$6 billion penalty for Newcastle container port

Greg Cameron

The ACCC is currently investigating “concerns that contractual restrictions may prevent the expansion of container throughput at certain ports”. It is speculation that these unspecified “concerns” include the anti-competitive Port of Newcastle container fee.
It is fundamental that any ACCC investigation recognises the fee, its purpose and the date it became NSW government policy.
The Hon Adam Searle’s question without notice to The Hon Duncan Gay on October 17 2013 [see below] uncovered the fact that the government decided in 2011 or early 2012 to cap the number of containers that could be shipped through the Port of Newcastle without incurring a fee. The fee charged per container is equal to the average fee charged for a container shipped through Port Botany (currently $150). As Mr Gay revealed in his answer, the fee was an instruction the government gave its financial adviser, Morgan Stanley, for conducting a scoping study into leasing Port Botany and Port Kembla. The government appointed Morgan Stanley on December 14 2011.
Earlier, in 2009, the previous, Labor, NSW government decided to develop a container terminal at the Port of Newcastle by leasing the former Newcastle steelworks ‘Mayfield Site’ to the private sector. With the government acting as Newcastle Port Corporation (Corporation), a negotiation commenced, under contract, with Newcastle Stevedores Consortium (Consortium) in 2010. The Corporation changed its contractual requirements in 2013 to include the fee. This negotiation concluded on commercial terms in November 2013, without the site being leased.
The ACCC claims that the Corporation ceased carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” in 2012 because the government decided not to develop a container terminal at the Port of Newcastle. As shown by Mr Gay’s answer, the government made no such decision. The ACCC is wrong to claim that the government decided in 2012 not to develop a container terminal, as proven by the Corporation’s ongoing negotiation with the Consortium and the “Port Commitment – Port Botany and Port Kembla”, which was publicly disclosed by The Newcastle Herald on 28 July 2016. Not even the government supports the ACCC’s claim. It defies reality that the Corporation complied with the Competition Act by requiring the Consortium to pay the fee.
The ACCC is obliged to acknowledge that the fee was an instruction the government gave Morgan Stanley for conducting a scoping study into leasing Port Botany and Port Kembla.
It is incontrovertibly in the public interest for the government’s liability to be determined because of the many billions of dollars of public money at risk if a container terminal is built at the Port of Newcastle and the fee proves to be unlawful or unenforceable. For example, a container terminal operating at a modest 1 million TEU a year between 2023 and 2063, will require the NSW government to pay NSW Ports $6 billion at the rate of $150 million a year.
Port Botany and Port Kembla were leased for $5.1 billion in 2013 for 99 years.
LEGISLATIVE COUNCIL 17 OCTOBER 2013
The Hon. ADAM SEARLE: My question is directed to the Minister for Roads and Ports. How much compensation will be paid to the private operator of Port Botany if a new container terminal is developed at Newcastle Port?
The Hon. DUNCAN GAY: The rules in the organisation that did the scoping study for Port Botany and Port Kembla and introduced guidelines there indicate that while general cargo is allowed there will not be an extension under the rules for the lease of Newcastle Port. So the short answer to the question is that we do not envisage that any compensation will need to be put in place. The Government has been clear on this all the way through the process, even before it indicated it would lease the port at the stage when Newcastle Port Corporation was in place. I have indicated in the House, as I have in Newcastle—indeed, I made a special visit to Newcastle to talk to the board, the chief executive officer and the local community—that part of the lease and the rationalisation was a cap on numbers there. I am not saying that there will be no containers into Newcastle. Certainly, a number of containers will come in under general cargo, but there will not be an extension. The only time an extension is allowed is when a specific number is reached and is tripped in Port Botany and Port Kembla.
 

Coal ship crew members refuse to sail

An industrial dispute onboard an Egyptian coal ship docked in Port Kembla has escalated as crew members accuse the ship’s owner of threatening their family members.

The Illawarra Mercury reports that the Wadi Alkarm has been docked off Wollongong since Thursday when 11 crew members refused to sail the ship.

They accuse the ship’s owner, Egyptian-owned National Navigation Co of halving their wages and prohibiting access to food and water between 7pm and 7am daily.

Four of the men agreed to be flown home, however seven crew members have refused to leave until they obtain their lost wages.

One crew member said the company had called his mother in Egypt and said they would "harm" him unless he flew home or agreed to continue sailing the ship.

"All the crew here are afraid," he said.

"We don't want to work, we want our rights and to go … to our home in Egypt."

Maritime Union of Australia branch secretary Gary Keane has been in contact with the men and said they were doubtful of promise by the company to have their wages paid sometime this week.

"These guys quite literally have no money in their pockets," Keane said.

Keane said National Navigation Co workers had been involved in a similar dispute in Gladstone earlier this year.

Keane said the Australian Maritime Safety Authority (AMSA) needed to do more to ensure companies followed the 2006 Maritime Labour Convention.

An AMSA spokeswoman said the department was "working with the International Transport Workers' Federation and the ship's master and agent in relation to this issue".

"AMSA understands that all the crew in question will be paid tomorrow," she said.

"[The authority] understands that the remaining seven crew have opted to return to Egypt once payment is received."

Port funding anger in Wollongong

Wollongong Lord Mayor Gordon Bradbury is angry at the level of funding committed to infrastructure in the Illawarra after the privatisation of Port Kembla, and is demanding answers from the NSW government.

He moved a motion on Monday night that will see council write to the state government to express its concerns over the way the proceeds from the lease have been distributed.

$100 million from the $760 million deal is to be shared across five local government areas for infrastructure projects, The Illawarra Mercury reported.

However, Bradbury said this shows a huge disparity to Newcastle who have been promised

$340 million, or half of the proceeds from the lease of its port, which will be spent on revitalising the CBD.

Bradbury is seeking an urgent meeting with NSW Premier Barry O’Farrell and Treasurer Mike Baird to seek a similar level of funding.

‘‘This is a slap in the face of the greatest order,’’ he said.

‘‘From my perspective it’s something we need to be cohesive on as a council.’’

The proceeds from the leasing of Newcastle Port is in addition to $120 million committed to Newcastle's revitalisation and takes the Hunter Infrastructure and Investment Fund to $690 million.

Keira MP Ryan Park said Illawarra residents were being treated like "second class citizens".

"I am gobsmacked that they would make an announcement that separates two cities that are very similar in economic conditions and are going through similar economic challenges by such a huge amount of money," he said.

"We are talking about hundreds of millions of dollars of difference for the sale of similar assets, and that is simply a disgrace."

"We've got to remember that this money [from Port Kembla] is going to be spread from one end of the region to the other and all the way out west to Picton and beyond," he said.

"Newcastle's money is concentrated in and around where their asset was, which always should have been the case in Port Kembla.

"I have never seen a government treat two communities – which are very similar in their economic challenges and in the types of forecasts they face – so very differently when it comes to funding of infrastructure."

In another blow for Wollongong, the government delivered just one fifth of its promised $100 million in the recent budget.

Park said this would lead to delays in getting vital Illawarra projects up and running.

"This flies in the face of what the Minister for the Illawarra – who is off duty – said a few weeks ago," Park said.

"He categorically said that these projects would be up and running and at least commenced by the end of this year."

A NSW Treasury spokesman said the government had not allocated the total $100 million next year because a consultation process on how to spend the money was under way

He said the money would be delivered in the future.

Kiama MP Gareth Ward said Labor MPs were "misrepresenting the situation" relating to the sale of Newcastle's port, because the Illawarra had received $270 million from the long-term lease of Port Kembla.

He said $170 million set aside to build the Berry Bypass was also part of the region's allocation.

"When we went to tender for [Port Kembla] we expected to gain $500 million and before we even went to tender we made it clear we would return $100 million for a new infrastructure fund and $170 million for the Princes Highway," Ward said.

He said the Illawarra had received roads and infrastructure funding from past Labor governments and this was why the $100 million needed to be spread across the whole region rather than being concentrated as it was in Newcastle.

"I make absolutely no apology for the fact that I lobbied exceptionally hard to ensure that not only did the port return an upgrade to the Princes Highway … but that $100 million went to suburbs like Shellharbour, Kiama and Shoalhaven," he said.

Port staff safe from job losses: NSW Port Consortium

The new consortium who will lease Port Kembla and Port Botany for 99-years in a multi-billion dollar privatisation deal, say there will no job loses.

Industry Funds Management (IFM), one of the superannuation groups that make up the NSW Port Consortium, said that investment in the ports would create more jobs, the Illawarra Mercury reported.

"We have committed to the state for at least two years that there will be no job losses," IFM chief executive Brett Himbury said.

"That is part of our sale contract. Longer term we're quite confident that we will continue to invest in the port and grow the capacity of both Kembla and Botany.

"We would expect as a result of that growth, that there should be growth across all of the dimensions of the business, including employment growth."

The NSW Ports Consortium is 80 per cent made up by Australian super funds, and 20 per cent by Abu Dhabi Investment Authority.

The group was granted the 99-year leases of Port Kembla and Port Botany on Friday, at a cost of $5 billion.

Himbury said the consortium was committed to the long-term growth of both ports.

"We are not a short-term private equity fund," he said. "We do not come in, rip the cost base out, gear it up and flip it off to someone else in 10 years.

"We hold these investments for a long period of time, we continue to invest capital in them.

"We continue to look after the employees, we deliver, hopefully, a better service and our investors benefit as a result of that."

He said that IFM has been part of a group leasing Melbourne Airport for that last 10 years, stating that in that time, direct employment has risen from 2500 to nearly 10,000.

Himbury said that a growing superannuation market meant more capital for investment.

"What that means is the Australian superannuation system – and indeed IFM – will have a lot of cash flow over the course of the next 20 years at least that we have to deploy into quality investments in this country and around the world.

"So we will have the capital available. We are therefore absolutely committed to continuing to invest in Port Botany and Port Kembla to grow the capacity and obviously impact returns for our investors and also enhance the community."

Image: theaustralian.com

Privatisation deal struck for two of Australia’s biggest ports

The NSW government has privatised two of Australia’s biggest ports signing over both Port Botany and Port Kembla on 99-year leases.

The two ports will be leased to the NSW Ports Consortium in a deal which will reportedly earn more than $4 billion for infrastructure projects in the state including WestConnex motorway in Sydney and Pacific Highway upgrades.

The Australian reported the Port Botany transaction netted more than $4.31 billion, while $760 million was earned from the Port Kembla package.

"This is a vote of confidence in the NSW economy and an endorsement of our fiscal strategy, but there is much work left to do," NSW Treasurer Mike Baird said.

"In order to catch up on the infrastructure backlog we have… the only way to start addressing that is to look at the capital on your balance sheet,'' he said.

"It's a great win for NSW. The infrastructure funding for this state has had a massive boost."

However, others are not so convinced that privatisation is the right move for the ports, arguing it could affect competition.

University of Wollongong transport and planning academic Associate Professor Philip Laird told the Illawarra Mercury he was concerned about the “packaging’ of the harbour.

‘‘To me, it’s there’s a lot at stake – if it’s packaged off with Port Botany, you reduce any incentive for competition between the ports, so it reduces the incentive for a container port here,’’ he said.

‘‘And in that case, why bother with Maldon Dombarton? And in that case we’ll get more trucks and it will make it harder for people to live here and commute to Sydney.

"If the two ports are leased to the same new owner, the promised contribution of $100 million to regional infrastructure should be increased to the value of a container port at Port Kembla – that is, $500 million.”

A 10,000 signatured petition against the privatisation of the port was tabled by Wollongong MP Noreen Hay in May.

"There is no question this current Coalition government is Sydney-centric and we need to keep track of these guys. They are talking about $100 million in new projects for the Illawarra [from the lease proceeds]. I want to know where the other $400 million is going – the community and I are not going away on this," Hay said at the time.

"We have to hold the government to account on this."

After the 99-year leases end, the ports will change back to public ownership, pending further negotiations.

Baird said the government would still control maritime safety, security and regulations at both ports.

Image: kemblaport.com

Port Kembla lease debate heads to parliament

A government decision to lease Port Kembla’s port will come under the spotlight during debate in the NSW parliament tomorrow.

The debate comes after a 10,000 signatured petition against the privatisation of the port was tabled by Wollongong MP Noreen Hay, The Illawarra Mercury reported.

A decision was made last year which will hand the port over to private providers for 99 years, a move the government says will release funds for major projects in the region.

However, others argue the move will minimise the competitiveness of Port Kembla.

University of Wollongong transport and planning academic Associate Professor Philip Laird told the Illawarra Mercury he was concerned about the “packaging’ of the harbour.

‘‘To me, it’s there’s a lot at stake – if it’s packaged off with Port Botany, you reduce any incentive for competition between the ports, so it reduces the incentive for a container port here,’’ he said.

‘‘And in that case, why bother with Maldon Dombarton? And in that case we’ll get more trucks and it will make it harder for people to live here and commute to Sydney.

"If the two ports are leased to the same new owner, the promised contribution of $100 million to regional infrastructure should be increased to the value of a container port at Port Kembla – that is, $500 million.”

Members of the Save our Ports group will travel to parliament house tomorrow for the debate.

Hay said the move to lease the port showed the government lacked insight into regional communities.

"There is no question this current Coalition government is Sydney-centric and we need to keep track of these guys. They are talking about $100 million in new projects for the Illawarra [from the lease proceeds]. I want to know where the other $400 million is going – the community and I are not going away on this," she said.

"We have to hold the government to account on this."

Image: kemblaport.com

NSW ports continue unabated growth

Newcastle Port.

Aerial view of Newcastle Port.

Cargo throughput volumes at NSW ports have showed strong growth in the 2007-08 fiscal year, Port Minister Joe Tripodi has announced.

Port Botany has recorded its seventh consecutive year of growth, with the rate of container movement increasing nearly 10 per cent to over 1.78 million TEU during the period.

“While trade in containerised goods is increasing, so is that of bulk liquids and gases. This trade increased by 18.1 per cent over last year,” Mr Tripodi said.

“The future of trade through Sydney’s ports is in containerised trade and bulk liquids, which is why we have started construction of a five-berth expansion of Port Botany and have approved plans for a new bulk liquids berth to cater for this growth.”

The $1 billion port expansion project underway is expected to double its capacity from 2010.

According to Mr Tripodi, Newcastle Port also showed robust performance in cargo throughput, with imports and exports passing through the port increasing by 7.7 million tonnes to 93 million tonnes, worth over $10 billion.

The increased result came despite the impact of chronic drought on the grain transport market, with coal continuing to be the port’s main export. 

“Rural drought conditions have significantly impacted on grain movements through Newcastle for the past few years, but this was offset slightly this year by import of fertiliser products,” he said.

Along with these two ports, Port Kembla recorded positive grains throughput.

Port Kembla will soon become the state’s vehicle importing hub after the relocation of car import facilities from Sydney’s Glebe Island.

Bigger ships can call Port Kembla

Tidal windows for large import vessels at one of Australia’s fastest growing ports will be expanded by an average of two hours, with the installation of OMC’s Dynamic Under Keel Clearance system at Port Kembla.

OMC International, the Melbourne-based maritime engineering group, has secured a contract to commission its DUKC system at the port for an initial term of five years.

This follows a successful six-month trial that identified DUKC’s® potential to improve the efficiency and safety of shipments through the strategically positioned port.

DUKC is a near real-time under-keel clearance management system for use at ports which have tidally restricted sailings.

The economic benefit to ports and shippers using DUKC® has been demonstrated by improved cargo loadings, increased tidal windows (the times available for ships to arrive or sail) and reduced demurrage (charges for delays).

During the Port Kembla trial, the DUKC system showed that it would markedly enhance safety during high swell events, which occur in the Port Kembla entrance channel particularly during the winter months.

OMC has installed the system in a number of ports around the world and on average, 10 large vessels transit under DUKC® advice in draught-controlled situations every day.

Port Kembla, which handles large cape size vessels for the iron ore and coal trades, is rapidly expanding. It is the closest specialist industrial port to Sydney, Australia’s largest market.

Since first developed in 1993, OMC’s Dynamic Under Keel Clearance system has successfully assisted over 35,000 vessel movements in ports around the world and has provided over A$5bn in economic benefits to ports and port users.

The DUKC system is expected to be operational in Port Kembla in May 2008.

©2019 All Rights Reserved. MHD Magazine is a registered trademark of Prime Creative Media.