Coastal Shipping Webinar

  • Hon Phil Twyford

Introduction, seafarers and POAL

Good morning everyone, I am delighted to be online with you all today.

Before I begin, I have to acknowledge that COVID-19 has disrupted the maritime sector on an unprecedented scale.

The work of seafarers and the maritime industry is keeping many economies around the world afloat and is key in maintaining international connections.

Managing the pandemic and keeping people safe is very challenging for seafarers and governments around the world, and I want to thank everyone for doing your bit.

Firstly, I want to acknowledge Jo Murray from the Council of Cargo Owners and Annabel Young and her members from the NZ Shipping Federation for assisting the Ministry of Transport and EY in the development of the coastal shipping report.

I would also like to acknowledge Brodie Stevens from Swire Shipping and Clive Glover from Strait Shipping for their support.

Let’s start with the elephant in the room.

Many of you will be watching the situation around a potential relocation of the Ports of Auckland.

Cabinet has agreed the Ports of Auckland is not viable as the Upper North Island’s key import port for the long-term.

The multi-billion dollar question is not if, but where and when it will move.

As you probably know, a report on the options for relocating the Ports of Auckland freight functions, done by independent consultants Sapere, is now complete and has been released.

It has some interesting things to say about relocation options –

Neither the Port of Tauranga nor Northport are likely to be able to create sufficient long-term capacity to provide for both their own freight growth as well as Auckland’s.

Sapere reached this conclusion using the same expert port engineers as used by the previous reports, but using a 60-year rather than a 30-year planning horizon, looking out as far as 2080 rather than 2050.

Their highest ranked option is Manukau Harbour, which is considered technically feasible although difficult to consent.

Sapere found that navigability of the harbour entrance and insurability of shipping to use the harbour are less of a concern than the previous reports identified, but this needs to be confirmed by a detailed feasibility study.

This helpfully points to a way forward, that if we are fortunate enough to be re-elected, Labour will pursue.

This includes extensive iwi and stakeholder engagement, and narrowing the set of options for a rigorous, evidence based comparative assessment.

It remains Labour’s view that the future of the upper north island ports is a critical decision for the country’s freight supply chain.

It must be made on the basis of what is right for NZ inc taking into account economic efficacy and environmental sustainability.

The COVID-19 recovery work remains a priority across agencies, so it would will be some months after the election before advice is provided to Ministers on the next steps.

Responding to COVID-19

During the COVID-19 lockdown, New Zealand’s transport system demonstrated it could bounce back after considerable disruption.                                                       

I would like to acknowledge the work of the industry including the port workers, harbourmasters, stevedores, agents, pilots, seafarers to keep critical freight flowing at that time.

I understand considerable pressure remains and we appreciate your commitment to working in a safe and healthy environment, to manage our border security, and minimise the risk of COVID-19.                                                        

Vision for transport

It really highlights how important ports are to New Zealand.

As an island nation, we rely heavily on our international maritime links to support our growing economy.

By volume, 99 per cent of our exports and imports are sea freighted, linking us to markets far from our shores. 

The future of New Zealand’s ports, freight services and coastal shipping is critical to our economy.

Our shipping sector fulfils a critical role in New Zealand’s freight system.

As you will know, it is the most cost-effective and efficient mode for transporting large, heavy cargo, like petroleum products, cement and aggregate.

This Government is committed to making the best use of all transport modes, whether that is rail, road, or coastal shipping.

Benefits of coastal shipping

As I have been saying for some time, the Government is committed to moving more freight on the "blue highway".

Rail and coastal shipping have been neglected historically, yet they still play an important role in the national inter-modal logistics market.

They account for around 25 percent of freight tonne-kilometres at a national level.

While coastal shipping is currently suited to move goods that are not time sensitive, it has been an underutilised and the Government believes it has a greater role to play within our transport system.

The latest data shows that coastal shipping’s tonne-km has grown 12 percent in the last five years, and international trade through our ports has grown around 30 percent.

(Figures show that coastal shipping transported 307,000 containers in 2012. This increased to 566,000 in 2019.)

Modelling benefits from coastal shipping

So while there has been growth, the externality benefits that coastal shipping makes to NZ has not been well understood.

Last year I asked the Ministry of Transport to take a look at this, and they contracted EY to investigate the externality benefits of coastal shipping.

This built on the landmark EY report in 2016 on the value of rail, which showed that the total value of rail in New Zealand was estimated to be up to $1.54 billion each year, from just four areas –

  • reduced congestion in our cities;
  • reduced carbon emissions;
  • improved road safety including reducing injuries and fatalities,
  • and lower road maintenance costs for taxpayers.

EY’s new report on coastal shipping will be available after this meeting.                                                         

The report focused on three primary transport externalities, calculating the safety, emissions and congestion benefits of moving freight via coastal shipping compared with the road alternative.

This included analysis of domestic movements and international transhipments.

This externality modelling is not a full benefits model. Coastal shipping provides a wide range of value to the New Zealand economy – much of which is not captured through this analysis.

The report does not go into for instance:                                         

  • The direct contribution towards employment and GDP. 
  • Opportunity cost avoided from having to invest in the roads.
  • And how having the presence of multiple transport modes allows freight to continue to be moved through times of disruption, as was experienced through the Kaikoura earthquake.

The overall findings from the report found that net external benefits from coastal shipping is valued at $306.4 million annually for New Zealand and up to $367.7 million under a 20 percent growth scenario.

Much of this value is in the form of reduced travel times and congestion benefits for all road users.

Congestion benefits account for 74% of externality benefits in the base scenario.

Going forward this will help inform what policy changes are needed to support coastal shipping’s role in moving freight around New Zealand.

Future of Freight

Freight volumes are expected to continue to grow, and all parts of the freight system will be impacted by this growth.

Consumer demand for next day and same-day delivery is increasing rapidly.

Competition in the freight market continues to drive an increasing emphasis on speed, even when the nature of the freight may not require it.

We cannot ignore that this could create barriers to the coastal shipping industry.

But while it does not offer the ‘direct to door’ benefits that road freight does, coastal shipping is much more efficient and cost effective for carrying non-time sensitive heavy bulk freight.

You have to acknowledge the safety, emissions and congestion benefits of coastal shipping and rail.

GPS 2021

This is explains why are exploring through the Government Policy Statement on land transport 2021 how we can increase the amount of freight moved by rail and by coastal shipping.

As many of you know, work is underway to release a finalised version of the draft GPS 2021.

Part of this work includes investigating the case for National Land Transport Fund support for coastal shipping and the land-based supporting infrastructure.

In the draft GPS I outlined that ultimately, the Government’s expectation for investment in coastal shipping is to give freight transporters real choice, allow New Zealand flagged coastal shipping to operate on a level playing field with other freight operators, and to enhance the sustainability and competitiveness of the domestic sector.

It also reflects the Government’s interest in partnering with industry to understand the challenges facing coastal shipping, and working with it to address these challenges.

The initial three years of funding – up to $45 million - will include funding relevant research to see what future support for the sector will help achieve the Government’s aims.

One of our proposed priorities is focused on tackling climate change.

The numbers around the environmental impact of road freight versus other options are very clear.

The freight sector, which includes more coastal shipping, has a role to play in a cleaner future.

Transport accounts for 20 percent of carbon emissions, bringing those emissions down is one of our top priorities.

We’re going to electrify the light vehicle fleet, phasing out diesel buses, getting more people walking, cycling, and talking public transport, transiting road haulage from diesel to electric and hydrogen, moving more freight by rail – and moving more freight by coastal shipping.

The report indicates that around 362,000 tonnes of CO2 are avoided annually thanks to coastal shipping compared to if you moved that same freight by road.

So coastal shipping has a big role to play in our vision of a zero carbon future.