Six-year wait for port extension costs NZ exporters, importers dearly

Tauranga CEO Leonard Sampson.
With Port of Tauranga having to turn away shipping line offers of extra services for exporters and importers this year because of red tape, it’s no surprise “extremely frustrated” chief executive Leonard Sampson rates regulatory settings as New Zealand’s biggest economic challenge.
“First and foremost for me would be the regulatory framework — it’s been holding back New Zealand for the past decade,” says the boss at the country’s biggest and busiest port and main export gateway.
The NZX-listed port has been waiting six years for regulatory consent for an extension to its bulging container terminal and a wharf at Sulphur Point.
Last year it warned it was running out of capacity and in February confirmed it had no space to accept any new container shipping services to Europe and the United States. Now halfway through a 17-month-long application process with the Environment Court, while awaiting news as to whether it will win a fast-track consent from the year-old Coalition Government, the port estimates the cost of project has risen from $68 million to more than $90m.
The glacial progress of what is considered by the supply chain industry to be a project of national economic performance has been likened to “a train crash in slow motion” by NZ Council of Cargo Owners chair Mike Knowles, who represents exporters and importers.
For port leaders the wait has been “extremely frustrating” and put the port three to five years “behind where it should be”, says Sampson. “We would have had this new berth built and be taking on new (shipping) services to assist New Zealand exporters and importers. It’s unacceptable to spend six years in a consenting process for something that was included in the regional coastal environment plan 30 years ago.”
Sampson says the challenge for the broader economy comes with the Government’s aspiration to double export earnings in the next decade.
“I appreciate (the wish to) double the value…but when 85% of New Zealand exports are agri-based, it seems difficult to say you’re going to double them without the volume.
“As an example we have significant growth in kiwifruit coming here (in the Bay of Plenty) but we don’t have the port infrastructure to be able to support that.
“Lost revenue for the port is one thing but it’s insignificant in relation to the opportunity cost for New Zealand importers and exporters.”
In the past year shipping route challenges and higher freight costs around Panama Canal and the Red Sea have brought shipping lines to the port’s door offering new services, particularly involving the west coast of the US, Sampson says.
“New capacity to and from the west coast of the US would’ve likely resulted in reduced costs to importers and exporters because it adds more capacity to that market. We’ve had to turn them away because we don’t have the infrastructure to support that.
More generally, “it’s been too cumbersome, costly and glacial to be able to build infrastructure in New Zealand,” he says.
“We’re seeing examples of that playing out now in energy, roading and port infrastructure.”
He believes that generally, business views the current Government “a little more favourably in terms of supporting business”.
“But now we need to turn to delivering. The time has come — there’s been enough consultation and studies, it’s about execution now….we need to get on and get things done.”
Sampson thinks the New Zealand economy is “on a knife edge”.
On the export landscape, from a port perspective, he says dairy is “relatively flat in terms of total volume. It’s probably fair to say we’ve reached peak cow and peak milk production. We may see some changes in commodity mix.
“Looking at the red meat sector, we’re seeing a slight decline, with decreased pricing particularly for sheepmeat. Beef is going strong, particularly to the US. Red meat overall is looking to decline over the next five years.
“Kiwifruit is expected to see 30-40% growth in the next five years. We are very fortunate to have that here in the Bay of Plenty. The forestry sector is going through a very challenging time given commodity prices into China and that flows through into some of the pulp and paper markets.
“Then you overlay that with external market factors — from a supply-side costs are really challenging, especially with cognisance of some of the very high energy costs at the moment … security of energy or electricity supply is crucial in terms of business moving forward. As with all of our infrastructure, we need a greater level of resilience in New Zealand.”
Forecasts have New Zealand’s GDP dipping back into recessionary territory, he notes.
“We see imports being subdued at the moment but we’re hopeful to see an increase in demand as interest rates start to come off (highs) — that might stimulate demand. But then you overlay that with some of the cost pressures like electricity, rates and insurance… We’re cautiously optimistic…but certainly it’s a challenging operating market, no question.”
Port of Tauranga is a sponsor of the Herald’s Mood of the Boardroom project.