Freight Rail

ACCC court action to aid Newcastle container terminal development

Rail line at Port Botany. Photo: Sydney Ports Corporation / Brendan Read

Provisions baked into port privatisation deals by the NSW Government over the last five years illegally stifle competition in the containerised freight market, the ACCC has alleged.

ACCC chairman Rod Sims on Monday announced legal action to address what the competition watchdog views as “anti-competitive and illegal” provisions within deals to privatise Port Kembla, Port Botany and the Port of Newcastle.

The ACCC believes the provisions were made by the NSW Government to maximise the value of privatisation deals – specifically the 99-year lease of Port Botany and Port Kembla to NSW Ports, a consortium of superannuation funds, back in 2013.

The Port of Newcastle was privatised a year later, in 2014.

In documents presented to the Federal Court, the ACCC has isolated provisions in Port Commitment Deeds for Port Botany, Port Kembla and the Port of Newcastle, which together would effectively force Newcastle Port Corporation to compensate NSW Ports, if Newcastle’s container traffic exceeds 30,000 twenty-foot equivalent units (TEUs) per annum.

Newcastle handles roughly 10,000 TEU per annum at present, but the ACCC believes the provisions are limiting the port’s ability to develop a full-scale container terminal in the future.

Port Botany handled roughly 2.7 million TEU in FY18.

“We are alleging that making these agreements containing provisions which would effectively compensate Port Kembla and Port Botany if the Port of Newcastle developed a container terminal, is anti-competitive and illegal,” Sims said.

The deeds in question have 50-year terms.

According to Sims, the deeds between the state and NSW Ports’ respective subsidiaries for Port Botany and Port Kembla would oblige the state to compensate the port operator if container traffic at Newcastle exceeds the 30,000 TEU cap.

The deed for the Port of Newcastle, in turn, obliges the port operator to compensate the state if the cap is exceeded.

“The ACCC alleges that the reimbursement provision in the Port of Newcastle Deed is an anti-competitive consequence of the Botany and Kembla Port Commitment Deeds, and that it makes the development of a container terminal at Newcastle uneconomic,” the competition watchdog said in a statement.

Sims added: “The compensation and reimbursement provisions effectively mean that the Port of Newcastle would be financially punished for sending or receiving container cargo above a minimal level if Port Botany and Port Kembla have spare capacity.”

Sims said the ACCC’s legal action seeks to “remove a barrier to competition in an important market”.

“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,” he said.

“I have long voiced concerns about the short-term thinking of state governments when privatising assets and making decisions primarily to boost sales proceeds, at the expense of creating a long-term competitive market.”

NSW Ports on Monday discredited the ACCC’s claims, saying the agreements between it and the state were “in the best interests of all stakeholders, the economy and people of NSW”.

“Having paid a consideration of $5.1 billion to the NSW Government in 2013 based on the full contractual terms contained in the agreements, NSW Ports will be vigorously defending the proceedings,” the ownership group said.

“NSW Ports is 80 per cent owned by Australian superannuation funds investing on behalf of more than six million individual Australians. The success of Port Botany and Port Kembla is in the national interest.”

CEO says Newcastle best option for growth

Port of Newcastle chief executive Craig Carmody recently told the Hunter Business Chamber he views the development of a deepwater container port at Newcastle as a significant opportunity for the region.

“The east coast container ports are reaching their landside capacity,” Carmody told a luncheon on November 30.

“They are all significantly constrained by urban congestion, they lack the heavy rail systems that allow for double-stacker trains, they are not connected to designated freight rail networks, and – incredibly – Melbourne, Brisbane and Botany will not be connected to the planned Inland Rail.”

Carmody said the location of Port Botany meant further expansion would be incredibly expensive.

“The commitment to new transport infrastructure to support Port Botany’s growth is around $11 billion in direct support [and] more than $27 billion in broader transport upgrades,” he said.

“The spending is mostly on roads because rail is a lost cause at Botany. The longest train they can fit into Port Botany is 640 metres – but truly efficient port trains are over 1.2 kilometres and the best are up to 1.8 kilometres long.”

Carmody also said Newcastle would have the opportunity to build a terminal suited to the largest ships of the future, which can carry up to 15,000 TEUs each. The $5 billion Panama Canal expansion project recently upgraded the global thoroughfare to be able to handle such vessels, and some of the world’s largest ports have invested heavily to be able to handle them.

“The world is shifting from a system where many ports could handle ships of around 5,000 TEU, to a system where there’ll be a Tier One network of Maxi ports, and daylight second,” Carmody said.

“Unfortunately, Australia’s three east container ports will not be taking the Maxi ships – at least there’s no viable plans to do so. This means Australia will be in the Second Tier of container ports. And that’s something we want to remedy with a Container Terminal at Newcastle.”