 2014 when the Port of Newcastle was privatised, requires the Port of Newcastle to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla under the Botany and Kembla Port Commitment Deeds.
The ACCC alleges that the reimbursement provision in the Port of Newcastle Deed is an anti-competitive consequence of the Botany and Kembla Port Commitment Deeds, and that it makes the development of a container terminal at Newcastle uneconomic.
“The compensation and reimbursement provisions effectively mean that the Port of Newcastle would be financially punished for sending or receiving container cargo above a minimal level if Port Botany and Port Kembla have spare capacity. This makes development of a container terminal at the Port of Newcastle uneconomic,” Mr Sims said.
“We are taking legal action to remove a barrier to competition in an important market, the supply of port services, which has significant implications for the cost of goods across the economy, not just in New South Wales. The impact of any lessening of competition is ultimately borne by consumers.”
“If a competing container terminal cannot be developed at the Port of Newcastle, NSW Ports will remain the only major supplier of port services for container cargo in NSW for 50 years.”
“I have long voiced concerns about the short-term thinking of state governments when privatising assets and making decisions primarily to boost sales proceeds, at the expense of creating a long-term competitive market,” Mr Sims said.
“These anti-competitive decisions ultimately cost consumers in those states and impact the wider economy in the long term.”
The ACCC is seeking declarations that the compensation provisions in the 2013 Port Commitment Deeds contravene the Competition and Consumer Act 2010 (CCA), injunctions restraining the operators of Port Botany and Port Kembla from seeking compensation under these provisions, pecuniary penalties and costs.
The CCA only applies to the conduct of state governments in certain limited circumstances. The State of NSW is not currently a party to the ACCC’s proceedings and the ACCC is not seeking orders against the state.
Port Botany Operations Pty Ltd is the operator of Port Botany. Port Kembla Operations Pty Ltd is the operator of Port Kembla. Both are subsidiaries of NSW Ports Operations Hold Co Pty Ltd. All are all entities within the NSW Ports group and all are parties to the 2013 Port Commitment Deeds.
Port Botany is currently the only port in NSW with dedicated container terminal facilities. Port Botany had a container throughput of approximately 2.7 million twenty foot equivalent container units (TEU) for FY17/18.
Port Kembla has handled approximately 1,600 TEU per year since it was privatised in 2013.
The Port of Newcastle has handled approximately 10,000 TEU per year since it was privatised in 2014.
Under the 2013 Port Commitment Deeds, it was agreed the State of New South Wales would pay compensation to the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle exceeded a cap of 30,000 TEU per annum (adjusted by an annual growth rate).
The compensation to be paid by the State of New South Wales to the operators of Port Botany and Port Kembla is equivalent to the wharfage fee the port operators would receive if they handled the containers.
Container traffic at the Port of Newcastle has not yet exceeded the specified cap, and therefore no payments have been made by the state under the 2013 Port Commitment Deeds.
NSW Ports responds to the ACCC
NSW Ports has issued the following statement:
NSW Ports notes the ACCC announcement that it has instituted proceedings in the Federal Court in relation to the 2013 Port Commitment Deeds.
NSW Ports firmly believes that the agreements (including provisions of the 2013 Port Commitment Deeds) signed with the NSW Government, to lease its assets at Port Botany and Port Kembla, operate in the best interests of all stakeholders, the economy and people of NSW.
Having paid a consideration of $5.1 billion to the NSW Government in 2013 based on the full contractual terms contained in the agreements, NSW Ports will be vigorously defending the proceedings.
NSW Ports is 80 per cent owned by Australian superannuation funds investing on behalf of more than six million individual Australians. The success of Port Botany and Port Kembla is in the national interest.
A NSW Parliamentary Inquiry into Port of Newcastle lease arrangements will lift years of secrecy. The NSW government made a secret deal with NSW Ports on 30 May 2013, covered under lease arrangements for Port Botany and Port Kembla. They agreed on a formula for charging the developer of a container terminal at the Port of Newcastle for container shipments. The purpose of their agreement is to limit or prevent the development of a container terminal at the Port of Newcastle.
So far, they have succeeded.
The Public Works Committee of the Legislative Council announced on November 20 it will “inquire into and report on the impact of Port of Newcastle sale arrangements on public works expenditure in New South Wales, including:
- the Westconnex Gateway project
- the Port Botany Rail Line duplication
- intermodal terminals and rail road connections in southwest and western Sydney
- other additional public road infrastructure requirements due to the additional road freight movements in Sydney under the existing port strategy.”
Until November 2013, the NSW government required Newcastle Stevedores Consortium to pay the Newcastle container fee as a condition of negotiating leasing the Port of Newcastle’s container terminal site from the government.
On 5 November 2013, the NSW government decided to lease the Port of Newcastle. A lease condition is that the lessee is required to pay the government’s fee in respect of developing a container terminal.
On 30 October 2018, the ACCC disclosed that an investigation is being conducted into whether the NSW government may have breached the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of the development of a container terminal at the Port of Newcastle.
Since 7 June 2013, the ACCC has claimed that the NSW government stopped carrying on a business for the purposes of the Competition Act in respect of a container terminal development at the Port of Newcastle, because the government announced a policy decision on July 27 2012 that the state’s next container terminal will be developed at Port Kembla.
The actual decision the NSW government took, but concealed, was to require the developer of a container terminal at the Port of Newcastle to pay the government a fee for container shipments, and to give this fee to a future lessee of Port Botany and Port Kembla.
It is impossible for the NSW government to have a policy not to develop a container terminal at the Port of Newcastle when it is government policy to contractually require the developer of a container terminal at the Port of Newcastle to pay the government’s fee.
The NSW government opposes a container terminal at the Port of Newcastle because it enables trucks to be replaced by trains for container transportation in NSW.
A container terminal at Newcastle would justify building a rail freight bypass of Sydney, from Newcastle to Badgery’s Creek and Port Kembla. This bypass would be paid for with private funds by replacing Port Botany trucks with Newcastle trains. Additionally, it would enable trains to replace trucks for transporting the bulk of Sydney’s regional and interstate freight.
More than one million container trucks travel through Port Botany each year. By 2040, there will be five million container truck movements.
A rail freight bypass of Sydney will justify building the Maldon-Dombarton rail freight line to enable a container terminal at Port Kembla to operate interchangeably with Newcastle. The South Coast of NSW will benefit from direct access to a container port.
By immediately building the section of the bypass line between Glenfield and Eastern Creek, containers can be railed between Port Botany and a new intermodal terminal in outer western Sydney, using the existing rail network. There would be no need for the intermodal terminal at Moorebank.
The remainder of the line – from Badgery’s Creek to Newcastle – will take about 10 years to build. This allows ample time for an orderly transfer of operations from Port Botany to Newcastle and Port Kembla.
Upon line completion, containers would be railed between Newcastle and intermodal terminals in outer western Sydney, where they would be de-consolidated at the intermodal terminals and the goods transported to their end destinations in Sydney.
Export goods manufactured in Sydney would be consolidated into containers at the intermodal terminals and the containers then railed to Newcastle for export. Empty containers would be railed from Sydney to all regional areas of NSW to be filled with export goods and the containers then railed to Newcastle for export. All container trucks would be removed from Sydney’s roads. Freight currently entering Greater Sydney by road can be railed.
There would be no need to build stages 2 and 3 of the $5 billion Northern Sydney Freight Corridor, to provide the equivalent of a dedicated rail freight line between Newcastle and Strathfield. There would be no need to build the $1 billion Western Sydney Freight Line, between Chullora and Eastern Creek. There would be no need to spend $400 million on upgrading the Port Botany rail freight line. There would be no need to connect Port Botany to WestConnex for the purpose of trucking containers.
Freight would be removed from the Wollongong-Sydney rail line. All of Sydney’s current rail freight capacity would be used for passenger services to provide a higher economic return than freight. All of the current rail capacity between Newcastle and Sydney would be used for passengers. A second rail bridge would be built over the Hawkesbury River as part of the rail freight bypass. The short parallel runway at Sydney airport could even be extended from 2600 metres to 4000 metres after terminating container operations at Port Botany.
Direct rail access to a container terminal is a pre-condition for regional economic development because more than 90 per cent of world trade in goods is conducted using containers. A rail freight bypass would enable Sydney firms to relocate to regional areas.
The Committee will report on February 28 2019.
Appendix: the Inquiry’s Terms of Reference
Public Works Committee
Inquiry into the impact of Port of Newcastle sale arrangements on public works expenditure in New South Wales.
Terms of reference
- That the Public Works committee inquire into and report on the impact of Port of Newcastle sale arrangements on public works expenditure in New South Wales, including:
- The extent to which limitations on container port operations currently in place following the sale of the Port of Newcastle contribute to increased pressure for transport and freight infrastructure in New South Wales, specifically:
- the Westconnex Gateway project.
- the Port Botany Rail Line duplication.
- intermodal terminals and rail road connections in southwest and western Sydney.
- other additional public road infrastructure requirements due to the additional road freight movements in Sydney under the existing port strategy.
- The nature and status of the port commitment deeds, the extent to which they contain limitations on container port movements, and the terms and binding nature of any such commitments.
- The extent to which container port limitations contribute to additional costs for NSW industries who are importing or exporting from New South Wales, especially in the Port of Newcastle catchment.
- Any other related matters.
- That the committee report by 28 February 2019.
Public Works Committee
- The Hon Robert Brown MLC Shooters, Fishers and Famers, Chair – firstname.lastname@example.org
- Mr Justin Field MLC* The Greens – email@example.com
- The Hon John Graham MLC Australian Labor Party – firstname.lastname@example.org
- The Hon Trevor Khan MLC The Nationals – email@example.com
- The Hon Scot MacDonald MLC Liberal Party – firstname.lastname@example.org
- The Hon Taylor Martin MLC Liberal Party – email@example.com
- The Hon Lynda Voltz MLC Australian Labor Party – firstname.lastname@example.org
* Mr Justin Field MLC is substituting for Ms Cate Faehrmann MLC for the duration of the inquiry.
Jenelle Moore, Director Committees, 92303750, Public.Works@parliament.nsw.gov.au
The NSW Nationals leader’s public support for a container terminal at the Port of Newcastle, as reported by the Sydney Morning Herald on October 23, is welcome news.
Under current arrangements, two container ships a week visiting the Port of Newcastle until 2063 would cost the NSW Government more than $6 billion.
The government is contractually committed until 2063 to paying the lessee of Port Botany and Port Kembla, NSW Ports, for containers shipped through the Port of Newcastle. Payment starts when more than three container ships a year visit Newcastle, assuming an average of 10,000 import/export containers a visit. Payment is based on the average price charged by NSW Ports for a container shipped through Port Botany, currently $150.
The government secretly decided to require the developer of a container terminal at the Port of Newcastle to pay the government for any cost the government incurred to a future Port Botany/Port Kembla lessee, due to container shipments handled by the developer. The government concealed its decision when parliament debated the bill authorising the ports to be leased. The “Ports Assets (Authorised Transactions) Act 2012”, which was assented to on 26 November 2012, did not authorise the government to pay the Port Botany/Port Kembla lessee from consolidated revenue.
Should the ACCC find that the decision to charge a Port of Newcastle container terminal developer is likely to be illegal under the “Commonwealth Competition and Consumer Act 2010” (Competition Act), the government will need to pass special legislation to pay NSW Ports. More likely, the government will assert that the leasing arrangements are legal and will defend its position, in the event that the ACCC sought a court determination. The legal process could take years.
The previous Labor Government started negotiating with the preferred developer of a container terminal at the Port of Newcastle, Newcastle Stevedores Consortium (Consortium), in 2010. Labor contractually required a container terminal with capacity of at least one million containers a year – the equivalent of two ships a week.
Port Botany and Port Kembla were leased to NSW Ports on May 30 2013. The government contractually required the consortium to pay the government for any cost the government incurred to NSW Ports, for container shipments handled by the consortium.
The ACCC claims that the government decided from at least July 27 2012 not to develop a container terminal at the Port of Newcastle. The ACCC based its claim on the government’s policy announcement that Port Kembla would be the location of the state’s next container terminal. The ACCC claims that the Competition Act stopped applying to the government in respect of a container terminal at the Port of Newcastle, due to the policy announced on July 27 2012.
The government announced on 28 October 2013 that no decision had been made to lease the Port of Newcastle. The government said “the scoping study for the proposed port transaction remains on track, with the NSW Government expecting to make a decision by the end of the year”. But on 5 November 2013, the government announced its decision to lease the port. Around that time, the government ceased negotiating with the consortium, without concluding a development agreement. The ACCC took no enforcement action under the Competition Act because the negotiation “did not result in any contract, arrangement or understanding”. The ACCC informed the Commonwealth Treasurer that “there does not appear to have been a contract, arrangement or understanding in place during the relevant period which had the purpose, effect or likely effect of substantially lessening competition”.
The ACCC refuses to acknowledge that the government contractually required the consortium to pay the government, for any cost the government incurred to NSW Ports, due to container shipments handled by the consortium. However, it was impossible for the government to conclude a contract that breached the Competition Act. If the government’s contract with the consortium breached the Competition Act, the same contract with the Port of Newcastle lessee breaches the Competition Act.
Logistics infrastructure company Linx Cargo Care Group has successfully bid to operate the Enfield Intermodal Terminal in Western Sydney, which is currently operated by Aurizon.
Linx will lease and operate the NSW Ports–owned, 15.1-hectare intermodal terminal located 18km from Port Botany, west of Sydney.
Linx will operate a port shuttle service between Enfield and Port Botany to reduce traffic congestion in Sydney, ahead of a forecasted increase of 400 per cent in truck traffic in the Port Botany area by 2030.
“Given the forecast for such a significant increase in road and rail congestion across Sydney over the next decade or so, Linx is committed to working closely with the New South Wales state government to develop an effective and achievable solution that will reduce the impact of increased freight movements across the city,” said Anthony Jones, CEO, Linx Cargo Care Group. “Linx has been building its rail capabilities for the past year in readiness for an opportunity like this.”
He added that part of the solution could include the duplication of the freight rail line between Port Botany and the interstate corridor mainline.
The Enfield Intermodal Logistics Centre includes the intermodal terminal, warehousing, and buildings with vacant land for the development of rail-related warehousing, freight forwarding, IMEX (Import and Export), transport and distribution facilities.
“Linx is currently working closely with NSW Ports to support the development of a freight hub on the land surrounding the Enfield Intermodal Terminal,” added Jones.
Marika Calfas, CEO, NSW Ports, said one of NSW Ports’ key objectives is increasing the number of containers moved by rail to and from Port Botany.
“Linx are well placed to expand the intermodal and rail services at the Enfield ILC and grow the rail mode share to and from Australia’s premier port,” she said.
Discover how the humble shipping container has revolutionised the way we live in new outdoor exhibition at the Maritime Museum
Container – the box that changed the world – opens 26 October 2017
In today’s global world you may have drunk coffee from Brazil or a smoothie containing frozen fruit from China. You could be wearing clothes made in India, watching a TV made in Japan, while sitting on a sofa containing wood from Argentina on a laminate floor manufactured in Sweden. All of this has been made possible by a rectangular steel box – the shipping container.
Container, an exciting new exhibition housed entirely in six 20-foot shipping containers at the Australian National Maritime Museum, will lift the lid on the history and impact of containerisation and the way the humble shipping container has revolutionised the way we live.
The exhibition opens in late October, when visitors can literally ‘step inside the box’ to learn about shipping, ports, cargo, the impact of containerisation on the ocean, the origins of everyday objects and even container architecture.
Inside the ‘Ship’ container, the history of the cargo industry before the invention of the container and the impact of its introduction are explored. From transporting goods in crates, bales, sacks and barrels loaded by hand, the container now allows the world’s 1.5 million seafarers to deliver 10 billion tonnes of trade each year.
‘Cargo’ looks at trade, customs, biosecurity and how perishable goods are transported around the world in the cold chain. The ‘Port’ container talks about the radical transformation of ports and port cities in Australia and around the world. It also gives visitors a peek behind the scenes at Port Botany, one of Australia’s busiest ports and the gateway for 99 per cent of New South Wales’ container demand.
‘Ocean’ looks at the challenges mass shipping poses to our oceans, including lost shipping containers, cargo spills and acoustic pollution, and the current focus on sustainable shipping.
The quirky and innovative ways containers are used beyond shipping, including ‘small homes’, food trucks, art installations and even swimming pools are uncovered in ‘Build’. ‘Things’ is a glass-fronted container with a shop front–style window display demonstrating the origins of everyday objects in our homes. The total number of kilometres travelled by sea by all the products in this container is 887,082km.
“As an island nation, 99 per cent of Australia’s trade is conducted by sea freight,” said Peter Dexter AM, Chairman of the Australian National Maritime Museum. “The Container exhibition highlights the importance of this industry and how it touches all of us. We are excited to be sharing this often overlooked story to the many people who visit Darling Harbour in such an innovative way.”
The exhibition has been embraced by the shipping industry with a large number of its key organisations coming on board to provide essential support to tell this important story. Major sponsor is NSW Ports, who has played a key role in the development of the exhibition. Sponsors are ACFS Port Logistics, Maritime Container Services, DP World Australia and Smit Lamnalco. Supporters are Transport for NSW and Shipping Australia. The containers are supplied by Royal Wolf and the Precinct Partner is Property NSW. It is supported by the USA Bicentennial Gift Fund.
Container is located in front of the Australian National Maritime Museum’s Wharf 7 building on Pirrama Road. The free exhibition opens on 26 October and will run until late 2018 before touring locations across New South Wales. For further information visit www.anmm.gov.au/container
A 15-month-old giraffe recently undertook a journey from Auckland Zoo to Mogo Zoo on the south coast of New South Wales.
The giraffe – Mtundu (Swahili: mischievous one) – arrived at DP World’s Port Botany terminal on the evening of 24 February, Mtundu, on board the Hamburg Sud vessel Hammonia Galacia.
The project to move Mtundu was a carefully orchestrated exercise requiring the cooperation of many parties and port stakeholders.
Having travelled from Auckland Zoo in a specially built enclosure, the giraffe was lifted off the vessel onto a low loader truck waiting on the wharf.
With the assistance of a convoy of transport and logistics professionals, the truck exited the port in the early hours of Saturday morning before hitting the highway, safely delivering Mtundu to his new home at Mogo Zoo, NSW.
A support crew including specialist animal handlers and veterinarian staff accompanied 500kg Mtundu on his journey.
“NSW Ports manages the ports of Port Botany and Port Kembla and is proud to be able to support the movement of goods on behalf of the people and businesses of New South Wales and Australia – (in whatever shape or size they come),” said NSW Ports in a statement.
“As one of the largest container ports in Australia, Port Botany is used to handling cargo from all over the world, with almost 2.3 million containers transiting the facility annually.”
FedEx recently reported that it had successfully delivered a giant panda from the US to China.