Opinion: the Port of Newcastle must get a container terminal

HARBOURING THOUGHTS: A container ship about to dock in the Port of Newcastle this week.
HARBOURING THOUGHTS: A container ship about to dock in the Port of Newcastle this week.

THE justification for a container terminal at Newcastle was examined 20 years ago by BHP when planning to close the local steelworks. BHP found a container terminal to be a financially viable and necessary commercial enterprise for serving northern NSW.

Two years after the steelworks shut in 1999, the NSW government decided to take over ownership of the steelworks site and BHP readily agreed. It did not bother BHP the government did not want a container terminal at Newcastle. The Carr government’s “three-ports policy” as adopted in 2003, making Newcastle the state’s next container terminal after Port Botany reached capacity. But in 2005, the government approved expansion of Botany for a third container terminal, spending nearly $1 billion to reclaim 60ha of sea. Due to road constraints, a limit was placed on the port’s capacity of 3.2 million containers per year.

In 2009, the NSW government, with Jodi McKay as Minister for the Hunter, agreed to allow Newcastle Port Corporation to develop a new “multi-purpose” terminal, with a minimum container capacity for one million “20-foot equivalent units” (TEU) per year. Port Botany’s container throughput had not yet reached 2 million TEUs. The corporation sought interest from the private sector to build the terminal, selecting Newcastle Stevedores Consortium in 2010. By year end, agreement had been reached with the consortium and approval from the NSW Treasurer was sought by the corporation to proceed immediately. This approval was not given, for reasons later revealed by the ICAC’s “Operation Spicer”. When the Coalition won the March 2011 general election, it put the container terminal proposal on hold. But in June 2012, the  Department of Planning and Infrastructure gave approval to the corporation’s plans, removing the last hurdle to building the terminal.

When the government sought authorisation from the NSW parliament in November 2012 to lease three ports – Botany, Kembla and Newcastle – critical information was withheld. The government planned to pay a future lessee of Botany for containers shipped through Newcastle, so as to boost Botany’s lease price. To meet the cost, the government planned to charge Newcastle Stevedores Consortium. Since the Consortium was required to pay the government around $100 per container, a Newcastle terminal shifting a million containers per year would cost the consortium $100 million per year. When the consortium did not withdraw its proposal, this placed the government in a dilemma. Did requiring the consortium to pay the fee breach anti-competition provisions?

The critical question was whether the corporation was carrying on a business, for the purposes of the Competition Act, between 2010 and November 2013, while it was negotiating with the consortium, under contract, for building a container terminal. If the answer was yes, the government was left with no source of funds for paying NSW Ports, which had leased Botany and Kembla in April 2013. So, in November 2013, the   government terminated negotiations with the consortium and proceeded to lease the port. By leasing the port, the government was able to act outside the operation of the Competition Act. This is why it was leased. Removing the fee virtually guarantees a container terminal will be built – it’s a financially viable enterprise with strong market demand. Little wonder then that Port of Newcastle under its new chairman, Professor Roy Green, wants to diversify.

Moreover, a container terminal will justify building a rail freight bypass of Sydney – linking Newcastle to Port Kembla – that will allow all containers for the Sydney market to be railed. The cost of this new rail line is met by removing container trucks from Sydney’s choked roads.

The rail freight bypass removes the need to build stages 2 and 3 of the Northern Sydney Freight Corridor and the Western Sydney Freight Line, saving $6 billion; and allows all of Sydney’s rail freight capacity to be more profitably used for passengers.

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