Newcastle vs Port Botany

New hope for Newcastle  Transport and Logistics News on-line 30th October 2014 – Greg Cameron

Port of Newcastle

The NSW Government has denied preventing a container terminal at world’s biggest coal port.

A report by the Australian Financial Review that conditions for the sale of the Port of Newcastle ”prevent the world’s biggest coal port from building a container terminal” have been previously denied by the NSW Government. The newspaper reported that the ACCC had warned that ”restrictions on competition” inserted into sale conditions ”may be unlawful and could be unenforceable”.

Last week, the NSW Greens asked a series of questions of the NSW Government – see 143 and 144  of 23 October – which included this: ”Did the Government consult the Australian Competition and Consumer Commission when inserting compensation provisions into the leases for Port Botany, Port Kembla and Port of Newcastle?”

Australia’s industry super funds may be feeling a little jittery about their first big foray into Australian infrastructure after spending $4 billion acquiring their 80.1 per cent stake in NSW Ports, the leaseholder to Ports Botany and Kembla.

The super funds paid the NSW Government a premium price for the monopoly. Port Botany is the only NSW port with a container terminal. Should the Port Botany container terminal ever reach capacity, Port Kembla will be developed to preserve the monopoly.

The big incentive for a Newcastle terminal is transporting containers for the Sydney market by rail to a single intermodal terminal at Eastern Creek, or Badgery’s Creek. A rail freight bypass of Sydney, between Newcastle and Glenfield, can be paid for by railing containers from the Port of Newcastle plus general freight that currently enters Sydney mostly by truck. The highest economic and social return from Sydney’s rail network is to use all of it for passengers by removing freight – see my submission number 177  to the ”Select Committee on the Planning Process in Newcastle and the Broader Hunter Region”.

Port Botany container terminal depends on trucks. Last year, trucks carried 87 per cent of containers between the port and western Sydney and rail only 13 per cent.

For 2031, the NSW Government is forecasting 1.7 million truck movements between Port Botany and western Sydney, double the 850,000 truck movements in 2013.

But by 2046, container truck movements between Port Botany and Western Sydney will quadruple to 3.5 million per year. Clearly, it is NSW Government policy to increase container truck movements on Sydney’s roads.

The Hon. Duncan Gay, NSW Minister for Roads and Freight (formerly Roads and Ports), was asked in parliament on 17 October 2013, ”How much compensation will be paid to the private operator of Port Botany if a new container terminal is developed at Newcastle Port?”

Mr Gay answered ”we do not envisage that any compensation will need to be put in place”; and, that there was a ”cap on numbers” at the Port of Newcastle. My Gay was referring to a cap on container numbers.

The ”cap on numbers” was introduced into the guidelines for companies bidding for the leases to Ports Botany and Kembla. The government’s ”cap on numbers” at the Port of Newcastle was established before the government took the decision to lease the Port of Newcastle. In December 2011, the government hired Morgan Stanley to be its financial adviser. The ”cap on numbers” would have been imposed around that time.

The government did not reveal the ”cap on numbers” at the Port of Newcastle before Mr Gay’s statement to parliament on 17 October 2013 and there has been no mention of it since.

In parliament on 11 June 2014, The Hon. Gladys Berejiklian, Minister for Transport, and Minister for the Hunter representing the Minister for Roads and Freight, answered ”no” to two questions asked on 7 May 2014: ”Does the proposed lease of the Port of Newcastle contain any provision that prevents a container terminal being developed on the former steelworks site?”; and, ”Was it a condition of the Port Botany lease that there will be no container terminal built at the Port of Newcastle?”

Mr Mark Speakman SC MP, Parliamentary Secretary to Treasury, said on 1 July 2014 that the Port of Newcastle lease ”does not constrain container shipments passing through the Port”; and ”the lease also does not prevent a container terminal being developed on the former steelworks site.”

The government has not revealed the source of funds to pay compensation to NSW Ports if the ”cap on numbers” is exceeded. The most likely source is Port of Newcastle Investments, the Port of Newcastle leaseholder.

The government has not revealed how its obligation to compensate NSW Ports is legally enforceable. Nor has the government revealed how the requirement on Port of Newcastle Investments to pay the government for exceeding the ”cap on numbers”, if such a requirement exists, is legally enforceable.

Presumably, compensation is payable to NSW Ports for loss of business. With 1450 metres of quay line, a container terminal can be developed on the former Newcastle steelworks site with capacity up to 3 million TEU per year. This compares with Port Botany throughput in 2013 of 2.2 million TEU.

There must be a rail freight bypass of Sydney, between the Port of Newcastle and Glenfield, before a Newcastle container terminal will handle 3 million TEU. However, a Newcastle terminal would be competitive for up to 1 million TEU, providing a rail freight bypass of Newcastle alone is built. The long-proposed Hexham to Fassifern rail freight by-pass would enable a Newcastle terminal to achieve 1 million TEU.

On a positive note, NSW Ports is able to increase its return by relocating container terminal operations to Newcastle and investing in a rail freight bypass, along with other Australian super funds. Port Botany container terminal operations could be smoothly transferred to Newcastle.

Container trucking set to quadruple

Port Botany container movements are forecast to reach 10.9m TEU per year by 2046, comprising 3.7m TEU rail and 7.2m TEU road. Container truck movements between Port Botany and western Sydney will be four times more than in 2013. A container truck carries on average 1.93 TEU and one-third of all containers are transported empty.

The NSW Government forecasts that by 2031 the Australian Government’s proposed intermodal terminal at Moorebank will have capacity for 1.2 million TEU.

Liverpool City Council argues that the Moorebank facility should not be built and instead there should be a 1.2m TEU terminal at Badgery’s Creek on the Australian-government’s airport buffer zone land. The Council proposes the best use of the Moorebank site is for residential development, which would generate more income for the Australian Government than an intermodal terminal.

Similar logic applies to Sydney’s existing intermodal terminals at Enfield, Yennora and Minto. These large industrial sites are worth more for residential development than they are for handling containers. Moreover, the intermodal terminals still require trucks to carry containers to the end destination and return. Thus, Port Botany’s traffic congestion is simply being transferred.

Containers may be railed between Port Botany and Badgery’s Creek by building a rail freight line between Glenfield and Badgery’s Creek. The NSW Government forecasts that in 2031, 0.6m TEU will be railed between Port Botany and a new intermodal terminal at Eastern Creek. But the NSW Government is proposing to build a new rail freight line between Chullora and Eastern Creek costing $1 billion. The government forecasts that capacity at intermodal terminals will be:

  2031 (m TEU) 2041 (m TEU)
Moorebank 1.2 1.2
Eastern Creek 0.6 0.9
Enfield 0.5 0.5
Yennora 0.2 0.2
Minto 0.2 0.2
[Other] [0.3]
Total                           2.7          3.3

(Source: Bureau of Transport Statistics, Heavy Vehicle Forecasts, February 2014 Release, August 2014)

The forecast modal split in 2031 is 32% rail and 68% road. In 2031, the NSW Government estimates that total container movements at Port Botany will be 5.m TEU comprising 1.6m rail and 3.4m TEU road. Container truck movements between Port Botany and western Sydney will double by 2031. Total container movements in 2013 were 2.2 million – 13% rail and 87% road.

This is the first time that the NSW Government has disclosed the freight capacity of the rail network. Even though intermodal capacity in 2031 is forecast at 2.7 million TEU, only 1.6 million TEU will be railed.

The alternative to operating five or more small intermodal terminals is to build one major intermodal terminal at either Eastern Creek or Badgery’s Creek with sufficient warehousing to allow all containers to be unstuffed/stuffed on site. This will remove container trucks completely from Sydney’s roads to be replaced by lighter trucks that carry goods without the container.

A rail freight bypass of Sydney – between Glenfield and Newcastle – is NSW Government policy. There will be no need to build the Western Sydney Freight Line or to build stages 2 and 3 of the Northern Sydney Freight Corridor, between Strathfield and Newcastle, costing $4.4 billion, in present value terms.

Significantly, there are no funds are available for these projects.


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