The Port of Newcastle has developed the concept for a staged container terminal development at its Mayfield site, which the company says is the largest and best connected vacant port land site on the eastern seaboard of Australia.
Together with direct water frontage and potential for deep water berthing, the Newcastle Container Terminal represents a once in a generation opportunity within the Port of Newcastle, the company says.
The Mayfield site has the capacity for a 2 million TEU per annum container terminal, coupled with a shipping channel that can accommodate vessels up to 10,000 TEU, with the capability of even larger vessels with some ancillary channel modifications.
Newcastle is an efficient option for importers and exporters in northern, western, north western and far western NSW.
A Newcastle Container Terminal would deliver substantial cost savings for NSW exporters and importers, save the NSW government billions in infrastructure spending and help reduce Sydney road and rail congestion.
Report quantifies benefits at $6 billion
In a report released on 11 December 2018, economic consultants AlphaBeta quantified the potential economic benefits to the NSW economy of $6 billion by 2050 and 750,000 truck movements off Sydney roads.
The report examined the economic impact of opening a container terminal at Port of Newcastle. It found the NCT would increase NSW Gross State Product (GSP) by $6 billion by 2050. Over half of the $6 billion in new economic value for the state would come from lower freight costs. Customers would save $2.8 billion in land transport costs in Port of Newcastle’s potential market by 2050 through shorter journeys and more efficient operations.
The average land transport journey to port for northern NSW exporters (compared with Botany) would nearly halve. Meanwhile, customers served by Port Botany would save $1.2 billion in freight costs as competitive pressure leads to lower prices. Sydney would also benefit from less freight traffic on its roads. This would create $500 million in extra value from avoided infrastructure spending, and reduced congestion and pollution costs (see Exhibit 3.).
Opening a container terminal in Newcastle would also have broader economic and social benefits, including stimulating exports and jobs in the Hunter Region and Northern NSW. Key sectors, such as agriculture, food processing and advanced manufacturing, would see exports grow in value by an extra $800 million by 2050. More than 4,600 jobs would be created in the Hunter Region and Northern NSW by 2050, in industries as diverse as transport, construction, agriculture, manufacturing and local services.
Adding a container terminal to Port of Newcastle could generate $2.8 billion in freight savings to importers and exporters in the Newcastle, Hunter and Northern regions of NSW by 2050. Currently, importers and exporters are served by Port Botany in Sydney or Port of Brisbane.
Both ports are hundreds of kilometres from the origin or destination points of freight in the Hunter Region and Northern NSW, an area responsible for about a sixth of imports and exports in NSW.
Opening a container terminal in Newcastle would nearly halve the average overland freight journey in these areas, immediately reducing transportation costs for imports and exports.
As Port of Newcastle will be home to a new, fully automated container terminal with an integrated intermodal terminal facility, it would also introduce productivity improvements in freight handling, generating further savings for Hunter Region and Northern NSW customers. If all freight customers in the potential addressable market switched to being served from Newcastle, the cumulative savings would be equivalent to $2.8 billion in additional GSP in NPV terms by 2050.
Potential market for Port of Newcastle
This study defines the potential market as NSW regions that are more cost-effectively served from Port of Newcastle than from alternative ports such as Port Botany, Port of Brisbane, and Port of Melbourne.
Importantly, the report did not consider the potential benefits that could be gained by actively promoting the Newcastle container port to Sydney-based businesses.
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
China Merchants Port (CMPort) has entered into an agreement to purchase a 50 per cent interest in the Port of Newcastle, New South Wales, from China Merchants Union and Gold Newcastle Property .
The remaining 50 per cent interest in Port of Newcastle is held by TIF Investment Trust, an independent third party.
The deal went through for over $600 million.
The acquisition of Port of Newcastle is CMPort’s first step in its bid to invest in Oceania.
“Given the unique position of the Port of Newcastle with precincts containing land resources, the acquisition will bring opportunities for the Company to further achieve its ‘Port and Park’ development under ‘Port-Park-City’ model,” the company said in a statement. Through this, the company seeks to operate its core port businesses alongside park development and infrastructure support, “thereby achieving a port-centred ecosystem with port operations as its core.”
In its statement, CMPort noted that it believes the price of the acquisition was fair and reasonable.
The Port of Newcastle is the largest port on Australia’s east coast, and a significant coal-export port.
In 2016, it handled bulk cargo volume of 167 million tonnes, of which coal export made up 161 million tonnes, approximately 40 per cent of Australia’s coal export
The Port of Newcastle has a total land area of 792 hectares, including approximately 200 hectares of vacant port land available for further development. In September 2016, the New South Wales Government committed $12.7 million towards a permanent multi-purpose cruise terminal facility at the Port of Newcastle, which will begin construction in 2018.
Road Freight NSW (RFNSW) has joined forces with its interstate counterpart, the Western Australian Road Transport Association (WARTA), in a renewed fight against landside surcharges imposed by stevedores at ports across the country.
RFNSW General Manager Simon O’Hara met with WARTA Executive Officer Cam Dumesny on 29 August, observing freight movements and out of the Port Botany terminals and getting feedback from carriers about the impact the new levies were having on their day to day operations.
“In New South Wales and Western Australia, truck operators, particularly those smaller, family-run businesses, are hurting,” said O’Hara.
“RFNSW and WARTA have now decided to use our collective strength in bringing the stevedores to account, for the sake of our members.
He noted that stevedores imposed the “unjustified” taxes on “hardworking truck operators” without any regulatory scrutiny.
“We are concerned about the dangerous domino effect this has had on industry,” O’Hara added. “Since stevedores started imposing these charges, other operators with significant supply chain power have also begun slugging transport operators.
“RFNSW and WARTA believe we need an independent body, ultimately the ACCC (Australian Competition and Consumer Commission), to be called in to put the brakes on the stevedores and start regulating landside port charges.
“We believe the recent Federal Court finding, which allows the ACCC to monitor and regulate pricing at the Port of Newcastle, means the ACCC should be in a position to review the situation at Australia’s ports,” he said.
“Accordingly, RFNSW and WARTA will make a joint submission to the ACCC, again calling for an investigation and independent umpire to review any financial charges.”
A Federal Court ruling has given the Australian Competition and Consumer Competition (ACCC) power to monitor and regulate pricing at the Port of Newcastle.
Road Freight NSW (RFNSW) General Manager Simon O’Hara said RFNSW was carefully analysing the ruling but described it as a “precedent case of intervention for the regulator.”
“It certainly sends a very strong message to industry about price gouging and that price increases need to be on the basis of an actual increase in costs,” O’Hara said.
RFNSW has thus called for the ACCC to act on new stevedore taxes imposed on truck operators.
“We believe there’s a lesson to be learnt here for stevedores, given that they have burdened our members with unreasonable increases in charges for accessing their terminals at Port Botany.
“They’re on notice.
“In light of the Federal Court’s ruling, RFNSW is again calling on the ACCC to act, for the sake of our members and other users of port infrastructure.”
The Australian Logistics Council (ALC) has reminded the ACCC to ensure it is sufficiently resourced and has personnel possessing experience in the operation and/or regulation of logistics infrastructure.
“There are many specialist and complex issues at work with the operation of supply chains and logistics infrastructure,” said Michael Kilgariff, Managing Director, ALC.
“[The] Federal Court decision seems to point to increasing ACCC involvement in pricing and access issues at ports.
“If that is going to be the case, then it is imperative that the ACCC ensures it is properly resourced with personnel who have had exposure to and experience in dealing with the complex and unique nature of these infrastructure assets,” he said.
“Any regulatory role played by the ACCC in the freight logistics sector must be fit for purpose.”
Despite the government initially denying there was a cap on container ships for the Port of Newcastle, it has tried to put a positive spin on the agreement by claiming it was a smart and generous decision.
Premier Mike Baird, who visited Newcastle this week, said the agreement was a sound one that married with the state government’s overall strategy when dealing with ports, according to the Newcastle Herald.
“There’s a massive requirement for infrastructure to support,” he said. “There’s rail and roads, which is a huge burden on taxpayers across the state. So it makes a lot of sense to be strategic in the allocation of capital.”
Baird believes investing in Port Kembla and Port Botany is more important than Newcastle because of the ‘logistic chain’ with regard to the former two ports.
“We have put a very generous capacity into the agreements they can continue here at the Newcastle and they can grow at 6 per cent a year,” he says. “The economy grows at about 3 per cent if it’s at trend [so] there’s double economic growth that can come in here in terms of containers.
Baird was also bullish stating that the Port of Newcastle’s time would come with regard to its capacity.
“In the not too distant future you’ll have a huge capacity for a container terminal here in addition to an economically sensible approach to investing in the infrastructure required to support containers full stop,” he says
Glencore will consider appealing a failed attempt to persuade the Government to regulate shipping prices at the port of Newcastle.
ABC reported that the Department of Finance recently denied Glencore’s application to access shipping channels and berths and Newcastle for the next 15 years.
Glencore said shipping prices have increased by 60 per cent since the privatisation of Newcastle Port in a sale to a consortium made up of Hastings Funds Management and China Merchants in April 2014.
A spokeswoman for Port of Newcastle said the decision was welcomed, and that ship-based charges were less than that of the nearest comparable port.
According to Port of Newcastle, prices at the port had not kept up with CPI until the price realignment on January 1 2015.
"There had been 20 years of under-recovery, with only two minimal price adjustments made by the previous port manager over a 20-year period," the spokeswoman said.
"Total Port of Newcastle charges are estimated to be less than one per cent of the cost of buying and importing coal – about 45 cents per tonne of coal."
Glencore expressed disappointment with the government’s decision, which was based on a recommendation from the National Competition Council.
A decision in favour of Glencore’s request would have enabled third parties to use the shipping facilities, and the Australian Competition and Consumer Commission to intervene in pricing disputes.
"The National Competition Council recommendation shows that it will not intervene to prevent a monopoly infrastructure owner using its market power to substantially raise access prices," Glencore said in a statement.
"The NCC approach materially undermines the effectiveness of competition legislation in Australia, not only affecting the coal industry but any other industry which relies on access to infrastructure.
"The NCC approach also means that where key infrastructure is privatised, customers cannot rely on competition law to protect them against unjustified future price increases by the new private owners.
"These issues have to be addressed by Government as part of the privatisation process.
"We are currently considering an appeal to the Australian Competition Tribunal."
Glencore suggested the decision would have the capacity to “lower the productivity of the Australian economy”.
Coal freight through Newcastle decreased year on year in 2015 due to overall falling coal exports, down 0.6 per cent on 2014 with exports of 158.1 million tonnes.
Non-coal trade through the port was up 9 per cent on 2014, with a 25 per cent increase in fuel imports, and a 120 per cent increase in the import and export of meals and grains to 423,000 tonnes.