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Ship upsizing challenging Australia’s ports    05/02/2018
Container ships are getting too wide and too deep for Australian container ports, officials say. As the new post-Panamax vessels grow in size, those they replace are cascading on to the Australian trade.

The Port of Melbourne. Photo credit: Shutterstock.

“It’s a worldwide phenomenon,” Mike Gallacher, CEO of Ports Australia, told Fairplay, a sister product of within IHS Markit. “We will have to make a decision as to our capacity to deal with it. It’s going to be a challenge.” 

IHS Markit figures show middle-sized ship orders in decline while orders for feeders and larger vessels have doubled in the past five years. Most ships (64 percent) being built or on order in 2017 were larger than 12,000 TEU.

While both Sydney and Brisbane container terminals could take ships of 9,500 TEU, the 12,000-TEU ships with beams 43 meters (143 feet) or wider can not navigate Melbourne’s Yarra River. 

“The Panama Canal expansion made a massive difference. Ships just got wider overnight,” Rod Nairn, CEO of Shipping Australia, told Fairplay. “Melbourne is limiting the size of ships that can visit Australia. If you can’t go to all three ports, you don’t go.”

Nairn represents international shipping interests in Australia. He argues that the vessels available are the bigger ships. But the Australian trade is asking for 8,500 TEU vessels or smaller.

“The past few months, the major lines have had ships on their inventories wanting to come to Australia, but they’ve had to find other ships that would fit Melbourne,” Nairn said.

The speed of change in design was probably exacerbated by overcapacity in the market and scrapping, he added. New emissions and ballast water requirements were other factors.

There is no quick fix on the horizon even as Australian economic growth accelerates, with GDP this year set to expand 2.6 percent compared to 2.3 percent last year, according to IHS Markit forecasts. The labor market continues to strengthen, but sluggish wage growth will likely continue to weigh on household consumption.

Infrastructure Victoria released a report last year entitled Advice on securing Victoria’s ports capacity, which recommended a new terminal be put off until 2055 or until the port reaches an annual capacity of 8 million TEU.

While the report acknowledges that “shipping lines want to bring larger ships, up to 10,000 TEU capacity, to Australia now, if possible," it says “Victoria does not necessarily need to respond to shipping company requests."

The size of container ships that can access Swanson Dock is limited to about 7,500 TEU and a beam of 42 meters by the West Gate Bridge, Yarra Channel, and width of the dock, it reported.

With minor works, Webb Dock could accept ships of up to 14,000 TEU, it said, but this would restrict shipping to a single stevedore, Victoria International Container Terminal (VICT) – something Nairn says the industry “is not comfortable with."

Infrastructure Victoria concluded that imposing reasonable constraints on the size of ships visiting Melbourne would delay the need for capital investment at Webb Dock or a second port.

The recommendation may well have been influenced by an Infrastructure Partnerships Australia study that found waning investor interest in Australian ports, more than any lack of consideration for international shipping. The port is also hamstrung by contractual arrangements with VICT and strict dredging guidelines.

“We can’t expect trade to change to meet our needs,” Gallacher told Fairplay. “We’ve got it the wrong way round by looking at what we need rather than what we need to do. If we don’t come to grips with these changes, we run a significant chance of a negative outcome. Ships just won’t come here.”

Australia has not developed a container hub terminal, partly due to a politically impasse on coastal shipping. New Zealand just 2,463 kilometers across the Tasman Sea.

Maersk Line is already bypassing Australia and hubbing out of Tauranga, New Zealand, on its new North Asia–South America service. Tauranga invested NZD350 million ($257 million) in upgrades to cater for vessels of up to 11,500 TEU. It is paying off, with profits up by 15 percent, or a projected NZD90 million for the full year, according to its 2017 financial report.

“Geography is probably the key player,” Nairn said. “Tauranga is only about 400 nautical miles off the Asia–South America route. But port size allowed it to happen. Tauranga has become an attractive hub for the region.”

Some Australian trade already tranships out of New Zealand, and Nairn warns that this may increase.

Tauranga boasts that it has the capacity to receive exports from the east coast of Australia to join the Maersk service north and is fast becoming a transshipping option for Australian exporters.

“Our productivity rates [the best in Australia] and fast connections to Asia are also making Tauranga increasingly attractive as a hub port for Australian shippers to Asia and South America,” Port of Tauranga’s chief executive, Mark Cairns, said in a statement.

“It’s going to be a challenge for Australia,” Gallacher said. “I don’t think that New Zealand factor is sinking through.”

Port of Melbourne, however, denies that there is any urgency. “Yes, there is going to be a demand for a new terminal due to the migration of bigger ships over time,” a port spokesperson told Fairplay. “Obviously, it’s one of the things we are looking at, but it’s not the most important thing. Ships won’t be turning away from the Port of Melbourne.”

The Competition and Consumer Commission’s Container stevedoring monitoring report 2016/17 also projects that Australia will be able to handle larger ships with modest investment.


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