The Australian Competition & Consumer Commission (ACCC) has instituted proceedings in the Federal Court against NSW Ports Operations Hold Co and its subsidiaries Port Botany Operations and Port Kembla Operations for making agreements with the State of New South Wales that the ACCC alleges had an anti-competitive purpose and effect.

The ACCC is alleging that making these agreements containing provisions which would effectively compensate Port Kembla and Port Botany if the Port of Newcastle develops a container terminal as it plans to do. This is anti-competitive and illegal, ACCC Chair Rod Sims said.

The NSW Government privatized Port Botany and Port Kembla in May 2013, and the agreements, known as Port Commitment Deeds, were entered into as part of the privatization process, for a term of 50 years. The Deeds oblige the State of NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a minimal specified cap.

Another 50-year deed, signed in May 2014 when the Port of Newcastle was privatized, requires the Port of Newcastle to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla under the Botany and Kembla Port Commitment Deeds. The ACCC alleges that the reimbursement provision in the Port of Newcastle Deed makes the development of a container terminal at Newcastle uneconomic.

Port Botany is currently the only port in NSW with dedicated container terminal facilities. Port Botany had a container throughput of approximately 2.7 million TEUs for FY17/18. Port Kembla has handled approximately 1,600 TEUs per year since it was privatized in 2013. The Port of Newcastle has handled approximately 10,000 TEUs per year since it was privatized in 2014.

Under the 2013 Port Commitment Deeds, it was agreed the State of New South Wales would pay compensation to the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle exceeded a cap of 30,000 TEUs per annum (adjusted by an annual growth rate).

The compensation to be paid by the State of New South Wales to the operators of Port Botany and Port Kembla is equivalent to the wharfage fee the port operators would receive if they handled the containers. Container traffic at the Port of Newcastle has not yet exceeded the specified cap, and therefore no payments have been made by the state.

Sims said: “We are taking legal action to remove a barrier to competition in an important market, the supply of port services, which has significant implications for the cost of goods across the economy, not just in New South Wales. The impact of any lessening of competition is ultimately borne by consumers."

“If a competing container terminal cannot be developed at the Port of Newcastle, NSW Ports will remain the only major supplier of port services for container cargo in NSW for 50 years. I have long voiced concerns about the short-term thinking of state governments when privatizing assets and making decisions primarily to boost sales proceeds, at the expense of creating a long-term competitive market,” Sims said.

Port of Newcastle CEO Craig Carmody said late last month that the planned Newcastle Container Terminal will ensure Australia is not left behind. The future of world trade is large vessels – and the countries trading with them will enjoy a significant reduction in their supply chain costs. Countries that cannot accept these large vessels in their ports will pay more for their exports and imports. Where will Australia be in this scenario?

“Currently, the east coast of Australia is limited to container ships of no more than 8,000 TEU. Brisbane and Botany have one berth each that can theoretically handle a 10,000 TEU vessel. But Australian ports typically handle vessels of around 5,000 TEU.”

The east coast container ports are reaching their landside capacity, he says, yet in 2018, Australia's total throughput of containers will be over eight million TEU with an 11 percent growth over the past 12 months.

“We don't see our container terminal as competition for Botany – our catchment is regional New South Wales,” says Carmody. “The Hunter Region has a larger economy than Tasmania or Northern Territory, and NSW north of Sydney is growing strongly on the back of industries such as coal, wine, and agricultural exports – as well as advanced manufacturing, food processing, defense industry and high-tech services. Deloitte Access Economics – in a recent report – estimated that the existing potential from Northern NSW was around half a million TEU, growing to more than one million TEU in 2050.”

Port of Newcastle holds the largest and best-connected vacant port land site on the east coast of Australia, he says, and it has a channel to serve a deep-water terminal and support the largest container vessels. “This is one of those times where we can say: if we build it, they will come. The container vessels are already big – the reason they aren't here is there's nowhere for them to come.”

Source:maritime-executive