Inter-island rail freight facing commercial reality

20:13, Nov 25 2013
IRON BRIDGE: The Aratere heads out into Cook Strait from Wellington. It has been forced out of service after losing a propellor.

The decision to abandon a new port at Clifford Bay is a blow for rail freight on Cook Strait, but the real test for its future is competition in the marketplace, writes marine and transport consultant ROD GROUT .

These are trying times for KiwiRail's inter-island operation, with the decision not to build a new terminal at Clifford Bay coming hard on the heels of the rail ferry Aratere limping out of service.

In short order two central tenets of its turnaround plan have been crippled - the ability to move larger rail freight volumes and improve service times on Cook Strait.

While Aratere's absence is a fixable problem, the same cannot be said of a more compelling dilemma facing inter-island rail prospects.

This is the impact of competition in the marketplace.

Since rail's "iron bridge" was introduced in 1962, growth in containerised cargo has radically improved shipping efficiency and slashed transport user costs.


The success of ships and ports handling 20 and 40-foot "boxes" stacked in three dimensions has pushed rail ferries to virtual extinction worldwide.

What was appropriate in 1962 no longer holds true, yet the legacy here survives thanks to years of state-funded backing and obsolete thinking.

Rail's multi-billion dollar turnaround plan, now in its fifth year, upholds an inter-island link as an essential part of its national railway network.

Under the plan it spent $54 million to increase Aratere's rail capacity by 18 wagon spaces in anticipation of market demand for greater capacity.

Yet this growth expectation is proving elusive as Ministry of Transport freight tracking data show inter-island rail volumes have flat-lined since 2011.

Inter-island rail freight currently comprises just 7 per cent, or 1.2 million out of 17.2 million tonnes moved across the entire network.

By contrast, growth on rail's bulk commodity routes has been strong and fully justifies new investment in infrastructure, rolling stock and system upgrades.

This part of the business is where the Government, as owner, and KiwiRail management should focus initiatives on returning rail to commercial viability.

Moving import and export commodities and general freight within each of the North and South Islands offers rail real potential for profits.

But spending capital to acquire new rail-capable ships would cost hundreds of millions of dollars and simply compound its ongoing financial struggles.

The reality is that New Zealand can make better and greater use of coastal ships to move freight between North Island and South Island ports.

A few leased container ships using existing facilities would easily cope with 1.2 million tonnes of goods - or 60,000 twenty-foot boxes - at no cost to the Government and taxpayers.

Rail freight consigned inter-island could be moved to and from Lyttelton port, linking with any of Wellington, Tauranga or Auckland ports.

In fact this is already happening, with thousands of tonnes of rail cargo intended for the Aratere now being carried by domestic and international ships.

Such inter-modal co- operation is commendable, but by no means resolves the predicament of what to do about rail freight's future on Cook Strait.

That future should also be considered in the light of the proposal for a new port at Clifford Bay being taken off the agenda.

With Lyttelton as the South Island railhead for inter- island freight, Picton could utilise portside railyards for other productive purposes, and eliminate costs for new linkspans and wharf strengthening.

Picton and Wellington would continue to service roll- on, roll-off truck, car and passenger ferries, while coastal ships moved rail cargoes between other ports using existing container handling equipment.

In short, this would enable the free market to run the business of moving rail freight inter-island, with no need to invest in costly new infrastructure.

There is no logical reason why private enterprise, either alone or in partnership with KiwiRail, should not be able to lease and operate readily available container ships to undertake this task.

Companies already operating in the freight sector are perfectly capable of contributing, if given the opportunity in a neutral marketplace.

Significant economic benefits would be gained from a whole-of-industry approach to adopting more efficient links for inter-island freight.

Only if government officials and their advisers accept marketplace reality, as they did for Clifford Bay, can progress be made on the turnaround plan.

Rod Grout is the managing director of Marine and Transport Consultancy Ltd, based in Christchurch.

The Press