The Dock Of The Bay
The Coming Shakedown Of The New Zealand Port Sector
- Victor Billot
This is an edited and updated version of an article that appeared in The Maritimes magazine, Autumn 2015, which is the publication of the Maritime Union of New Zealand (MUNZ). Victor Billot is MUNZ’s Communications Officer and Editor of The Maritimes.
Sittin' in the mornin' sun
(Otis Redding, “Sitting On The Dock Of The Bay”)
Ports In A Storm
In 2015, the New Zealand ports sector has entered a new unstable phase, driven by changes in shipping, increasing competition, and investment by outside operators. The business press provides a largely uncritical promotion of these developments, often couched in terms of “port rationalisation”. This is a vague term that seems to mean many things. Rationalisation can refer to adjusting the number and role of New Zealand ports, or the resolving the lack of any clear strategic direction in the sector. The intense competition between port operators, the ownership model (privatisation is still on the agenda) and attacks on unions are also part of the mix.
The instability in the sector reflects a wider international malaise. The ongoing global financial crisis and the political and economic stability of major export markets such as China are threats for New Zealand. There is a somewhat naive assumption that continued growth in trade is almost guaranteed. The reliance on a small number of commodities in the export sector makes this country vulnerable to any instability or downturn in the markets for these exports. New Zealand has been described as having a “hollow society” in the past, but it also has in some aspects a hollow economy. On the surface we are a developed country, but are reliant on a strange and limited range of goods and services.
Our economy is entirely dependent on sea ports for the vast majority of its imports and exports. Despite this, the stability and effectiveness of the port sector has been left to chance, with no sense of any direction or strategy at a national level in the maritime industry. Shipping companies, such as the Danish-based transnational Maersk, change their schedules on a regular basis, which in the case of smaller ports can destroy a large part of the business and create problems throughout the supply chain. Port management, left to their own devices, have engaged in a series of competition-driven strategic moves based on the parochial interests of individual ports and employers, attempting to secure a dominant position.
Inland Ports And Strategic Alliances
The development of inland ports was a notable feature of 2014, along with the building of complex strategic alliances between ports and other logistics operators, shippers and exporters. Port of Tauranga’s 50% investment in Port of Timaru was complemented by a logistics deal with Kotahi (the logistics arm of Fonterra and Silver Fern Farms) and Maersk. The latter’s vessels are calling at Timaru again, after the terminal was mothballed after Maersk withdrew a previous service several years ago.
In February 2015, the logistics partnership took another step with the announcement of a new company being formed, extending the relationship further. The 50/50 venture between Kotahi and Port of Tauranga is called Coda, and will include Tauranga's Tapper Transport unit, container packing firm MetroPack and 37.5% stake in MetroBox, which stores empty containers, and takes in Dairy Transport Logistics from the Kotahi side. Coda is forecast to move more than five million tonnes of containerised and bulk cargo a year to and from ports and freight hubs. Ports of Auckland has moved into an alliance with the Port of Napier and Icepak to build an inland port at Longburn in Palmerston North. Auckland has also combined with Netlogix to form Nexus Logistics, an independent container logistics and distribution services provider. It has also created a partnership with logistics operator CHH Lodestar to set up facilities for handling and packing forest products. The new Lodestar facilities will be located at Ports of Auckland's Wiri Intermodal Freight Hub and Waitemata sea port.
Another area where competition is increasing in the inland port sector is at Rolleston, south of Christchurch. Both Port of Lyttelton and Port of Tauranga are rolling out container terminals. Port of Lyttelton finalised purchase of a 27-hectare site in Rolleston, in December 2014. LPC’s Rolleston site will be fully operational with a rail service early in 2016, with a non-rail based service planned by mid 2015. However the largest of the proposed developments – a long term multimodal freight hub at Ruakura, near Hamilton – appears to be looking shaky. The Ruakura development was independent of ports, and is a joint project led by the Tainui iwi through Tainui Group Holdings (TGH). TGH and its partner Chedworth Properties had a decades-long timescale for the project that would feature an industrial park, housing and an 80 hectare inland port and freight hub directly in the heart of the Auckland-Waikato-Tauranga triangle. The inland port was the first phase, due for completion by 2021.
But the resignation of Mike Pohio, the Chief Executive Officer (CEO) of TGH, in January 2015, has led to some uncertainty about where the development is at. The Ruakura development had received the go ahead after changes to Hamilton City zoning were approved by an independent board of inquiry in September 2014. However, TGH Chairman Henry van der Heyden told media that while Ruakura would remain an important land holding for Waikato-Tainui, the TGH board was considering other ways of developing the property and with what partners.
Terminals Prepare For Larger Vessels
The anticipated arrival of larger container vessels to the New Zealand trade is also driving changes. Port of Tauranga and Port Otago have gained consent for dredging projects in order to prepare for new generation vessels, some of which are 8,000 plus TEU capable (twenty-foot equivalent unit, a measurement of cargo capacity i.e. the number of twenty-foot containers the ship could hold). In February 2015, Centreport Wellington announced plans to seek resource consent for channel dredging in Wellington Harbour. Centreport CEO Blair O’Keeffe says New Zealand requires a three hub structure, focussed on the north, central and southern regions of New Zealand. Centreport is 76.4% owned by Greater Wellington Regional Council (via its subsidiaries WRC Holdings Ltd and Port Investments Ltd) and 23.6% owned by Horizons Regional Council (via MWRC Holdings Limited).Tauranga is also purchasing two new gantry cranes, and Southport at Bluff is adding a second mobile crane, to deal with an expected upturn in container numbers.
Ports of Auckland was recently embroiled in the thick of a debate in the Super City about plans for its expansions, a torrid debate that is too involved to cover here in any depth. Suffice to say the port’s location in the heart of Auckland’s downtown business district is causing friction between the fractions of local capitalists. Some want to reduce the role of the port in the city or even remove it altogether as a major terminal, thus freeing up space for residential and business development in the most valuable real estate zone in the country. One suggestion has been to relocate the port in part or total to Whangarei, a concept recently promoted by the new MP for Northland, Winston Peters. It appears the Ports of Auckland have gone down a new track now, recently announcing plans to move towards partial automation of cargo operations, using new technology that would allow more containers to be stored on the current land area.
Global Operators Looking At New Zealand
The bulk stevedoring industry is also facing a change with the entry of Australian logistics giant Qube which purchased International Stevedoring Operations (ISO) at the end of 2014.Tauranga-based ISO has a long history of anti-union activity and casualisation in the stevedoring industry. It was the focus of MUNZ action during the Mainland dispute in the late 1990s and early 2000/01, and the Port of Napier dispute in 2007.Qube has left the current ISO management in place, according to statements, but whether this is a long term plan is not yet clear. Qube is a major corporation that is one of the three main terminal operators on the Australian waterfront (the others being DP World and Hutchison.) It also has extensive interests in road and rail transport, warehousing and distribution, container parks and related services, and intermodal logistics hubs including rail terminals and international freight forwarding. Some of the key figures in this company were involved in the Patricks dispute on the Australian waterfront in 1998, including Chairman of the Board of Directors, Chris Corrigan.
The bulk and general sector is not the only area where overseas operators are showing an interest. The spectre of privatisation has been hanging over New Zealand terminals for some time. Some ports all already part-privatised including Tauranga and Southport in Bluff which are listed on the NZX. Northport in Whangarei has shareholding from Tauranga and smaller shareholders. Timaru is now part owned by Tauranga. Ports of Auckland has been the subject of an ongoing campaign over the last several years to be considered a candidate for privatisation.
The finance sector sees privatisation as a solution for everything, possibly because it benefits as the handmaiden of the privatisation process. It is the main cheerleader for this course of action, together with some of its allies on the political Right. Infrastructure is an in demand asset that can be pumped for profit and when any social considerations or even strategic goals for the national economy can be ignored, the rewards are greater still for the owners. Responsibility is not the strong point for finance capital in the 21st Century.
However the Ports of Auckland is a huge asset for Auckland City – despite all the screaming about inefficient wharfies, the port makes money hand over fist. The Government prefers a hands-off approach and has not involved itself in the debate. There seems to be little groundswell outside the usual circuit of Remuera ACT Party enthusiasts and trucking company directors to head down the privatisation path. A change in local Government and a swing to the Right could see this option back on the table. On another tangent, there have been calls for the winding down of the port and its freight operations. Combined with the concerns about the port’s expansion and environmental footprint, this is another ongoing debate, but one that does not seem to be making much headway. The port plays a central role for local industry, and the majority view of the business Establishment seems to favour expansion of the port rather than mothballing.
Port of Lyttelton is the more interesting target for privatisation. It has had two major issues to contend with in the last decade that have set its direction to the future. In 2006 it was the subject of an attempted privatisation. GNT (global network terminal) operator Hutchison would have taken majority ownership of the port operations while majority ownership of land and infrastructure would have remained with Christchurch City. The plan was derailed when Port Otago purchased a block of shares to prevent the sale from proceeding, driven no doubt by its reluctance to see a major well-connected global player engaged in the only other major terminal in the South Island.
The big impact on the future of the port was the 2010 and 11 earthquakes. The port was extensively damaged but has played a major role in both the immediate relief efforts to the stricken city of Christchurch, and the ongoing rebuild of the city. A massive insurance payout and the influx of work due to the rebuild have meant, with tragic irony, that the port is busier than ever and has expanded its size and operations. In late 2014 the city came to an arrangement with Port of Otago to buy back its share and bring the ownership of the port under 100% control of Christchurch City Holdings Limited.
But rather than this being a move to return the port to the full control of the local community, it is the first step towards a new privatisation gambit. The City Council voted in late 2014 to put up asset sales for public consultation as part of a plan to plug a claimed $1.2 billion shortfall for the city’s reconstruction. Christchurch Mayor and ex-Labour MP and Cabinet Minister, Lianne Dalziel, announced in December 2014 that up to 34% of the port could be sold off as a key part of these asset sales. Given the rapid moves in the port sector to establish dominant terminals, this would be an ideal opportunity for a global or regional operator to gain a foothold in the New Zealand port sector. Lyttelton is the largest port in the South Island and is a leading contender for terminal hub status in the ongoing shakedown of the industry.
Working On The Waterfront
The final part of the waterfront equation is the labour question. This is in some ways a testament to maritime workers who have maintained a level of organisation in their industry that allows them to resist attacks on their terms and conditions. The strong historical roots and distinctive culture of maritime industries have forged a collective and strong minded mentality amongst workers. The dangerous and difficult nature of work has demanded this approach and, over time, conditions were improved in the industry.
The major industrial disputes in New Zealand of 1890, 1913 and 1951 have all had maritime workers playing a central role. Despite the effects of technology reducing the size of the waterfront workforce, and the effects of casualisation and deunionisation since the Rightwing economic agenda was rolled out in the 1980s and 90s, the waterfront remains a major site of resistance by workers to the power of capital. Ongoing disputes in Australia and in the United States are driven by the same pressures.
Employers are seeking a compliant and docile workforce which can be made to do more work for less cost. This goal has been successfully achieved in many industries but the waterfront is proving a difficult case. The Government is well aware of this situation, despite keeping its distance from the port sector. It is playing a long game by locking in incremental changes to employment law that wear down the ability of unions to organise. The introduction of changes to the Employment Relations Act in 2015 feature the so-called “Ports of Auckland” clause that allow an employer to walk away from negotiations.
This is directly aimed at undermining the ability of workers to engage in effective collective bargaining. Despite these ongoing struggles, New Zealand ports remain one industry where unions still play a strong and effective role. The US socialist journalist Joe Allen identifies the modern logistics industry – the distribution sector of the economy – as being the logical place for the working class to rebuild their organisations in developed economies. In an article published in Jacobin magazine in February 2014, he writes that the emergence of the modern logistics corporation has created a new industrial working class with potentially enormous economic power. “Organising this workforce, which is mostly part-time and often short-term, is both essential and incredibly difficult”.