How the NSW Government Contrived the Container Shipping Market

Greg Cameron

Greg Cameron

A secret government fee on container shipping at Newcastle port is designed to make a container terminal uneconomic.

In the event that container shipments exceed a ”cap”, a fee will be collected by the Newcastle port leaseholder from stevedore tenants of the port and paid to the Port Botany leaseholder, for ”compensation”.

Making a container terminal at Newcastle port uneconomic is the government’s way of keeping Port Botany’s monopoly for container shipping in NSW.

Secrecy surrounds the government’s restrictions, which may be unlawful and could be unenforceable. But contriving the NSW container shipping market by imposing anti-competitive restrictions on Newcastle port is unjustified. It is a strategy that clearly disadvantages would be exporters and importers in northern NSW and the Hunter regions.

There is no reference to the restrictions in the public lease documents for Port Botany, Port Kembla or Newcastle port. Public scrutiny is prevented because the restrictions are ”commercial in confidence”.

In response to parliamentary questioning, the government says that the restrictions are included in confidential ”Port Commitment Deeds”. It was only on 9 June 2015 that the government disclosed the existence of deeds. The disclosure came in an answer to a parliamentary ”Question On Notice”, but this question had been asked on 23 October 2014.

Claims that restrictions on Newcastle port are consistent with the ”NSW Freight and Ports Strategy” are misleading because the restrictions were imposed two years before the strategy’s release, on 13 December 2013. The strategy reflects the government’s decision to make a container terminal at Newcastle port uneconomic.

Morgan Stanley, the government’s financial adviser, was instructed to include the restrictions in a ”Scoping Study” for leasing Port Botany. Commissioned in December 2011, Morgan Stanley was tasked to consider long term future plans for container port capacity in NSW. At no stage in the development of ”NSW Freight and Ports Strategy” did the government reveal Newcastle port restrictions.

On 26 April 2012, the government said that a decision had not been made about whether to proceed with a container terminal at Newcastle port. However, the restrictions were already included in the “Scoping Study”. A decision to proceed with a container terminal would have been the opposite of the earlier decision to make a container terminal uneconomic. Port Botany and Port Kembla were both leased to the same company on 12 April 2013.

The government first referred to the restrictions on 17 October 2013, in response to this parliamentary ”Question Without Notice”:

The Hon. Adam Searle: My question is directed to the Minister for Roads and Ports [The Hon. Duncan Gay]. How much compensation will be paid to the private operator of Port Botany if a new container terminal is developed at Newcastle Port?

Whether the ”Port Commitment Deeds” comply with Australia’s ”Competition and Consumer Act 2010”, is a matter for the Australian Competition and Consumer Commission to pursue. Worryingly, the ACCC is yet to acknowledge that it is aware of deeds.

Between 2009 and November 2013, the government was negotiating with Anglo Ports (the preferred proponent) as part of a public tender process to develop a multi-purpose cargo facility at Newcastle port, which was to include a container terminal with an annual capacity of one million containers.

The government withdrew from this negotiation; Anglo Ports did not withdraw. For two years, the government was negotiating for a container terminal after having imposed restrictions designed to make a container terminal uneconomic.

NSW Treasury made serious allegations about the negotiation at a ”Budget Estimates Committee” hearing on 22 August 2014: ”Attempts by Government to dictate uneconomic enterprises contrary to market demand are examples of the kind of rent seeking activity likely to encourage influence peddling or corruption,” said Treasury.

It is extraordinary for Treasury to make allegations against the previous government over a matter in which Treasury was, and remains, closely involved. In a statement published on the NSW Parliamentary web site dated 10 February 2015, Anglo Ports ”categorically denied” that ”its proposal or the tender under which it was conducted had any of these characteristics [nominated by Treasury].”

Treasury’s assertion of a container terminal at Newcastle port being an uneconomic enterprise is clearly contradicted by restrictions designed to make a container terminal an uneconomic enterprise. It is for this reason that the government refuses to disclose them.

Greg Cameron
Florey ACT 2615
17 June 2015

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