By Mark Stone
With trade growing rapidly again as world trade recovers post-GFC, it is now time to look at the next round of major capital investment in our ports.
Container movements into Melbourne are expected to quadruple from more than two million to eight million per annum by 2035.
The Baillieu Government’s announcement that it will develop the Port of Hastings into Victoria’s second major container port is most welcome and will strengthen the state’s capacity to deal with the expected boom in container trade.
Minister for Ports Denis Napthine confirmed the Government had introduced a bill to establish an independent Port of Hastings Development Authority, which will prepare a plan for the port’s expansion.
This reverses the previous government’s decision to roll the Port of Hastings Corporation into the Port of Melbourne.
Dr Napthine says he expects the Port of Hastings to be fully developed in about 10 or 15 years, to help handle the anticipated eight million shipping containers passing through the Melbourne region by the year 2035.
VECCI welcomes the development of the Hastings Port, as it will have many long-term benefits for Victoria’s economic future. Having an alternative port will allow Victoria to accept more cargo and enhance our reputation as an international trade hub, especially as Asian markets continue to open up.
It will also serve our thriving business community in the south east of Melbourne and Gippsland, providing more direct access to a major port and reducing transport costs.
And, of course, it smooths the heavy load that will be experienced by the Port of Melbourne.
However, while this announcement helps to secure Victoria’s long-term trade future, we’re also in need of more immediate fixes.
While Hastings has a 10-15 year timeline, Swanson Dock is already close to capacity and could struggle to cope with the larger ships that will reach the port in future years because those ships will have trouble fitting along the quayside in the same numbers as they do now, triggering a need for more berth space elsewhere.
Container trade is currently tracking at around 2.4 million twenty-foot equivalent containers in Melbourne. This will increase to 2.7 million by 2015 and 3.55 million by 2020, moving towards and beyond Swanson Dock’s capacity.
Bigger and bigger ships are being built for East-West trades, pushing smaller ships carrying 6,000-7,000 containers onto North-South trades, which include Melbourne. We are currently receiving ships carrying around 3,500-4,000 containers, and must be prepared for the larger ships.
This will occur in the next few years, well before the 10-15 years it will take to get Hastings up and running.
Victorian exporters require a regular shipping service to the rest of the world and a shorter-term solution is needed to complement Hastings.
An obvious short-term solution would be to free up some berths at Webb Dock East, which is at the mouth of the river and has previously served as an international container terminal.
Best estimates suggest capital works will be at a fraction of the cost of Hastings which, at an estimated $10 billion capital cost, is in line with the Government’s 10-15 year timeline.
The other advantage of Webb Dock is the possibility of increased competition in the short-term via the introduction of a third stevedore.
The beneficiaries will be exporters and importers and their customers and employees.
A new stevedore would also most likely innovate in terms of upgrading cranes and equipment, forcing the other stevedores to innovate and providing productivity benefits to the entire economy.
Whatever the case, it is time to roll the sleeves up for the next round of significant port investment.
This is a version of an article that originally appeared in The Age business section on Wednesday 3 August.
[...] With container movements set to quadruple in the next 25 years, this freight traffic will continue to increase, even if the Port of Hastings is developed, and put more pressure on the Monash. [...]
I worked on the Melbourne waterfront when there were five stevedores – and the market was destructively competitive. I operated ships into Web Dock and sat on the bridge of vessels for whole shifts where not one container could be unloaded because all of the equipment was in such a state of disrepair that none of it was operating. When Patricks and subsequently Conaust / P&O became the port duopoly in Australia, the productivity caught and passed world’s best practice.
The newer >4,000teu vessels that are expected to be introduced will be beneficial for the stevedores to operate and equipment can be expected to be deployed that will unload them quicker, faster and cheaper on a teu productivity basis compared to the present standard.
A possible impediment to this progress could be the introduction of new players into the market that will cause damaging competition to once again restrict investment. We need to be careful what we wish for. The key to productivity gains is managment quality as well as competition. Our current shortcomings are related as much to the former as to the latter.