$3b annual savings seen in big ships

BIG SHIPS: The largest ships visiting New Zealand ports carry up to 4100 20-foot containers.

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The Shippers' Council is leading a project looking at the hurdles of bringing big ships to New Zealand following Fonterra's claim that the ships could save the economy $2 billion to $3b a year.

The largest ships visiting New Zealand ports carry up to 4100 20-foot containers. But for years there has been talk of ships carrying 6000 to 7000 20-foot containers being deployed on New Zealand routes.

In a recent speech Fonterra's general manager (supply chain), Nigel Jones, said that if New Zealand was serious about remaining cost-competitive, the larger ships would need to be introduced within three to five years and at least two ports were needed to be able to accommodate them.

The big ships would save the economy $2b to $3b a year from potential freight efficiencies, he said. "New Zealand cannot sit back and see our competitors benefit from economies of scale we can only dream of."

Mr Jones said his estimate was conservative and based on savings of $100 per import or export container.

"Operating costs on big ships are significantly lower than on smaller ships. A large component of that is fuel costs."

If fuel costs were to increase so, too, would the savings from the bigger ships. But while the debate around big ships has tended to focus on the capital expenditure required to upgrade ports, Mr Jones said a bigger constraint could be rail links between the ports and their hinterlands.

In the 1990s California had upgraded its ports but not the links to the hinterlands, which resulted in major bottlenecks.

In the North Island questions had to be answered about the connecting infrastructure to both Auckland and Tauranga, he said. And the lead times to upgrade the rail infrastructure were likely to be longer than those to upgrade the ports.

In response to Fonterra's calls, the Shippers' Council said it would lead a project to determine key bottlenecks in New Zealand's infrastructure that would stop big ships calling and working efficiently.

It aimed to have a paper detailing its findings and recommendations within six months.

Maersk's New Zealand managing director, Julian Bevis, welcomed the project.