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Quay conclusions: the best choices for additional NSW port capacity

The best choices for additional NSW port capacity

Making informed and evidence-based decisions on the future capacity of ports in NSW is vital to Australia’s economic growth. Following detailed analysis we outline three findings in this report Quay conclusions: Finding the best choices for additional port capacity in NSW.

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In the report Quay conclusions: Finding the best choices for additional port capacity in NSW we lay out a detailed analysis and key findings: 

1. Premature port investments = higher costs for NSW

Our key finding is that new container terminal capacity is not needed in NSW for several decades at least – and that premature development of a new terminal would increase costs across the entire NSW supply chain.

2. Port Kembla makes the most sense for containers, but only once Port Botany nears capacity

Port Kembla offers the lowest overall costs and highest overall benefits for an additional container port – but only when it is needed in several decades.

3. Containers at the Port of Newcastle makes the least sense for NSW

Developing a container terminal at the Port of Newcastle would impose the highest overall costs, and offer the lowest overall benefit.

Freight matters

Freight is the life blood of the national economy, underpinning all aspects of daily life. The cost of freight is added to each imported item we purchase; and is added to the final price of the goods Australia exports to foreign markets.

In this way the cost of freight is ultimately absorbed by consumers in the price we pay for household or other goods; and is added to the price of each good Australian businesses export to global markets.

Planning the right future container capacity

Each of the existing major Australian container ports has capacity to accommodate growth for many decades; but the very long-term nature of freight has seen a corresponding focus on long-term freight planning, across Commonwealth and state governments.

Relative competitiveness

The purpose of this study is to determine the relative competitiveness and the likely catchment areas of Port Botany, Port Kembla and Port of Newcastle as container ports. We consider the entire logistics chain costs from source to consumption, including costs incurred through additional terminal investment, through the development of an evidence based origin destination model for containers in NSW.

Findings

Premature port investments = higher costs for NSW

Our key finding is that new container terminal capacity is not needed in NSW for several decades at least – and that premature development of a new terminal would increase costs across the entire NSW supply chain because it would:

  • Duplicate existing, lowest cost container capacity that is less than half full: Port Botany has three competing stevedores who moved 2.7 million TEUs in 2017/18, within a theoretical capacity of over 7 million TEUs per annum – meaning it is less than half full.
  • Attract low volumes, because of higher costs: User choice modelling shows that until Port Botany’s stevedores near capacity, both Port Kembla and Port of Newcastle would struggle to attract enough users – because of their higher costs in recouping capital invested and higher landside transport costs to reach fewer users. Our modelling shows that under different scenarios where Port Kembla and/or Port of Newcastle are developed, by 2046, these ports will only account for circa 10 percent and circa 6 percent of total containerised trade respectively.
  • Require massive public investment to fund landside freight infrastructure: 80 percent of import containers are consumed within 40 km of Port Botany. Less than 1 percent of full import containers were destined for regional areas; and 2 percent destined for the Central Coast, Newcastle and Hunter regions. This means that most containers will need to travel to or from Sydney; in turn requiring many tens of billions in public funding to upgrade road and rail capacity.

Maximising the use of Port Botany will ensure that the benefits are harnessed from existing and committed investments made by the Australian Government, the NSW Government and businesses including WestConnex, the Southern Sydney Freight Line, Moorebank Intermodal Terminal and Sydney Gateway.

Port Botany’s role as the container ‘growth port’ also ensures continuing alignment to the supporting supply chain investments made by businesses including NSW Ports, stevedores and warehousing and logistics assets developed by major customers.

 

Port Kembla makes the most sense for containers, but only once Port Botany nears capacity

Our next finding confirms that Port Kembla offers the lowest overall costs and highest overall benefits for an additional container port – but only when it is needed in several decades – because:

  • Port Kembla’s proximity to the population and employment growth areas in Greater Western Sydney and South Western Sydney enhance its attractiveness as a second container port, when required.
    • Analysis of census data shows that Sydney is home to 70 percent of all transport, postal and warehousing jobs across the state, compared to 9 percent collectively for the Central Coast, Newcastle and Hunter region. By 2046, this density is expected to increase in the Western Sydney Employment Area, west of Eastern Creek.
    • Port Kembla is circa half the distance relative to Newcastle from the five largest container consumption areas in 2046, as projected by TfNSW – which all reside in Western and South Western Sydney.
  • Port Kembla enjoys better existing and planned transport connections to customers in Sydney’s south west and west, which are known and substantially less costly than similar connections to the Hunter. For example, the South Coast Line is projected to have 20 paths spare, and if utilised for containers, the spare existing capacity may be able to handle up to 1 million TEUs.
  • It supports consensus State and Australian Government planning involving the Western Sydney City Deals and the Aerotropolis.
  • Our modelling shows that by 2046, Port Kembla would attract throughput of almost 700,000 TEUs, around 70 percent more than the Port of Newcastle.

However, premature development of Port Kembla would impose supply chain costs across NSW, $21 million per year higher by 2046 if one additional container port were developed. The Port of Newcastle imposes more than double, increasing the total to $75 million per year if both ports were developed. These costs may well be higher once the cost of additional public investment is added. This demonstrates the efficiency of using existing port infrastructure – when there is available capacity – as opposed to developing new port infrastructure, the cost of which needs to be recovered from users.

Containers at the Port of Newcastle makes the least sense for NSW

Despite the current public affairs focus, detailed analysis shows that developing a container terminal at the Port of Newcastle would impose the highest overall costs, and offer the lowest overall benefit, because:

  • Newcastle is the furthest from Greater Western Sydney and South Western Sydney – which are the key growth areas for transport and logistics and supported by consensus Federal-state investment and planning.
  • Newcastle’s road and rail links to Sydney are the most constrained, with the rail line offering less than 10 train paths in and out of Sydney per day; and the connections to the M1 (F3) road corridor on both the Sydney and Newcastle ends suffering from high levels of commuter congestion.
  • Port of Newcastle is heavily constrained on the landside by its location adjacent to Newcastle’s CBD requiring trucks to navigate the arterial road network though Wallsend or take the more circuitous route using the New England Highway; and on the waterside by the need for expensive dredging and realignment of the channels – seeing higher chargers to imports and export trade.
  • Our modelling shows that by 2046, Port of Newcastle would only attract throughput of around 400,000 TEUs – while Port Kembla attracts around 70 percent more trade.
  • Developing the Port of Newcastle would benefit some exporters within its catchment area, however that number is slightly less than 100,000 TEUs by 2046 – a tiny proportion of the overall export task.

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