Industry insight New Zealand ports and freight yearbook - Deloitte

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Industry insight New Zealand ports and freight yearbook - Deloitte
Industry insight
New Zealand ports and freight yearbook
2018
Industry insight New Zealand ports and freight yearbook - Deloitte
New Zealand ports and freight yearbook 2018 | Contents

Contents

Introduction                                             3

Glossary                                                 4

Global Perspectives                                      6

Thought Leadership – Smart Ports                         19

Thought Leadership – Port / City Duality                 25

Domestic Environment                                     29

New Zealand Freight Task                                 31

Port Performance                                         41

Port Summaries                                           53

                                                              2
Industry insight New Zealand ports and freight yearbook - Deloitte
New Zealand ports and freight yearbook 2018 | Introduction

Introduction

The Deloitte Ports and Freight Yearbook is   The Yearbook also presents the most
a concise snapshot of selected               recent data on the New Zealand freight
macroeconomic and domestic drivers of        task, as well as operational and financial
New Zealand port and freight activity. As    performance of New Zealand’s major
a recent initiative, we welcome your         ports.
feedback in relation to the content and
presentation format, and look forward to
future discussion and engagement.

Key updates to this years publication
include a contribution from Deloitte’s
specialist economic advisory team,
Deloitte Access Economics, who provide
an overview of both the global economy
and the prospects for global trade.

We also include two thought leadership
pieces that highlight the challenges and
opportunities facing ports in New Zealand
and internationally.

The first examines smart ports, the
technology that makes them possible and
what their future holds. This includes the
internet of things, 3D printing and
automated port operations.

The second looks at the relationship
between ports and cities, how this
relationship has changed overtime and
provides examples of initiatives to
enhance the integration of ports into the
wider urban environment occurring
elsewhere in the world.

                                                                                                                                                  3
Industry insight New Zealand ports and freight yearbook - Deloitte
New Zealand ports and freight yearbook 2018 | Glossary

Glossary

AKL                         Ports of Auckland / Auckland           HKB     Hawke’s Bay

AS-NA                       Asia to North America Trade Route      IDN     Indonesia
                                                                   IMF     International Monetary Fund
AS-ME                       Asia to Middle East Trade Route
                                                                   IND     India
AS-Med                      Asia to Mediterranean Trade Route
                                                                   IoT     Internet of Things
AS-NE                       Asia to Northern Europe Trade Route
                                                                   ISPS    International Ship and Port Security
AS-SA                       Asia to South America Trade Route      ITS     International Trade Statistics
AUS-FE                      Australia to Far East Trade Route      JPN     Japan

BLU                         Southport (Bluff)                      KOR     South Korea
                                                                   LNG     Liquefied Natural Gas
BOP                         Bay of Plenty
                                                                   LPG     Liquefied Petroleum Gas
BRA                         Brazil
                                                                   LYT     Lyttelton Port of Christchurch
CAGR                        Compound Annual Growth Rate
                                                                   MAN     Manawatu
CAN                         Canterbury                             MLB     Port Marlborough

CHN                         China                                  MMH     Marsden Maritime Holdings

DEU                         Germany                                MoT     Ministry of Transport

EBIT                        Earnings Before Interest and Tax       MYS     Malaysia

EIA                         Energy Information Administration      NAFTA   North American Free Trade Agreement

EST                         Eastland Port                          NA-SA   North America to South America Trade Route

FEU                         Forty-foot Equivalent Unit             NATO    North Atlantic Treaty Organisation

FIGS                        Freight Information Gathering System   NE-NA   Northern Europe to North America Trade Route

FTA                         Free Trade Agreement                   NE-SA   Northern Europe to South America Trade Route

GDP                         Gross Domestic Product                 NFDS    National Freight Demands Study

GFC                         Global Financial Crisis                NIP     National Infrastructure Plan

GIS                         Gisbourne                              NPAT    Net Profit after Tax

GT                          Gross Tonnes                           NPE     Napier Port

                                                                                                                          4
Industry insight New Zealand ports and freight yearbook - Deloitte
New Zealand ports and freight yearbook 2018 | Glossary

Glossary

NPL                         Port Taranaki                                            VICT   Victoria International Container Terminal
NSN                         Port Nelson                                              VNM    Vietnam
NTH                         Northland                                                WAI    Waikato
NYMEX                       New York Mercantile Exchange                             WLG    Centreport / Wellington
NZIER                       New Zealand Institute of Economic Research Inc           WST    Westland
NZTA                        New Zealand Transport Agency                             WTI    West Texas Intermediate
OCR                         Official Cash Rate                                       WTO    World Trade Organisation
OECD                        Organisation for Economic Co-operation and Development
OTG                         Otago
POE                         Port of Otago
RBNZ                        Reserve Bank of New Zealand
RCEP                        Regional Comprehensive Economic Partnership
RMA                         Resource Management Act
SAU                         Saudi Arabia
STEO                        Short Term Energy Outlook
STH                         Southland
T&L                         Transport and Logistics
TAR                         Taranaki
TEU                         Twenty-foot Equivalent Unit
THA                         Thailand
TIU                         PrimePort Timaru
TNM                         Tasman-Nelson-Marlborough
TPP                         Trans Pacific Partnership
TRG                         Port of Tauranga
TWN                         Taiwan
USA                         United States of America

                                                                                                                                        5
Industry insight New Zealand ports and freight yearbook - Deloitte
Global Perspectives

                      6
Industry insight New Zealand ports and freight yearbook - Deloitte
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Global economy1                                      Tax cuts in the United States (US) are       Both Australia and New Zealand are             This solid economic performance in
                                                     expected to stimulate investment activity,   expected to benefit from the pick up in        coming years is weighted to the downside
The global economy is strengthening after
                                                     flowing through to employment and            global growth, expanding by 2.9% and           in the IMF’s medium term forecasts. The
a period of subdued growth. The
                                                     household consumption. This will support     3.0% respectively in 2018.                     strength of business sentiment and
International Monetary Fund’s (IMF)
                                                     broader momentum in growth, with US                                                         investment activity could be curtailed by
World Economic Outlook (January 2018)                                                             Despite the broad-based pick up in global
                                                     GDP projected to grow at 2.7%                                                               faster than expected interest rate hikes.
estimates global gross domestic product                                                           growth, price pressures remain subdued.
                                                     in 2018.                                                                                    This would also dampen the rally in equity
(GDP) growth reached 3.7% in 2017, up                                                             Labour markets have tightened across
                                                                                                                                                 prices and strong price growth across
from 3.2% in 2016. This is stronger than             The strength of Asian economies has been     developed countries, but the flow on to
                                                                                                                                                 various housing markets, posing a risk to
anticipated, as the cyclical recovery in the         an important driver of economic activity,    wages and spending activity has been
                                                                                                                                                 household spending activity.
Eurozone accelerated and manufacturing               accounting for around 60% of global GDP      slow. Commodity prices have fallen as
activity in Asia increased.                          growth over the past 10 years. This will     supply exceeds demand and further              Politics in the US and Europe also pose
                                                     remain the case in 2018, with China          dampens price growth.                          a risk to the global outlook. The
The global outlook remains bright, with
                                                     alone contributing nearly 30% towards                                                       negotiations around the United Kingdom’s
growth estimated to accelerate to 3.9%                                                            The IMF expects inflation to accelerate to
                                                     global growth.                                                                              departure from the European Union have
in 2018 and 2019. This is well above the                                                          3.3% in 2018 as job growth translates
                                                                                                                                                 made progress over the past year, but
average 3.3% rate achieved in the years                                                           into higher wages and spending. This will
                                                                                                                                                 there is still much to be decided, including
following the 2008 Global Financial                                                               be the strongest rate of growth since
                                                                                                                                                 terms around trade and financial access to
Crisis (GFC).                                                                                     2013.
                                                                                                                                                 the single market. A deterioration in
   Real GDP growth (annual change)                                                                With inflation expected to pick up, the        negotiations could result in a disorderly
      20                                                                                          period of accommodative monetary policy        exit, disrupting the region’s economic
                                                                                                  is coming to an end. The US Federal            recovery.
                                                                                                  Reserve has already commenced the
                                                                                 Forecast

      15
                                                                                                                                                 The Trump administration managed to
                                                                                                  process of monetary normalisation,
      10                                                                                                                                         pass its tax bill in late 2017, alleviating
                                                                                                  raising interest rates by 75 basis points in
                                                                                                                                                 concerns about its ability to enact policy.
                                                                                                  2017. Markets are expecting a further
       5                                                                                                                                         However, the administration’s focus on
 %

                                                                                                  three rate hikes in 2018.
                                                                                                                                                 protectionist policies now poses a more
       -                                                                                          Monetary normalisation is not just             immediate risk to the growth outlook. An
                                                                                                  occurring in the US. The Bank of England       increase in trade barriers and restrictive
      (5)
                                                                                                  also raised rates in late 2017, in response    regulation could derail the current
                                                                                                  to a weaker currency and strong job            momentum in global growth.
     (10)
                          Australia               China                  India                    growth, and the European Central Bank
                          New Zealand             United States          World
                                                                                                  has indicated that it would taper its asset
                          Euro area
  Source: IMF world economic outlook                                                              purchase programme.

1: Economic analysis performed by Deloitte Access Economics                                                                                                                                    7
Industry insight New Zealand ports and freight yearbook - Deloitte
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Global trade1                                        Trade liberalisation started in earnest     The Regional Comprehensive Economic
Global trade activity exceeded                       after WWII, accelerating in the 1990’s      Partnership (RCEP) negotiations were
expectations in 2017 after gaining                   with a proliferation of free trade          launched in November 2012, with
momentum in the back half of 2016 and                agreements (FTA). Since 1980, average       countries included in the proposed free
reversing two years of pronounced                    tariff rates in both advanced and           trade area accounting for almost half of
weakness. The IMF expects volume trade               emerging economies have more than           the world’s population, almost 30% of
in goods and services to have expanded               halved. Over this period of time, global    global GDP and over a quarter of world
by 4.7% in 2017, marking the first time              economic growth also accelerated,           exports. Negotiations are still ongoing
that trade has outpaced output growth                benefiting from value chain efficiencies    with bilateral agreements between
since 2014. Emerging markets and                     and opening of new markets. More            participating countries a key prerequisite
developing economies have been a key                 recently, the number of new trade           before the RCEP can progress further.
driver with import and export volumes                agreements have slowed as their
growing by 5.9%.                                     coverage expands. Currently, a record
                                                     25% of global GDP is covered by FTAs.
The outlook for 2018 remains upbeat,
with growth moderating slightly to 4.6%,             After the US pulled out in January 2017,
which remains stronger than global output            the Trans-Pacific Partnership (TPP)
growth. The World Trade Organisation                 continues to be negotiated among the 11
(WTO) revised their estimate for growth              remaining countries, including New
in world merchandise trade volume in                 Zealand. In January, the TPP-11 finalised
2017 to 3.6%, up from the previous                   the terms of a ‘Comprehensive and
estimate of 2.4%. The improvement was                Progressive Agreement’, which
driven by increased import activity in Asia          incorporates the majority of the original
and North America as demand recovered                TPP terms agreed upon in 2015. This
from a weak performance in 2016. The                 agreement is expected to be signed
WTO projects that merchandise trade                  in March.
growth will moderate to 3.2% in 2018.

Looking ahead, trade activity is likely to
be constrained by rising global interest
rates and slower economic activity in
China. Structural issues, such as the
slower pace of global value chain
integration and trade liberalisation, will
also limit growth in trade over the
medium term.
1: Economic analysis performed by Deloitte Access Economics                                                                                   8
Industry insight New Zealand ports and freight yearbook - Deloitte
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Container freight trends                                     The importance of Asia (especially China)
                                                                                                                       Global freight task
                                                             is exemplified in its participation in the
China has dominated the container trade                                                                                              60,000                                                                              18.0%
                                                             top four container trade routes.
for over a decade, principally as an
                                                                                                                                                                                                                         16.0%
exporter. The US, in second place, is a                      The majority of Twenty-foot Equivalent                                  50,000
                                                                                                                                                                                                                         14.0%
net importer.                                                Units (TEU) shipped on the Asia-North
                                                             America trade route are East bound,                                     40,000                                                                              12.0%

                                                                                                               Billion tonne-miles
Since 2000 the proportion of total global
                                                             heading from Asia to North America, this                                                                                                                    10.0%
freight that is containerised has steadily                                                                                           30,000
                                                             is consistent with China’s status as the
increased and as of 2016 containerised                                                                                                                                                                                   8.0%
                                                             World’s dominant exporter. The West
goods make up 15.7% of total freight                                                                                                 20,000                                                                              6.0%
                                                             bound trade between Asia and Northern
(billion tonne-miles).
                                                             Europe reinforces this notion.                                                                                                                              4.0%
                                                                                                                                     10,000
                                                                                                                                                                                                                         2.0%
                                                                                                                                          -                                                                                -
                                                                                                                                               2002      2004     2006        2008     2010     2012     2014      2016
                                                                                                                                               Container        Other Dry        Oil/Gas/Chemicals       Container Share (RHS)
                                                                                                                     Source: The Shipbuilders Association of Japan

      Full container volumes                                                                                           Top trade routes
               120                                                                                                                   25

               100
                                                                                                                                     20

                80
 Million TEU

                                                                                                               Million TEU
                                                                                                                                     15
                60
                                                                                                                                     10
                40

                20                                                                                                                    5

                -    CHN   USA   KOR   JPN   IDN   THA   DEU    TWN      IND   VNM   BRA   MYS   SAU   Other                         -        AS-NA   AS-NE     AS-Med      AS-ME     NE-NA   AUS-FE   AS-SA    NE-SA    NA-SA
                                                   Exports     Imports                                                                                West Bound         East Bound     North Bound    South Bound
    Source: Worldshipping                                                                                           Source: Worldshipping
                                                                                                                                                                                                                                 9
Industry insight New Zealand ports and freight yearbook - Deloitte
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Container shipping                               These risks are further discussed below:

The shipping industry plays a pivotal role       Growth in emerging markets
within the global economy. Shaped since
                                                 China’s stunning economic growth over
the 1960’s by the two mega trends of
                                                 the last three decades was a boon to
globalisation and containerisation.
                                                 global shipping. In 2000 China imported
The shipping industry is constantly              and exported 13 million TEU, by 2015 this
evolving, striving for increased efficiency      had quadrupled to 52 million TEU.
through innovation with new larger ships,        However, as China begins to moderate it’s
specialised for each trade (especially           forecasts of GDP growth and move
containers) and adopting emerging                towards a services based economy, this
technologies to boost efficiency and             rate of growth in container volumes is
improve environmental outcomes.                  unlikely to persist. Among emerging
                                                 economies only India has the potential to
After difficult years in 2015 and 2016, the
                                                 have a similar impact on global trade and
shipping industry experienced somewhat
                                                 the reforms necessary for it to do so may
of a recovery in 2017, with the majority of
                                                 happen much more slowly than in China.
lines forecast to record an operating
profit. Analysts expect this to continue
into 2018. According to the IMF’s World
Economic Outlook, global economic
growth for 2018 is projected to be
approximately 4%. This growth has a flow
on effect to the shipping industry, with
Hapag-Lloyd predicting that global
container shipping volume will increase
between 4.8% and 5.1% from 2018
to 2021.

Despite the positive economic outlook
the shipping industry faces a number of
challenges. According to McKinsey, the
global container shipping industry is
exposed to a number of risks which
could result in a material slowdown in
container trade.
                                                                                             10
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Changing manufacturing footprints                Dematerialisation of demand                  With the trade deals of the last 30 years   existing deals, may prove to be an
                                                                                              providing a significant stimulus to trade   impediment to continued growth in
Digitally enabled technologies (robotics,        This is a phenomenon observed in wealthy
                                                                                              growth, a retreat by developed countries    global shipping.
and 3-D printing) has the potential to           societies where demand for physical
                                                                                              from new deals or the withdrawal from
alter the regions in which the production        goods is replaced by demand for services.
of goods occurs.
                                                 As China has become wealthier, demand
If labour costs are no longer a key              has started to shift towards services.
determinant of manufacturing location,           This, coupled with income growth in the
due to the automation of the process,            developing world slower than that
then manufacturing may return to                 achieved by China in the last 30 years,
countries that had previously outsourced         means the growth rate in trade may lag
this function to developing countries with       that previously observed.
lower labour costs.
                                                 McKinsey also cites the miniturisation of
The above risk is qualified by noting that       products as another factor impacting
labour costs were a key driver for only          trade growth. With smaller products or
13% of all TEUs in 2015 and that over            products boasting multiple features that
half of TEUs were generated by goods             were once the realm of a variety of
where access to raw materials is of              different goods, fewer containers of
more significance.                               goods need to be shipped to meet
                                                 consumer demand.
The impact that the emergence of 3-D
printing will have on trade volumes is not       Geopolitical risk
yet fully understood. 3-D printing is
                                                 In recent years the march towards
notable for its efficient use of materials
                                                 globalisation has started to stall with
resulting in lighter finished goods and
                                                 nationalist and isolationist sentiment
reduced waste of raw materials.
                                                 increasing through much of the developed
In theory this means that fewer raw              world. This is exemplified by the decision
materials would need to be transported           of the US to withdraw from the TPP trade
in order to produce the same quantity of         deal and it’s current threat to withdraw
a given product and the final product may        from, or renegotiate, the North American
be smaller or lighter potentially reducing       Free Trade Agreement (NAFTA) between
the number of containers required by             the US, Canada and Mexico.
the shipper.

                                                                                                                                                                               11
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Consolidation                                    The three largest alliances are:
                                                                                                     Top 20 container lines
According to key shipping observers              !   2M Alliance: The two largest lines,                      !%$#
(Drewery, Lloyds Register and Alphaliner),           Maersk and MSC formed the 2M                             !)$%
one of the themes expected to                        alliance, later adding Hyundai (38%                      !)$#
                                                                                                              !($%

                                                                                                *A99A:?!K=N
characterise 2018 is the continued                   share of global containership capacity).                 !($#
consolidation of shipping lines.                                                                              !'$%
                                                 !   Ocean Alliance: CMA, CGM, COSCO,
                                                                                                              !'$#
The top seven lines control nearly 70% of            Evergreen and OOCL, unravelling                          !&$%
global container ship capacity in a market           several preceding pacts (28% share of                    !&$#
where economies of scale are considered              global capacity).                                        !#$%
vital. The continued quest for scale has                                                                       !!"

                                                                                                                                              14014

                                                                                                                                                                                                          B@C

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                                                                                                                                                                                                                            5;H?,-7-,,?
                                                                                                                     *+,-./

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                                                                                                                                                                                4418

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                                                                                                                                                                                                    *48
                                                 !   THE Alliance: Hapag-Lloyd, having
seen the largest shipping lines form three
                                                     merged with UASC, formed an alliance
major alliances.
                                                     with Yang Ming, Hanjin, K Line, NYK
These three alliances collectively control           and MOL (15% of global capacity).
80% of global containership capacity,                                                                                         '*              4O,+?                  299A+?O,                      E?
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Scrapping
As new ships are delivered into continued
over capacity, scrapping will continue. In
2016 an all time record of over 670,000
TEU was scrapped. Initial forecasts were
for scrapping in 2017 to be even higher,
however increased demand coupled with
lower scrap prices resulted in lower than
expected volumes, with only 427,250 TEU
ultimately scrapped in 2017.

Notably almost half of forecast scrapping
will be Panamax-size ships, a class now
made largely obsolete since the expanded
Panama Canal was commissioned in
June 2016.

   Containership demolition activity 2015-2017YTD
           120

           100

            80
 000 TEU

            60

            40

            20

            -
                                    Apr-15

                                                                                          Apr-16

                                                                                          Apr-17
                                                                                 Oct-15
                                                                                          Nov-15

                                                                                          Nov-16
                                                                                          Oct-16
                                                                                          Dec-15

                                                                                          Dec-16
                                                                                          Aug-16
                                                                        Aug-15
                                                                                 Sep-15

                                                                                          Sep-16
                                                               Jul-15

                                                                                           Jul-16

                                                                                          Mar-17
                                    Mar-15

                                                                                          Feb-16
                                                                                          Mar-16

                                                                                          Feb-17
                           Feb-15

                                                                                          May-16
                                             May-15
                  Jan-15

                                                      Jun-15

                                                                                          Jan-16

                                                                                          Jun-16

                                                                                          Jan-17

                 Intermediate (+3000-7999 TEU)                                            Panamax (+3000 TEU)   Feeder (100-2999 TEU)
   Source: BIMCO, Clarksons
                                                                                                                                        13
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Excess capacity                                  The order book remains strong with some
                                                                                                     Capacity and demand growth
                                                 three million TEU to be delivered by 2020.
Prior to the GFC shipbuilding activity                                                                       15.0%
                                                 Despite chronic over capacity, shipping
exceeded demand as shipping lines all
                                                 lines continue to invest in new larger
pursued the same growth strategy -                                                                           10.0%
                                                 ships. Reports suggest CMA CGM is
larger more efficient new-generation
                                                 preparing to order six 22,000 TEU ships
ships. The order book peaked at an all-                                                                       5.0%
                                                 with the option for a further three of the
time record 170 million Gross Tonnes
                                                 same size. Once complete these ships

                                                                                                   Growth
(GT) in 2007 (pre-GFC). Even as shipping                                                                            -
                                                 would replace the 21,413 TEU OOCL Hong                                    2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
line losses continued, the order book
                                                 Kong as the largest container ship.
remains at historically elevated levels.                                                                      (5.0%)
                                                 Drewery Maritime Research remains
According to Alphaliner, capacity reached
                                                 critical of the continued ordering of ultra-                (10.0%)
a record 21 million TEU in November
                                                 large ships, having identified capacity
2017. Capacity is expected to breach the
                                                 management and continued consolidation                      (15.0%)
22 million TEU threshold at some time
                                                 as the two key requirements for sustained                                            Container shipping demand      Capacity Growth
during 2018. This increase can be                                                                   Source: Crucual Perspective
                                                 liner profitability. Over capacity is partially
attributed to scrapping being more
                                                 to blame for the US$3.6 billion industry
than offset by the arrival of new ultra-
                                                 wide operating loss in 2016 although most
large ships.
                                                 carriers are expected to report a profit for
                                                 2017 despite a weak final quarter.                   Idle capacity
                                                 Although new ships continue to enter                        2,500                                                                                   10.0%
                                                 service and scrapping in 2017 was lower
                                                 than expected, idle capacity has                            2,000                                                                                   8.0%
                                                 decreased from the highs of late 2016
                                                 when more than 1.5 million TEU,                             1,500                                                                                   6.0%
                                                                                                   000 TEU

                                                 representing over 8% of the total global
                                                 fleet, was idle. Total TEUs considered idle
                                                                                                             1,000                                                                                   4.0%
                                                 are now less than 500,000, approximately
                                                 2.4% of the of the global fleet.
                                                                                                              500                                                                                    2.0%

                                                                                                                -                                                                                   -
                                                                                                                        Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17
                                                                                                                               Carrier Owned        Non-Carrier Owned        Idle fleet share of total fleet
                                                                                                     Source: DreweryMaritime Research
                                                                                                                                                                                                               14
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Shipping rates                                   In container markets, two prominent
                                                                                                World container price index
                                                 indicies are Drewery’s World Container
Analysts have reported a US$3.6 billion
                                                 Index (WCI) and the Shanghai Shipping                    1,800
industry-wide loss for container shipping
                                                 Exchange’s Shanghai Container Freight                    1,600
operators in 2016. This reflected over
                                                 Index (SCFI).
capacity coupled with depressed freight                                                                   1,400
rates. Pacific rates between Asia and West       The WCI uses an average of spot rates on                 1,200

                                                                                            US$ per FEU
Coast North America dropped below                11 key global routes.                                    1,000
US$750 per Forty-foot Equivalent Unit
                                                 The Shanghai Shipping Exchange created                    800
(FEU), and US$1,500 per FEU to the East
                                                 the SCFI in 2005 as a composite of key                    600
Coast, previously sectors which averaged
                                                 global routes.                                            400
US$2,000 and $US3,000 per FEU
respectively.                                                                                              200
                                                                                                             -
However, trade began to increase from                                                                         Mar-15   Jul-15    Nov-15 Mar-16      Jul-16   Nov-16 Mar-17      Jul-17   Nov-17
the end of 2016 with Drewery reporting                                                                                     SSE - SCFI - Shanghai-Europe          Drewry - WCI - Global
that the average revenue per FEU in                                                           Source: Drewery Maritime Research, SSE
December 2016 had recovered to
US$1,645, high enough to be profitable
for most shipping lines.

Maersk recorded a loss of US$496 million
in 2016 but reported a 2017 profit of
US$356 million on the back of increased
average freight rates, that were up over
14% on the same period in 2016.

Shipping rates vary for each route, by
cargo and client, between shipping lines,
and over time.

Various indicies such as the Baltic Dry
Index (BDI, for dry bulk) seek to track
price changes over time.

                                                                                                                                                                                                  15
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Ship size                                        The current order book emphasises the
                                                 pursuit of scale with ten ultra-large
The first container ship was introduced in
                                                 container vessels due to be delivered in
1956. The Ideal X carried 58 containers.
                                                 January 2018 alone. Included in this
Within eight years the Associated
                                                 number are seven “megamax” vessels
Steamship company had introduced ships
                                                 (19,000 – 21,000 TEU) and three ships of
with a capacity of nearly 1,000 TEU. Since
                                                 more than 14,000 TEU. These deliveries
then the capacity of container ships has
                                                 come despite the deferment of ten ultra-
continued to increase at a rapid rate. The
                                                 large vessels by COSCO until 2019
largest ships currently in service are now
                                                 (including six of 19,000 – 21,000 TEU)
almost 400 metres in length and have a
                                                 and the delay of three 14,000+ TEU
capacity of more than 21,000 TEU.
                                                 vessels by Yang Ming until 2019.
The continuous pursuit of scale economies
                                                 COSCO has the largest order book at
is the rationale behind the ever increasing
                                                 present with 27 vessels to be delivered
size of container ships. Larger vessels
                                                 between January 2018 and December
provide cost efficiencies in fuel, crew and
                                                 2019, including 17 between 20,000 and
greenhouse gas emissions per container.
                                                 21,000 TEU destined for the Asia-Europe
However there is a question as to how
                                                 trade route.
much longer ships can continue to
increase in size. For a start the world’s        Bunker price plays an important role in
shipping lanes may simply not be wide            the economies of scale achieved by larger
enough or deep enough to handle vessels          ships. The largest savings are due to the
significantly larger than those already          reduced cost of fuel per container shipped
under construction. Additionally, returns        but with forward bunker prices ranging
to scale decline with size, with the             from US$50/bbl to US$63/bbl, down from
attractiveness of increasing vessel size         prices of more than US$100/bbl in 2011
from 20,000 to 30,000 TEU being                  and 2012, these cost advantages are
significantly less than from 10,000 to           reduced by up to a third (McKinsey).
20,000 TEU.                                      It is notable that nine new CMA CGM
                                                 ships are to be powered by Liquefied
                                                 Natural Gas (LNG).

                                                                                              16
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

Bunker prices                                         Heading into 2018, the oil price
                                                      predictions by major organisations and
As shown in the graph below, bunker
                                                      investment banks are generally not widely
prices peaked pre-GFC, fell briefly (as did
                                                      divergent. Energy Information
prices for many commodities), before
                                                      Administration (EIA) forecasts Brent
firming from 2009 to 2014. Since 2015
                                                      crude oil prices to average US$50/bbl and
aggressive global production (including US
                                                      US$61/bbl in 2018. On 10 January 2018
shale oil) has seen prices fall steeply,
                                                      New York Mercantile Exchange (NYMEX)
although recently prices have staged a
                                                      contracts suggest a range for 2018
recovery from near US$30/bbl to over
                                                      between US$50/bbl and US$63/bbl.
US$50/bbl.

    Oil price
           140

           120

           100

            80
 US$/bbl

            60

            40

            20

            -
             Dec-88   Dec-92   Dec-96      Dec-00   Dec-04  Dec-08   Dec-12   Dec-16   Dec-20
                                        Brent FOB        NYMEX Futures
   Source: EIA, CME Group
                                                                                                  17
New Zealand ports and freight yearbook 2018 | Global Perspectives

Global perspectives

International ports                                                                                                                As in previous years, Chinese ports saw                                                                                         The global container port and terminal         This is placing greater demands on
                                                                                                                                   large increases in throughput with an                                                                                           industry is nevertheless under pressure        stevedores speeding up terminal
The international ports sector appears to
                                                                                                                                   average increase of 9.3%. The continued                                                                                         from two interrelated factors. First, larger   automation. While shipping lines or
be in good health. Global throughput
                                                                                                                                   strength in the US economy saw North                                                                                            shipping alliances are creating more           shippers may wish ports to lower prices,
growth remains positive except for a
                                                                                                                                   American port throughput grow by 8.7%,                                                                                          complex and formidable counterparties.         global consultancy Drewery has warned
decline in the fourth quarter of 2015.
                                                                                                                                   Northern Europe by 4.7% and Southern                                                                                                                                           that demands for lower terminal handling
                                                                                                                                                                                                                                                                   Second, to cater for even larger
Throughput growth, a key port measure,                                                                                             Europe by 8.2%.                                                                                                                                                                charges may put future port investment
                                                                                                                                                                                                                                                                   containerships, ports are required to
was particularly marked across the top 20                                                                                                                                                                                                                                                                         at risk, and so the ability to handle larger
                                                                                                                                   The figure below presents the 20 largest                                                                                        invest heavily in more capacity and new
ports, averaging 4.1% for the period from                                                                                                                                                                                                                                                                         ships. The scale, cost and risk of port
                                                                                                                                   ports globally by TEU. Notably ten of                                                                                           technology, driving up capital expenditure
2011 to 2014, then easing to 1.2% from                                                                                                                                                                                                                                                                            expansion is rising.
                                                                                                                                   these are Chinese ports and a total of                                                                                          requirements and operating costs. This is
2014 to 2016. According to Alphaliner, in
                                                                                                                                   15 from Asia, three from Europe, one                                                                                            true not just for major ports on the main      The consolidation occurring in the
2017 global container throughput grew
                                                                                                                                   from North America and one from the                                                                                             trade routes which are required to service     shipping industry is also having an effect
7.7% year on year. This represents the
                                                                                                                                   Middle East.                                                                                                                    ultra-large container ships (14,000 TEU        on ports. As the alliances adjust their
highest rate of growth since the beginning
                                                                                                                                                                                                                                                                   and over), but also ports on secondary         sailings to optimise utilisation and
of 2011.
                                                                                                                                                                                                                                                                   routes who are faced with a cascade of         efficiencies, ports gain or lose services. In
                                                                                                                                                                                                                                                                   larger vessels from main routes that have      Asia for example the Port of Singapore
                                                                                                                                                                                                                                                                   been replaced by ultra-large ships.            will attract 34 weekly calls up from 29 at
                                                                                                                                                                                                                                                                                                                  present. However, Port Klang in Malaysia
                                                                                                                                                                                                                                                                   The capital expenditure required to
                                                                                                                                                                                                                                                                                                                  will have port calls fall from 11 to five and
                                                                                                                                                                                                                                                                   service these larger ships is evident in the
     Top 20 ports                                                                                                                                                                                                                                                                                                 Hong Kong Port will have only seven and
                                                                                                                                                                                                                                                                   fact that between 2000 and 2016 nearly
                                                                                                                                                                                                                                                                                                                  three calls on the Northern European and
               45                                                                                                                                                                                                                                                  US$69 billion was committed across 292
               40                                                                                                                                                                                                                                                                                                 Mediterranean services respectively, down
               35                                                                                                                                                                                                                                                  port projects.
                                                                                                                                                                                                                                                                                                                  from ten and five at present.
 Million TEU

               30
               25                                                                                                                                                                                                                                                  Larger ships are segmenting container
               20                                                                                                                                                                                                                                                  terminals into those that can handle
               15
               10                                                                                                                                                                                                                                                  larger ships versus those that are unable
                5                                                                                                                                                                                                                                                  to. These ships make fewer visits,
                -                                                                                                                                                                                                                                                  creating higher peak workflows, while
                                                                                                                                                                                                Antwerp
                                                                                                                              Tianjin

                                                                                                                                                                                       Xiamen
                                           Shenzhen

                                                                                            Guangzhou

                                                                                                                                                                  Kaohsiung
                                                                                                        Qingdao

                                                                                                                                                                                                          Los Angeles
                                                      Ningbo-Zhoushan
                               SIngapore

                                                                                                                                                     Port Klang
                    Shanghai

                                                                        Hong Kong

                                                                                                                                                                                                                                                    Keihin Ports
                                                                                                                                        Rotterdam

                                                                                                                                                                              Dalian
                                                                                    Busan

                                                                                                                  Jebel Ali

                                                                                                                                                                                                                                          Hamburg
                                                                                                                                                                                                                        Tanjung Pelepas

                                                                                                                                                                                                                                                                   demanding faster handling, and creating
                                                                                                                                                                                                                                                                   accelerated terminal obsolescence.

                                                                                    2013                2014                  2015                  2016                 2017
    Source: Annual Reports, Deloitte Analysis
                                                                                                                                                                                                                                                                                                                                                            18
Thought Leadership
Smart Ports

                     19
New Zealand ports and freight yearbook 2018 | Smart Ports

Smart ports

Deloitte Port Services                          impact will further increase. Ports need to   inspection will also lead to increased        Security has become a top priority for
                                                prepare by becoming data-minded and           efficiencies.                                 ports worldwide. The International Ship &
The Deloitte Port Services team recently
                                                implementing new approaches to data                                                         Port Security Code (ISPS) is becoming a
released a paper outlining key challenges                                                     The industry will move towards self-
                                                management. This involves setting up                                                        critical factor for international shipping
and opportunities for port operations with                                                    steering ships and the usage of sensors
                                                new platforms, innovative delivery models                                                   and transportation companies.
one of the focus areas being smart ports.                                                     will replace the need for towing.
                                                and governance.
They have also recently released a paper                                                      The Norwegian shipping company Yara, in        Maersk Cyber Attack
                                                Data is key
focused on smart port technology.                                                             partnership with maritime engineering          The importance of cyber security as a
                                                Data analytics and data exchange are          group Kongsberg, is already developing         parallel to physical security is
The following is primarily drawn from
                                                becoming a new comparative advantage          the world’s first fully automated (and         demonstrated by the July 2017
those reports. If you would like access to
                                                for port players. Capacity sensing, route     emission free) 120 TEU container ship          NotPetya cyberattack which affected
either of the full reports please contact us
                                                optimisation, energy management, fault        planned for launch in 2018. The ship will      Maersk Line and its associated container
for a copy.
                                                detection & resolution can be done with       be equipped with sensors enabling it to        terminal operations.
Smart ports                                     much more efficiency. Advanced data           dock autonomously.
                                                analytics allow for streamlining and                                                         The attack is estimated to have cost the
Data-driven technologies and the Internet                                                     Technology has a dark side                     company between US$200 and US$300
                                                optimising existing infrastructure usage
of Things (IoT), combined with advanced                                                                                                      million dollars. Maersk was prevented
                                                and operations by eliminating                 Fast-evolving technologies represent
robotics, analytics and 3D printing will                                                                                                     from taking new orders for a number of
                                                unnecessary/empty transport.                  unprecedented opportunities as well
redefine the future of ports.                                                                                                                days causing a significant negative
                                                                                              potential threats for ports. Cyber security
                                                3D printing will change global                                                               impact on business volumes. As ports
Ports, ships, shippers and regulatory                                                         and cyber-resilience are becoming more
                                                shipment                                                                                     become more reliant on data driven
agencies increasingly operate via                                                             important as a parallel to physical
integrated systems which monitor,               3D printing will transform the cargo of       security.                                      technologies and the IoT, the risks of a
analyse and share data and market               ships in the future.                                                                         similar attack damaging port operations
information. Technological advancements                                                                                                      will increase if not proactively managed.
                                                3D printing is driving manufacturers
offer ports new business model
                                                towards the goal of zero-inventory and
opportunities and the potential to
                                                will reduce the need for shipping finished
transform into smart ports.
                                                goods. It will however mean increased
Becoming a smart port to remain                 shipment of raw materials.
relevant
                                                Robots and sensors will continue to
Smart ports are capitalising on the             replace people
expanding IoT universe. Technology
                                                Increased efficiency of robotics and
already has a strong impact on ports
                                                analytics will drive automisation even
around the world today, but that
                                                further. The potential use of drones for

                                                                                                                                                                                    20
New Zealand ports and freight yearbook 2018 | Smart Ports

Smart ports
Technological advancements offer ports the opportunity to transform into smart ports

 Impact of digitalisation
 Much stronger life cycle integration, new entrants

                                                         Design & Engineering                Construction                         Operations

                                                                                                   Life cycle integration

                                                                                                   Big data and analytics
          User interfaces and
             applications
                                                                  Simulation and virtual reality                    Mobile interfaces and augmented reality

                                                                                                                                                              Technology integration
                                                                                      Building information modelling (in the cloud)
       Software platform and
              control
                                                                                          Ubiquitous connectivity and tracking

                                                                                                   Additive manufacturing
            Digital / physical
            integration layer
                                                                                                       3-D scanning

                                                                                    Intelligent construction equipment and scanning
      Sensors and equipment
                                                                   Unmanned aerial vehicles                                   Embedded sensors

 Source: Deloitte Port Services – Deloitte Netherlands

                                                                                                                                                                                       21
New Zealand ports and freight yearbook 2018 | Smart Ports

Smart ports – the Internet of Things

Smart ports                                     The Internet of Things                         There are three main challenges driving       Migrating activities
                                                                                               the need for smart ports:                     The second challenge driving the IoT in
According to Olaf Merk, Administrator for       Seaports are playing catch-up with the
Ports and Shipping at the International         large transport and logistics (T&L)            1.   Operational excellence                   seaports is migrating activities. The need
Transport Forum (ITF) "Smart ports are          players when it comes to developing                                                          to be smart is also driven by the
                                                                                               2.   Migrating activities (challenging        challenging external market environments.
the only ports that will survive”. A true       insight driven solutions and IoT
                                                                                                    external market)                         Shifting transport networks also endangers
smart port means there is no waste of           applications.
space, time, money or natural resources.                                                       3.   New business opportunities               traditional port leaders. Changes in global
                                                Being part of both larger T&L supply                                                         shipping routes increase competition and
The challenges of creating a smart port         chains and in itself being a cluster of        The size of a port is no longer the primary   render the value propositions generated by
correspond to the current challenges of         companies and businesses active in the         focus, but rather efficiency and smarter      IoT, like cost reductions and increased
ports: spatial constraints, pressure on         T&L sector, ports are in a unique position     operations. Automation and information        efficiency, even more important.
productivity, fiscal limitations and the        to fully grasp the potential generated by      services can be used to address the
need to be green.                               these new high tech developments.              challenges listed.                            New business opportunities

Technology and innovation are the driving       Becoming a smart port means developing         Addressing operation excellence               The third challenge driving the IoT in
force behind smart port productivity. This      solutions that will address the current and                                                  seaports is the development of new data-
                                                                                               The primary challenge driving the IoT in      driven business models. IoT applications
technology, in the form of physical and IT      future challenges faced by seaports
                                                                                               seaports is operational excellence. On the    provide more added value than only
infrastructure, could be the best way to        including spatial constraints, pressure on
                                                                                               supply side the main challenges are;          updating existing frameworks. Next to the
see benefits in a smart port environment.       productivity, fiscal limitations, safety and
                                                                                               capacity, efficiency, reliability, support    physical flows, more emphasis will be put
                                                security risks and sustainability. Ports are
“The ultimate smart port may be the fully                                                      and costs. On the demand side port users      on data-driven models like value-added
                                                faced with a range of technical and
automated port where all devices are                                                           might want extra services like savings in     services, subscriptions, apps and anything
                                                strategic issues. The diverse nature of a
connected via the IoT”, believes Peter                                                         time, security and traceability. Improving    as a service.
                                                port, with a wide variety of companies
Lundgren, Sales Director at JLT Mobile                                                         these drivers is where the quick wins lie
                                                operating different kinds of equipment                                                        Blockchain
Computers, as elsewhere, the major                                                             for ports. Addressing the issues
                                                and requiring different types of products
drivers in smart ports are productivity and                                                    associated with operational excellence can     Maersk Line has recently announced its
                                                and services, creates a complicated
efficiency gains.                                                                              be seen in current IoT implementation in       intention to work with IBM to develop a
                                                environment with multiple stakeholders.
                                                                                               ports. The digital port solutions focus on     system that will enable global trade to be
Port operations are starting to integrate
                                                                                               efficiency improvements such as traffic        conducted using blockchain technology.
various infrastructures, both physical and
                                                                                               management systems, improving flow
IT, including different network and                                                                                                           The technology is intended to standardise
                                                                                               throughout the port area, automation,
positioning technologies. For smart ports                                                                                                     information flows and provide an open
                                                                                               reducing costs, digital invoicing (customs)
to be effective it is important for the                                                                                                       platform for those involved in the global
                                                                                               and improving lead time.
technology to be able to work together                                                                                                        supply chain to easily and safely
with other ports and service providers to                                                                                                     exchange information in real time.
effectively share information.

                                                                                                                                                                                      22
New Zealand ports and freight yearbook 2018 | Smart Ports

Smart ports - from digital to smart

                                                            Port development –becoming a smart             Smart port development
                                                            port
                                                                                                           The development of a smart port should
                                                            Becoming a true smart port that uses the       be something that stems from a defined
                                                            full potential of an IoT network and smart     strategy. A port should have a clear
                                                            data solutions means that a port must be       business case in mind when planning its
                                                            able to identify and take advantage of         IoT implementation.
                                                            new business models.

                                                            The nature of the business makes this           Container terminal automation
                                                            challenging, since it requires integration      Victoria International Container
                                                            between the supply and demand side              Terminal (VICT) is an example of the
                                                            from the T&L sector, assimilating not only      increased utilisation of technology in the
                                                            logistics firms, suppliers and distributors,    operation of modern ports. VICT has;
                                                            but also their clients.                         11 automatic container carriers, 20
                                                            Ports have already positioned themselves        automatic stacking cranes and six
                                                            in the supply chain as a place for supply       automatic lashing platforms. The
                                                            and demand to meet. In other words,             terminal has a truck gate system where
                                                            they represent a physical manifestation of      trucks are loaded and unloaded using
                                                            a platform business model.                      fully automated equipment and a
                                                                                                            paperless booking system. Automated
                                                            A port platform model would be                  cranes are equipped with load sensing
                                                            represented by three parties:                   capabilities that enable the port to
                                                            •   Supply – this side of the market            monitor weight distribution across
                                                                includes inbound logistics, ship            individual containers. The terminal is
                                                                owners, terminal operators, maritime        able to operate continuously without the
                                                                service providers, etc.                     disruption previously caused by shift
                                                            •   Platform – this is represented by the       changes. Automated stacking cranes
                                                                platform itself. The Port provides a        and container carriers move containers
                                                                physical/business platform for supply       precisely without the risk of damage or
                                                                and demand to meet.                         misplacement.

                                                            •   Demand – this includes outbound
                                                                logistics, manufacturers inside and
                                                                outside the port, and distributors.

                                                                                                                                                     23
New Zealand ports and freight yearbook 2018 | Smart Ports

Smart ports – the development of a smart port

Challenges ahead                                The final level of integration will be a     •   Clean – the port will be clean and         Terminal operations
                                                result of stakeholder management and             vessel waste recycled
Firstly the port needs to determine what                                                                                                    Terminal operators today need to off-load
                                                determination shown by the port.
they want to achieve by becoming a                                                           •   Highly efficient – ports will be able to   larger and larger vessels, reduce
smart port. The strategic goal should go        Becoming a smart port, driven by smart           increase handling capacity through         throughput times and manage landside
beyond increased efficiency improvements        technology like IoT, is a fundamental part       increased automation                       logistics. Terminal operators are relying
and focus on long term strategy, where          of the future of ports.                                                                     on technology to meet these challenges.
                                                                                             •   Secure – using automated container
insights are distilled from smart                                                                                                           Cranes off-loading containers from ships,
                                                Ports of the future                              screening technologies and digital
applications enabling a transition towards                                                                                                  transporting containers, scanning
                                                                                                 security monitoring.
an insight driven company.                      Shipping plays a major role in our global                                                   containers, certifying cargo – all of these
                                                economy and seaborne trade has               •   Transparent – new technologies will        activities take place within the dock yards
The challenge that ports face is that a
                                                quadrupled since the late 1960’s. The port       improve transparency and reduce costs      and transfer areas.
large variety exists between ports e.g.
                                                industry has embraced new technologies           associated with running local customs
pure bulk port versus a container port.                                                                                                     The technology used to complete all of
                                                over time, but has not yet been disrupted        operations.
A second challenge is the increased focus                                                                                                   these operations is crucial to terminal
                                                by the massive growth in new
                                                                                             •   Employers – ports will continue to         operators as they increase throughput,
on cyber security. The port industry is         technologies. Blockchain, 3D printing and
                                                                                                 source local employment and new            reduce the cost per container handled and
responsible for customer data, which is         smart mobility technologies all have the
                                                                                                 technologies will require more highly      reduce the amount of time required for
extremely valuable, and are also                potential to dramatically impact the
                                                                                                 skilled people.                            moving goods into and out of the
responsible for physical goods.                 shipping industry according to Smart
                                                                                                                                            terminal.
                                                Ports: Competitive Cities by Siemens.        Managing the port of the future
Currently, port security is limited to the
                                                Cities and their ports need to strategise
global ISPS code, which focuses on                                                           Managing the port of the future and its
                                                as to how best prepare, change and
physical threats. Ports need to be aware                                                     various complex applications, processes
                                                benefit from current and future
that digital threats are just as significant,                                                and systems while optimising safety,
                                                technologies.
especially if ports continue on their path                                                   security, energy efficiency, cost and
towards digitalisation.                         According to Siemens, ports of the future    environmental care will continue to be an
                                                will be:                                     ever increasing challenge. Ports will have
For smart ports to operate effectively
                                                                                             to rely more and more on technology.
there will need to be co-operation              •   Electric – powered only by electricity
between ports in order to share data and                                                     Other logistics hubs are already starting
                                                •   Digital – a single system, where all
insights.                                                                                    to digitally integrate their distributed
                                                    elements are digitally connected
                                                                                             systems and partners in order to move
This will present another challenge as
                                                •   Emissions free – terminal operations     passengers and freight more smoothly,
there is a certain level of protectionism by
                                                    and docking vessels will run only on     efficiently and in a more cost effective
each port of their data.
                                                    electricity                              way.

                                                                                                                                                                                     24
Thought Leadership
Port / City Duality

                      25
New Zealand ports and freight yearbook 2018 | Port / City Duality

Port / city duality

Port / city duality                               stackers or quay cranes that require only
                                                  one person to operate them.
Many of the world’s major cities grew in
size and wealth on the back of the trade          The disconnect between ports, the urban
that flowed through their ports. As ports         environment and residents has stimulated
have become more industrialised a                 a great deal of discussion on the place of
disconnect between port and city has              ports within a city.
developed. Mechanised port traffic and
                                                  The expansion of both ports and cities has
operations coupled with security concerns
                                                  brought the spatial constraints of the port
mean that it is no longer feasible for the
                                                  / city relationship into focus.
public to be allowed unrestricted access to
port areas.                                       Local policy makers are well aware of the
                                                  vital role ports play in an economy and
Despite the spatial disconnect, ports
                                                  that the development of ports is crucial to
retain their influence on the economic
                                                  continued prosperity. However, ports
strength of global metropolitan centres
                                                  located in or near the city centre are often
and their regions.
                                                  seen as undesirable by residents due to
Ports and cities have also developed an           noise and environmental impacts.
institutional disconnect as a result of
                                                  City growth places a strain on available
increased privatisation in the sector.
                                                  land and forces land values upward. As a
Where once ports were owned and                   result, key operations of local ports are
operated by central government or local           being relocated to sites where there is
authorities, internationally this role has        less impact on cities and their residents.
increasingly been performed by private
                                                  With the relocation of some port
companies whose primary responsibilities
                                                  functions, the development of the areas
are to their shareholders, rather than the
                                                  previously occupied by a port is key to the
city or community as a whole.
                                                  economic growth of local economies.
The number of people that have first hand
experience of interacting with ports has
decreased significantly with the advent of
mechanisation and containerisation. The
hundreds of workers previously employed
by ports to load and unload cargo have
been replaced by automated container

                                                                                                 26
New Zealand ports and freight yearbook 2018 | Port / City Duality

Port / city duality

Port-related waterfront development               The right mix of functions for                Fisherman’s Wharf in San Francisco has
                                                  successful waterfront redevelopment           had similar success by developing a range
As discussed in The Competitiveness of
                                                                                                of waterfront seafood restaurants and
Global Port-Cities: Syntheses Report              Successful waterfront projects, have
                                                                                                markets in an area previously reserved for
released by the OECD, port-related                generally achieved the right mix of
                                                                                                fishermen and their fleets. Despite the
waterfront development might present an           diversified functions that render the
                                                                                                redevelopment a number of fishing
opportunity to create a new image for a           waterfront area economically vibrant. In
                                                                                                vessels still use the area as their base of
city or a region.                                 most port redevelopments the mix of
                                                                                                operations.
                                                  functions that attract people, tourism, and
A number of former port areas are being
                                                  business and in turn create economic          Darling Harbour in Sydney is an example
redeveloped into bustling working and
                                                  value, consist of the following:              of a successful redevelopment following
living areas.
                                                                                                the decline and obsolescence of the
                                                  •    port functions;
Port redevelopment offers a new                                                                 existing port. Darling Harbour for many
waterfront focal point for residents and          •    developing recreational and cultural     years hosted warehousing and woolstores
visitors. The most successful examples of              activities; and                          in addition to extensive rail yarding
waterfront development have tended to                                                           operations. A government review in the
                                                  •    expanding food related businesses
focus their land use on non-maritime                                                            1980’s deemed port operations to be
                                                       such as food markets or restaurants.
functions including:                                                                            inefficient and recommended their
                                                  For example, Port Vell in Barcelona           relocation. The New South Wales
•   commercialising the location i.e.
                                                  attracts more than 16 million visitors per    government then announced their
    marinas, fisheries and aquariums;
                                                  annum.                                        intention to redevelop the area. An
•   applying the port function to the                                                           aquarium was opened in 1988 shortly
                                                  The old port area was transformed
    tourism industry i.e. cruise passenger                                                      followed by museums, shops, hotels and
                                                  through an interesting and vibrant mix of
    terminals;                                                                                  bars. Other attractions include Chinese
                                                  functions. Port Vell continues to operate
                                                                                                Gardens, a convention centre and public
•   utilising the ports maritime history i.e.     as a port through marina facilities, ship
                                                                                                parks. Development continues to this day
    preserving and adapting historic              repair dockyards, and a cruise terminal. It
                                                                                                with a major business and residential
    buildings for new uses; and                   now offers numerous cultural and
                                                                                                project in progress, supplemented with
                                                  recreational activities, including a
•   organising events that will attract                                                         further open public spaces. Reinforcing
                                                  Maritime Museum, Aquarium and water
    locals and tourists to the port.                                                            the areas link with the city.
                                                  sports facilities. The historic former
                                                  warehouse, Palau de Mar, has been
                                                  refurbished to accommodate restaurants
                                                  where visitors are able to enjoy waterside
                                                  dining.

                                                                                                                                              27
New Zealand ports and freight yearbook 2018 | Port / City Duality

Port / city duality

Port history

Liverpool’s waterfront area utilises its port
heritage as a catalyst for the tourism
industry. The waterfront has preserved a
great deal of port related heritage making
it an attractive destination for tourists and
residents alike. The photo to the right
shows the port in its present state. The
refurbishment and retention of the
historic port buildings, and their
contribution to making the waterfront a
vibrant location, is clear.

Port history does not necessarily need to
be included as part of a successful
redevelopment. The Dongjian Bay Scenic
Area in Tianjin, China houses the largest
manmade sand beach in China and Asia’s
largest cruise port. This redevelopment
has created a new area for the city’s
tourism and cultural industries without
including the area’s historical background.

                                                                    28
Domestic Environment

                       29
New Zealand ports and freight yearbook 2018 | Domestic Environment

Economic environment

Reserve Bank Monetary Policy                    The RBNZ has revised its November             Quarterly Predictions, December 2017            Quarterly Survey of Business Opinion,
Statement February 2018                         estimates of the impact of Government                                                         Predictions, December 2017
                                                                                              According to NZIER the growth outlook is
                                                policies based on Treasury’s Half Year
On 7 February 2018, the Reserve Bank of                                                       slightly softer as population growth slows.     NZIER report that confidence fell in the
                                                Economic and Fiscal Update. The
New Zealand (RBNZ) left the Official Cash                                                                                                     September quarter, with only a net 7% of
                                                predicted net impact of these policies        There is much uncertainty over the effects
Rate (OCR) unchanged at 1.75%.                                                                                                                businesses expecting an improvement in
                                                has been revised down in the near term        of the new Government’s policies.
                                                                                                                                              general economic conditions.
Global economic growth continues to             although the Kiwibuild Programme will         Nonetheless, the New Zealand growth
improve, although inflation and wage            contribute to residential growth              outlook remains positive.                       A decline in business confidence is not
outcomes remain subdued. Commodity              from 2019.                                                                                    unusual heading into a general election.
prices have increased. Bond yields and                                                                                                        Although economic activity has come off
                                                Annual CPI inflation was 1.6% in
credit spreads remain low although they                                                                                                       the boil, businesses expect a rebound in
                                                December, lower than expected due to
have increased since November and                                                                                                             demand in the next quarter.
                                                weakness in manufactured goods prices.
equity prices are near record levels but
                                                Non-tradables inflation is moderate but
are exhibiting increased volatility.
                                                expected to increase gradually as capacity
Monetary policy remains easy in the
                                                pressures increase. Tradables inflation has
advanced economies but is gradually
                                                remained subdued. Overall, CPI inflation
becoming less stimulatory.
                                                is projected to remain near the midpoint
The exchange rate has firmed since the          of the target range and longer-term
November Statement largely due to a             inflation expectations are well anchored       Official cash rate
weak US dollar. RBNZ assumes the trade          at 2%.
                                                                                                   9.0
weighted exchange rate will ease over the
                                                Monetary policy will remain                        8.0
projection period.
                                                accommodative for a considerable period.
                                                                                                   7.0
GDP growth eased over the second half           Numerous uncertainties remain and policy
                                                                                                   6.0
of 2017 but is expected to strengthen in        may need to adjust accordingly.
response to accommodative monetary                                                                 5.0
                                                                                               %

policy, high terms of trade, government                                                            4.0
spending and population growth.
                                                                                                   3.0
Employment growth has been strong and                                                              2.0
GDP growth is projected to strengthen,
                                                                                                   1.0
with a weaker outlook for housing and
                                                                                                    -
construction offset by accommodative                                                                     1999   2001     2003   2005   2007    2009    2011    2013    2015    2017
monetary policy, the continued high terms
of trade, and increased fiscal stimulus.                                                       Source: RBNZ statistics

                                                                                                                                                                                         30
New Zealand Freight Task

                           31
New Zealand ports and freight yearbook 2018 | New Zealand Freight Task

New Zealand freight task

This section reproduces elements from            Petroleum and coal freight are
                                                                                                        New Zealand freight generated by commodity
Deloitte’s 2017 Ports & Freight yearbook.        concentrated on a few key regions where
                                                                                                                        5.0                                               60
                                                 the resources are located and extracted,
The information in this section is drawn                                                                                4.5
                                                 coal from West Coast and Waikato, and

                                                                                             Billion tonne-kilometres
                                                                                                                        4.0                                               50
from the National Freight Demand Study,
                                                 petroleum from Taranaki and Northland                                  3.5

                                                                                                                                                                               Million tonnes
a pivotal source of information for New                                                                                                                                   40
                                                 where it is imported and refined.                                      3.0
Zealand’s freight task. The first National
                                                                                                                        2.5                                               30
Freight Demand Study (2008) guided               Key construction materials, aggregate and                              2.0
freight infrastructure and investment and        cement, are also produced in high                                      1.5                                               20
land-use planning decisions across the           volumes, although generally close to                                   1.0                                               10
public and private sectors.                      domestic markets given their bulk and                                  0.5
                                                 relatively low unit value. Manufactured                                  -                                               -
The National Freight Demand Study was
                                                 and retail goods, whether domestically
updated in 2014, and has not been
                                                 made or imported, are usually smaller
updated since.
                                                 and of greater unit value, and are
The primary sector is New Zealand’s key          transported greater distances.                                               Billion tonne-kilometres   Million tonnes
                                                                                                    Source: NFDS 2014
generator of domestic freight, much of it
destined for export. The flows are from
source (farm gate or plantation forest)
either direct to ports for export (such as
logs) or more usually via intermediate
processing industries (dairy factories) for
both domestic consumption and / or
export. Favourable export conditions and
a buoyant construction sector have
supported the strength in forestry, while
dairy has enjoyed rapid expansion (much
enabled by irrigation). Dairy alone
exceeds the tonnage of all other
agricultural commodities: livestock, meat,
wool, horticulture, grains and fish.

                                                                                                                                                                                   32
New Zealand ports and freight yearbook 2018 | New Zealand Freight Task

Regional freight generation

Regional freight generation                      substantial plantings in; Northland,        New Zealand regions
                                                 Waikato, Bay of Plenty, Gisborne, Hawkes
Clear patterns are evident in domestic
                                                 Bay, and Tasman / Nelson / Marlborough.
freight flows. Primary producing areas
generate flows to export ports, typically        Forestry accounts for 35% of freight in                                           Northland (NTH)
via processing facilities. Population is a       these regions (except Waikato at 16%
major driver of both consumption and             and Northland at 26%).
manufacturing activity.                                                                                Auckland (AKL)                    Bay of Plenty (BOP)
                                                 Crude oil flows are either direct export
The Golden Triangle (Auckland, Waikato,          (from Taranaki) or direct import (to
Bay of Plenty) combines both population          Marsden Point in Northland). Domestic
and primary industries (forestry and             transport of petroleum products is                        Waikato (WAI)
                                                                                                                                                      Gisbourne (GIS)
dairy) to account for 45% of all freight         primarily from the Northland refinery to
tonnage produced.                                coastal distribution, with a rising direct
                                                 import share, and then by truck to the                Taranaki (TAR)
Canterbury is the dominant freight                                                                                                               Hawke’s Bay (HKB)
                                                 nation’s service stations. West Coast coal
generator in the South Island producing
                                                 production is principally for export via
15% of the national freight task.                                                                      Manawatu (MAN)
                                                 Lyttleton, while Waikato coal serves the
Manufacturing and retail freight tonnage         domestic market in the upper North
correlate strongly with population, notably      Island. Cement is manufactured at a plant
in Auckland and Canterbury, which host           in Northland for distribution by coastal                                                       Wellington (WLG)
manufacturing hubs, large scale                  ships and then road and rail. Cement was
distribution centers, and receive                                                                                                    Tasman Nelson Marlborough (TNM)
                                                 manufactured in the West Coast of the
consumer goods through their ports.              South Island but this has been             West coast (WST)
                                                 superseded by direct import.
The primary sector is located in regions                                                                                           Canterbury (CAN)
offering favourable topography, climate,         Southland hosts the Tiwai Point
and soil.                                        Aluminium Smelter, which while
                                                 generating largely direct import / export
Waikato, Taranaki, Manawatu, and
                                                 flows, accounts for almost 10% of the
Southland are well-suited to dairy
                                                 regions total freight flows.
production, as well is Canterbury if
irrigation is available, with dairy                                                                                        Otago (OTG)
                                                                         Southland (STH)
accounting for over 20% of total freight
generated for these regions. This is
similar for forestry, where warm climate
and lower-value land have attracted
                                                                                                                                                                     33
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