Ports of Tauranga deserves plaudits for its performance in Covid-troubled times

The  latest Covid lockdown  has   delivered  a sharp  jab  to   many  NZ businesses, but  not what they had  been encouraged to think our wellbeing-focused government  was  planning  for them.   It  has  taken  the  gloss  off  what  might   otherwise have been regarded   as a  strong  reporting  season  for NZX-listed  companies.

The spike in coronavirus cases has led to NZ falling 26 places in Bloomberg’s Covid Resilience Rank.

We  had been the longest-running first-ranked country on the Bloomberg watch-list, since the inception   of the ranking  in November 2020. The plunge follows the spread of the Delta variant in Auckland and Wellington, which (when we checked yesterday) has resulted in 347 people testing positive for the virus across Auckland and Wellington.

Prime Minister Jacinda Ardern says lockdown is starting to work  and  she   insists   she is  acting   on  the  “best advice”  in  keeping  the  whole country  locked  down until  Wednesday,  when  there  will  be  a  slight  easing  with the  rest of  the  country  south of  Auckland moving  to level  3.

NZ is now ranked 29th on the Bloomberg ladder, two places above Australia which announced 1000 new cases on Thursday – Australia’s worst day of cases since the pandemic began.

Australia’s  plight is  cold  comfort to  businesses in NZ, where   some  sectors  have  been suffering  acutely  from  shortages   of  materials  and  shortages  of   skilled labour.

The  question   is  whether   those  industries which have shown  remarkable  resilience in  their  operations over  the  last  12  months  can  do   so  again, according to their  results  as  reported  over the past week or two.

Take,  for  example, the  port  companies:  they  have  kept  NZ’s  trade   moving  almost  without  a  hiccup  (though  there  was a  worrisome  episode  at the  Port  of  Tauranga   when the  infected crew   of  a  container  ship  mingled   with  local  stevedores).      And  the  Port  of  Auckland has  had  its  own  specialised  problems.

As  NZ’s  largest  port,   Port  of    Tauranga  encapsulated,  to   a degree,   how  the  NZ  economy  performed    through  the  pandemic. Reporting  net  profit  15%  up  at  $102m    on  25m  tonnes  of trade, it said a  14.3% increase in log exports and a 46% increase in subsidiary and associate company earnings were balanced by increased costs and reduced container volumes due to supply chain congestion.

Port of Tauranga Chair David Pilkington says that as  the world continues to grapple with the devastating effects of the Covid-19 pandemic, there has been major disruption in international supply chains.

“Constrained capacity in parts of the NZ supply chain, especially at Ports of Auckland, has exacerbated delays and restricted our ability to adapt quickly to the needs of importers and exporters.

“International shipping capacity is in hot demand and costs for shippers have skyrocketed. However, it is not efficient to run a container terminal at more than 100% capacity and our costs, including straddle carrier diesel use and the related carbon emissions, have grown as a result of the congestion we have had to endure. In recent months, we have also experienced the labour shortages felt by many other industries.”

Temporary surcharges for long-stay containers, introduced in January to discourage inefficient cargo flows and relieve yard congestion, helped Port of Tauranga to recover a portion of the additional costs being experienced. Parent company revenue increased 8.9% to $323.5m, while operating costs increased more than 15%.

Port of Tauranga CEO Leonard Sampson says the evolving response to the Covid-19 pandemic has had a significant impact on Port of Tauranga operations.

“We saw 106 fewer container vessel visits between September 2020 and June 2021. However, the average cargo exchange increased 21.7% due to the reduced vessel frequency and shippers maximising available capacity,” he says.

Near-record surges of container volumes in the months of October and December, compounded by constrained rail capacity, caused significant congestion, reduced productivity and weeks-long delays transferring import containers by rail to Auckland.

Additional trains from KiwiRail since May have eased the pressure, but container vessels are still arriving “off window” and are being processed in the order they arrive.

Sampson says congestion is unlikely to be resolved permanently until vessels can return to schedule and Ports of Auckland is back operating at full capacity. This highlights the need for Port of Tauranga to expand its capacity to cater for future demand.

“We have applied for resource consent to extend our container berths to the south of the existing wharves, by converting existing cargo storage land. This $68.5 million project is a vital piece of national infrastructure if we are to meet future cargo demand and have a resilient supply chain,” he says.

“We are also pursuing our plans to automate some of the container storage at the terminal to increase our capacity within the current land footprint. Our capability will be further extended with the opening of the inland port at the Ruakura Superhub near Hamilton in mid-2022.”

The inland port is being developed in a 50/50 partnership with Tainui Group Holdings.

Cargo trends  were  interesting: total  trade rose 3.8% compared with the previous year,  although container numbers were 4.1% fewer at 1.2 million TEUs.

Imports increased 4.0% to 9.4m/t, and exports increased 3.6% to 16.3m/t.

Log export volumes bounced back from the 2020 lockdown, increasing 14.3% to 6.3m/t. Sawn timber and wood panel exports decreased 12.4% in volume.

Dairy product exports decreased 1.9% to just over 2.3m/t, reflecting a later-than-usual season and a reduction in tranship volumes.

Kiwifruit exports increased 10.1% in volume.

Oil product imports increased 11.6% in volume, and cement imports increased 42.4% in volume, reflecting the strength in the local economy.

Fertiliser imports decreased 16.9% in volume, grain volumes decreased 8.9% and protein and stock feed imports decreased 10.4%.

Coal imports increased significantly as a result of lower hydro energy production and declining gas production.

So   how  is the  year ahead  shaping?

Sampson  says  it remains uncertain but he is confident  Port of Tauranga has resolved land-side congestion issues for now.

“However, the disruption to the international supply chain remains, and the challenges in Auckland are unlikely to be resolved soon.

‘’Covid-19 precautions will continue to impact efficiency and costs as we  see a worsening sector-wide labour shortage that could potentially have an impact on operations”.

As  Point  of  Order  sees  it,  the  Port  of  Tauranga   and  its  workers    deserves  a  round of  applause    from  the  rest  of  the country for  what  it has   achieved in   the  most testing of  circumstances

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