A new report commissioned by Waka Kotahi makes the case for massive investment in a coastal shipping network to future-proof New Zealand’s supply chain and reduce emissions

The amount of domestic freight moved by sea rather than road or rail could double in the future if a new coastal shipping network is set up.

That’s one of the key conclusions of a new report on how Waka Kotahi should invest more than $30 million in funding that had been earmarked for coastal shipping in the latest National Land Transport Programme. The report, commissioned by the transport agency and written by shipping consultants Pacific Marine Management, also finds a new feeder network oriented around hubs in Auckland and Tauranga could improve the resilience of New Zealand’s supply chains.

“Investing in the blue highway will make our supply chain more resilient, which is especially important given the strains that Covid-19 and global congestion have placed on it. The Kaikōura earthquake also showed how important it is to have a reliable alternative to move freight on top of road and rail,” Transport Minister Michael Wood says.

“We’ve got loaded containers sitting at the wharf, we’ve got costs for all those containers sitting here, we’ve got customers waiting on them. In some instances, we’ve got to change the whole order process because all of a sudden we missed the vessel.”
– Doug Paulin, Sealord

The report details challenges, like the potential closure of Marlborough’s Tory Channel to Interislander ferries and other shipping, and the lack of a big dry dock in NZ.

As it stands, about 78 percent of cargo containers are moved around New Zealand by international ships – though this includes cargo indirectly imported from overseas or indirectly bound for export. As these ships become larger and more expensive to run, the chances of them helping to move domestic freight from Tauranga to Lyttelton will fall. New Zealand’s smaller ports like Nelson will also struggle to accomodate the larger international ships.

The consultants say supply chain resilience is threatened by these trends. They lay out a range of observations in light of this “predicament”.

“The domestic shipping network needs to be independent of the international shipping services, and of the port operations within the terminals that serve them,” the report finds. This could include separate terminals at major hub ports in Auckland and Tauranga or dedicated berths within those ports.

Only one company currently operates a fully domestic shipping service in New Zealand: Pacifica/Swire Shipping. That service only runs once a week as well and is responsible for 40 percent of the domestic sea freight moved in New Zealand (or 32 percent if you consider the need to redistribute empty shipping containers around the country). The remainder is picked up by international ships, which have a reputation in the sector for being unreliable.

Right now, Sealord has eight South Island cool stores full of frozen hoki, barracuda, and jack mackerel. It has Chinese orders it would like to meet, but can’t. There are two reasons: labour shortages, and the fact the fishing company can’t rely on container ships to stop at Nelson.

“We’ve got loaded containers sitting at the wharf, we’ve got costs for all those containers sitting here, we’ve got customers waiting on them,” said Doug Paulin, the chief executive. “In some instances, we’ve got to change the whole order process because all of a sudden we missed the vessel.”

Sealord exports to 62 countries, and is entirely reliant on sea freight. But first, like other exporters, in must get its product to an international export port – most often Tauranga. 

And that’s getting ever more difficult. Since the deregulation of the 1990s, the number of NZ-flagged container ships has dropped from 34 to just one, the small Pacifica Shipping-owned Moana Chief. 

To serve customers like Sealord and Sanford, international shipping line Maersk has also put on ships, the Seaspan Hannover and Maersk Nadi, to do the rounds of the regional ports. But like the Moana Chief, they’re erratic: theye missed eight of their last 24 scheduled stops in Nelson, Paulin said. And they are not specifically coastal feeders; they are legitimate deep sea vessels that go back and forth to the Pacific islands and part of that slow rotation is calling at minor NZ ports.

Waka Kotahi’s report details proposals to invest the $30m the Government has budgeted for coastal shipping, to help mend this broken import/export infrastructure that is so critical to NZ’s economic survival.

“The international ships have less reliable timetables and are known to leave domestic cargo behind, treating such as a ‘filler cargo’,” the report finds.

A new coastal hub and spoke network would involve a thrice weekly reliable service. This could help New Zealand businesses make long-term commitments to use the service. Such a move would require tripling the amount of freight moved by domestic ships.

Some of this could come from the 60 or so percent of fully domestic cargo that is currently transported by international carriers.

“One logistics specialist stakeholder estimated that a more frequent service could double the amount of domestic cargo that moves by sea,” the consultants wrote. Growing freight demand would account for some of the doubled cargo, but some would also come from road and rail services which tend to have higher emissions.

The domestic freight market alone probably couldn’t supply enough cargo to triple the current load, however. The target volumes would also have to include at least some empty container transport and transhipment – imported cargo or containers bound for export that are swapped between ships at an intermediate port.

The estimated cost of supporting the new coastal shipping service would be $25 to $40 million and work would need to begin immediately.

The report also looked at ways to reduce greenhouse gas emissions. Moving freight from trucks to ships would do at least some of the work, it found.

“We want to give businesses more choice in how they move their freight. Moving more freight by ship will also help drive down emissions, as shipping has a lower emissions per tonne-kilometre than land transport, and also reduce the number of trucks on the roads, which will improve safety and reduce congestion,” Wood said.

Wind propulsion – achieved via rigid sail-like wing foils or rotating cylinders called Flettner rotors – could produce 20 to 25 percent of the power needed to move ships, the report said. But low- and zero-carbon fuels would still be needed to reach the International Maritime Organisation targets of a 2 percent annual reduction in carbon intensity between 2023 and 2026, a 40 percent reduction in carbon intensity by 2030 and a 50 to 100 percent cut in outright emissions by 2050, compared to 2008 levels.

New Zealand has opportunities to contribute here as well, the report found, with our renewable electricity enabling the production of green hydrogen or ammonia to fuel ships. Biofuel blends can also reduce emissions in the short-term.

The report also called for a number of assessments and business cases, including examinations of the natural disaster readiness and container terminal capacity of New Zealand’s ports and an investigation into the viability of a dry dock for servicing and repairing larger ships, including the Cook Strait ferries, larger coastal vessels, tankers, cement ships and Navy and NIWA ships. As it stands, these ships often need to be serviced overseas, burning large amounts of fuel to get there and rendering them out of service for long periods of time.

The Government is also warned to be careful with its funding to KiwiRail.

“Another challenge that was raised by stakeholders is the potential for market share distortions created by any Government non-commercial financial support to KiwiRail,” the report finds.

“The dilemma for Government is how to prevent that support, intended to revitalise the rail network, from being used to compete unfairly in the truck sector of the Cook Strait trade.”

Government also needs to consider how to avoid conflicts of purpose between financial support for rail with the potential financial support for coastal shipping.”

Waka Kotahi was considering the report now, Wood said, and further engagement with the shipping sector would be forthcoming in 2022.

Until Covid, the big container ships would come out from Asia and North America and after dropping off most of their cargo in Auckland, would continue down the country offloading and onloading goods and produce. But no longer. The whole world is running behind schedule, and the small ports have fallen off that schedule entirely. Moreover, the new container ships that cross the Pacific Ocean are too big to dock at most regional ports.

That’s why Paulin welcomed Waka Kotahi’s report. He just urged caution that the ministry not spread its investment so wide and shallow that little is achieved.

“If nothing was to change in the next three months, we’re at risk of running out of cold storage space, and then I need to stop vessels fishing.” he said. “So that’s why it’s critical that this coastal feeder service really is worked on – because there’s a lot of industries that are in the same boat.”

Marc Daalder is a senior political reporter based in Wellington who covers climate change, health, energy and violent extremism. Twitter/Bluesky: @marcdaalder

Newsroom Pro managing editor Jonathan Milne covers business, politics and the economy.

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