August 2016 Newsletter

Aug 25, 2016 | Member Newsletters

Reminder: NZ Shippers’ Council Annual and Ordinary Meetings.

Kindly hosted by Lyttelton Port
Date: Thursday 25 August
Venue: 41 Chapmans Road, Hillsborough, Christchurch
(Lyttelton Port’s corporate offices) Schedule: 10–11am AGM (Full members only)
11.15am–4pm (approx.) OGM (Full members and affiliates)

The agenda includes: meeting with Maritime NZ on container weight verification and other issues, meeting with Ministry of Transport on climate change and shipping, political update, briefing from Lyttelton Port post- Canterbury quakes and port tour (approx. 90 minutes).

Full agendas and papers will be emailed to attendees by 18 August. There is still time to confirm your attendance at this meeting. Please RSVP to

Discounted accommodation options for those attending the AGM/OGM can be found here:

The George Hotel is offering a special rate of $277 including GST per room per night (room only) instead of their usual $505 per night. More information is here: Phone 03 379 4560 and quote “NZ Shippers’ Council” to receive the discounted rate.

Rydges Latimer is also an option. Their rates are: Superior
King/Twin $216, Deluxe King/Twin $234, Premier King $243, Premier Twin $252, 2 Bedroom Suite $324. Rates include GST and are based on single or twin share. Please note these are subject to availability so
not all room types may be available depending on when the booking is made. Phone 03 379 6760 and quote NZSHIPPERS to receive the discounted rate.

VGM (Verified Gross Mass) Implementation Goes Smoothly in NZ

We are pleased to note that the implementation of the SOLAS container weight verification rule on July 1 appears to have run relatively smoothly at New Zealand ports. There have been no reports across our membership of major disruption created by the VGM requirements – although we note that our membership comprises larger shippers who typically handle full container-loads, and the new rule may have been more problematic for smaller shippers dealing with part-loads and freight forwarders.

The international experience has been more varied – although the widespread disruption that was predicted does not at this stage appear
to have eventuated there are reports of additional fees and VGM surcharges being applied by agencies in Africa and Asia (see GSF story in International News).

New Transport Domain Plan and Research Strategy

NZSC has expressed its disappointment in the lack of sector consultation to date regarding the Ministry of Transport’s new Transport Research Strategy and Transport Domain Plan and looks forward to the opportunity to contribute.

At the recent launch of these new initiatives, Associate Transport Minister Craig Foss said that government’s investment in developing, operating and maintaining our transport system relies on a foundation of high quality information. He said the Domain Plan is intended to ensure the sector has access to more comprehensive data and information, and the Research Strategy will guide investment in research that better meets future transport needs.

NZSC notes that this is potentially a major exercise involving work on topics as varied as freight volumes, source, destination, our vehicle fleet, quality of port and airport infrastructure, environmental impacts of big ships etc. All these topics are of interest to us at the Shippers’ Council.

We are therefore concerned that while there has clearly been considerable consultation at central and local government level to frame these initiatives, there has been little consultation with private sector stakeholders – the very people who produce or import the freight. We are also surprised that ports and airports have not been involved in this process.

We note that the Freight Futures study produced a year or so ago by the Ministry of Transport was flawed as a direct result of the lack of consultation with relevant entities. The Shippers’ Council was not consulted by those writing that study until it was in near final form. We hope that the current exercise does not result in similarly poor quality outcomes at similarly high cost. Equally we hope that this new initiative is not reinventing the wheel – as it is our suspicion that much of the required data and information already exists.

Biosecurity 2025

Last week the Minister of Primary Industries launched public consultation on the Biosecurity 2025 discussion document. The schedule for public meetings and hui are provided here

MPI is also scheduling workshops to enable more detailed discussion about key issues and proposals in the discussion document. We will advise when more information is available about these workshops.

You can find the discussion document, an online submission form, consultation information, and further details on consultation meetings here

The public consultation closes on 9 September, which is also the closing date for written submissions.

New Service between Tauranga and Asia

Maersk’s recently announced new direct service between Tauranga and Asia will see the arrival of by far the largest ships ever to visit New Zealand waters. Capable of carrying 9,500 TEU these ships are significantly larger than those anticipated in our 2010 report “The Question of Bigger Ships”.

The extent to which NZ exporters will gain real benefit from this new service remains to be quantified. This is a service between South America and Asia that calls into New Zealand rather than a dedicated service for the New Zealand market. According to Maersk Oceania’s Trade and Marketing Director, Hennie Van Schoor, New Zealand will only be a small part of the overall service which indicates capacity will be limited. Reefer capacity available for New Zealand is also unknown. What is known is that there will be a strong demand for these reefer plugs from Chile and other South American exporters.

We note that this new service was not the type envisaged in our “Bigger Ships” report, which envisaged dedicated services to Asia of no more than 7,000 TEUs. We continue to hope that such services will eventuate – however we hope that other NZ ports at this point in time don’t feel the need to dredge to accommodate 9000TEU+ vessels. Council’s position was always that the Big Ships model would be underpinned by multiple lines working together through consortia to introduce bigger vessels. The model was about sustainability of the whole industry, both shippers and shipping companies.

It is also noted that current sea freight rates are at an all-time low – and whether there is any scope to further decrease rates through the introduction of bigger ships now is questionable. Ironically, bigger ships may be the saviour of the lines but may not in fact deliver further benefits to shippers.


NZSC political engagement on climate change

Over the next few months we will need to be engaging with Government on how international shipping is going to be treated in the international response to climate change.

The UN Climate Change Conference helpfully gave the IMO responsibility for determining how the international shipping industry was to be treated in terms of the response to climate change. There had been danger that an arbitrary policy would be applied or that policy would be determined by the United Nations Framework Convention on Climate Change (UNFCCC), which would be a disaster because they would not know the consequences of any decisions taken.

There are some problems for New Zealand. If not carefully constructed there is a risk that any policy response could have both an unintended consequence and more negative impact on New Zealand than most other jurisdictions.

Sea freight is at this point the most climate change friendly form of freight. But getting any tax equation wrong might tip the balance in favour of road and rail and have a more negative environmental impact than the status quo.

There is evidence from past practice that some of our competitors might seek to use wider policy instruments for protectionist purposes. Remember the food miles attempt from ten years back?

NZSC’s government relations consultant has met with the Ministry of Transport, MFAT and Maritime New Zealand over the past month to discuss these issues and the good news is that the officials from Transport and Maritime New Zealand do appreciate the potential pitfalls. The negatives are that the environment officials in New Zealand and elsewhere want action – fast, and the part of the IMO undertaking this work is under a Convention that New Zealand has not adopted. We therefore may not get to vote on the final policy.

The fact that New Zealand does not have permanent representation at the IMO is another factor we should be concerned about. (See story: Call for Upgrade to NZ Representation at the IMO).

New Global Sulphur Cap Looming

The International Maritime Organisation (IMO) is set to agree on the timetable for a new global limit on the sulphur content of marine fuels later this year at the October meeting of the Marine Environment Protection Committee.

The IMO was expected to wait until 2018 to set the new timetable but under pressure to act swiftly it contracted a compliant fuel availability survey, which has now been completed. The report is central to whether the IMO commits to its original intent to introduce a 0.5% limit in 2020 or wait a further 5 years.

In recent years, the marine fuel landscape has changed dramatically. Back in October 2008, the IMO agreed to reduce the maximum sulphur content in marine fuel to 3.5% from 2012, with a further reduction to 0.5% from 2020 onwards. Following protests from various stakeholders who wished to delay the deadline to 2025, the IMO commissioned a survey of compliant marine fuel for the original 2020 deadline. The regulation as it currently stands stipulates that the global maximum permissible sulphur limit on marine fuel will be 0.5% outside of the Emission Control Areas (ECA)*. The limit inside the existing ECAs is already set at the much lower 0.1%.

There’s no doubt the global sulphur cap will present the shipping industry with challenges, including significant added cost. It would require ships to burn more expensive distillate or alternative fuels or adopt exhaust cleaners. There are estimate that the additional cost to global shipping could total some US$50bn per year.

Port News

Port of Tauranga harbour dredge nears completion

Port of Tauranga is nearing completion of its major harbour dredging project – with scheduled completion in early September, more than six years after the NZSC recommended in its Big Ships report that they be the first port in the North Island to commence work towards becoming big ship capable. This process was expected to take two to three years which shows the foresight from the Council in encouraging the ports to commence working towards becoming big ship capable, sooner rather than later.

Tauranga’s dredging project is the culmination of a $350 million, five-year capacity-building programme to develop the infrastructure necessary to accommodate larger ships and future-proof the Port for the next 20 to 30 years.
TVNZ ONE News this week reported that, in addition to Tauranga, ports in Whangarei, Napier, Wellington, Lyttleton and Dunedin are either underway or planning to make their harbours deeper in readiness for larger vessels.

As noted earlier (see article: New Service between Tauranga and Asia), the Shippers Council hopes that these other ports don’t feel the need to dredge to accommodate 9,000+ TEU vessels.
 The Council’s view is still that there should only be one big ship capable port in each island. In our view it is not necessary for multiple ports to be investing in significant dredging to accommodate bigger ships unless there is a clear net benefit to “NZ Inc”.

Napier port development gets NZ$25m boost

The government has announced NZ$25m worth of road access improvements to Napier port as one of the first actions of Matariki, the Hawke’s Bay Economic Development Strategy. The improvements will include amendments to intersections at Watchman Road and Hyderabad Road/Prebensen Drive as well as the SH50/SH2 Expressway.

It is part of the third tranche of the government’s Accelerated Regional Roading Programme, which was launched in 2014 to speed up the delivery of transport projects important to regional New Zealand.

In announcing the investment Transport Minister Simon Bridges said that in 2015 Napier Port handled the equivalent of more than 250,000 containers, up more than 16% compared with 2014. Improving the road access will enable more efficient and safe movement of freight.

Ports of Auckland and Napier Port alliance

Ports of Auckland and Napier Port have announced a strategic alliance that builds on their joint venture in Palmerston North’s Longburn regional freight hub.

Ports of Auckland chief executive Tony Gibson said the partnership means Napier and Auckland can find ways to optimise services for freight customers and achieve further scale and efficiencies in the supply chain, prompting even greater competitive contestability and resilience in New Zealand’s supply chain to help lower costs to exporters and importers.

Next Steps on Future Port Study await incoming Council

Now that the recommendations on the long-term strategy to accommodate Auckland’s future demand for sea-based freight and cruise activity have been received, Auckland Council has decided no further work will be done on these matters until after the October 2016 local government elections, when a newly elected Council is formed.

For the record, the New Zealand Shippers’ Council position is that our members require ports that are reliable and efficient so that we can get our goods to market in a timely fashion. From our perspective, these economic considerations need to be front and centre in any discussion about the future of any New Zealand port.

Trade Policy Update

Charles Finny reports that there is little to get excited about on the trade policy front.

As a follow up to our substantive submission on TPP earlier in the year NZSC expressed support for the passage of the consequent legislation. This may, however, all be wasted effort.

President Obama seems intent on trying to get the US to ratify the Agreement post General Election and pre-inauguration (the lame duck period) but prospects that he will succeed must have diminished as both Presidential candidates expressed such strong opposition to the agreement during their conventions.

Brexit has put a dampener on NZ negotiations with the EU. We now have the prospect of a separate negotiation with Britain but nothing can happen on that front until Britain actually leaves the EU.

The India-New Zealand FTA negotiation is going nowhere. Likewise the negotiation with the Gulf Cooperation Council remain blocked, and no progress has been made on getting China to the negotiating table on the (so-called) FTA update.

Neither has there been any progress in seeking New Zealand participation in the Pacific Alliance (Chile, Peru, Colombia and Mexico).

Global Shippers / International News

The Global Shippers Forum (GSF) is targeting an end to container shipping surcharges within five years via a multi-pronged plan to lobby international bodies, including the World Trade Organisation, and publicly shame what they say are the industry’s worst offenders.

Reports of unjustified surcharges have been on the rise following the introduction of the new mandatory container weight verification rule that took effect last month. GSF says the levying of such pre-shipment charges and surcharges remains a key issue for shippers in Africa, Asia and other developing regions, where some container lines and forwarders are exploiting the new rule to charge exorbitant and unjustified charges for questionable and unspecified “administration fees” and other “services” related to the collection and transmission of a container’s verified gross mass.

Similarly, the Hong Kong Shippers’ Council last month criticised forwarders’ VGM fees, saying the keying in of VGM was too little work to justify charges. The Agriculture Transportation Coalition, a major U.S. exporter group, has also warned that some carriers and terminal operators are threatening new fees.

Forwarders have defended the fees, arguing that the keying in of VGM data requires extra effort and time. There is also considerable, and as yet unexplored, financial risk and legal angles to the SOLAS rule.

NZSC does not believe that there is an issue with VGM-related surcharges in New Zealand although we are monitoring the situation closely.
We do not support the charging of any unwarranted fees. Across our membership it is common practise to negotiate contracts inclusive of all charges so any issues around additional fees and surcharges are dealt with upfront.

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