Restrictions on ports asset sales raised by ACCC

Greg Cameron

The ACCC is ”concerned by any restrictions imposed by Governments which have the purpose or effect of substantially lessening competition”.

The ACCC is ”continuing its engagement with parties involved in the privatisation of ports in New South Wales.”

The ACCC raised the issues in its just released ”Container stevedoring monitoring report no. 16”.

”The ACCC encourages early engagement from State governments on any competition issues that may arise in relation to the proposed sale structures or sale conditions for any monopoly or near monopoly assets, including any restrictions on competition proposed in the arrangements. Such restrictions may be unlawful and could be unenforceable,” the ACCC said.

A container terminal at the Port of Newcastle would compete with Port Botany initially for the northern NSW trade. It would also provide the base-load freight to build a rail freight bypass of Sydney, between the Port of Newcastle and Glenfield. A proposal in late 2010 to build a container terminal at the Port of Newcastle was investigated by the ICAC earlier this year.

Whereas Port Botany is a truck-based container terminal, Newcastle would be rail-based.

The NSW Government forecasts a four-times increase in container truck movements between Port Botany and western Sydney by 2046. Trucks are forecast to carry 7 million teu in 2046 and rail will carry 3.9 million teu. No details have been offered as to how rail capacity will increase from the forecast 1.6 million teu in 2031. But if the rail capacity target is not reached there will be even more truck movements.

A benefit-cost analysis would show the worth of removing all freight from the existing rail network so that it can be used 100 per cent for passengers.

Port Botany suffers a competitive disadvantage because containers are trucked between the port and western Sydney and goods are then trucked between western Sydney and northern NSW.

Newcastle’s natural advantage of proximity to market is defeated if a fee has been placed on container movements. The NSW Greens placed a series of questions on the parliament notice paper, two of which are:

Is compensation payable to the Port Botany leaseholder if container movements exceed an annual threshold at the Port of Newcastle?

Is the Port of Newcastle leaseholder required to pay the Government a fee for container movements through the Port of Newcastle on the same or similar terms as the Government is required to compensate the Port Botany leaseholder?

If a fee is payable on container movement at the Port of Newcastle it is a reasonable conclusion that no-one is interested in developing a loss-making business. No-one understands this better than the ACCC.

In its report, ACCC said that its attention was drawn to port lease arrangements from an article in The Newcastle Herald published on 11 May 2014. The Herald reported: ”The government has confirmed it leased Botany with a clause that prevented Newcastle from competing against it with a container terminal. And the Newcastle lease is believed to contain a similar undertaking.”

Leasing arrangements for Port Botany and the Port of Newcastle reflected the Coalition’s policy that Port Kembla will be the State’s next container terminal once Port Botany reaches capacity.

Under the government’s heavy vehicle transport forecasts, there is no container terminal at Port Kembla in 2046 when Port Botany container movements are set to reach 10.9 million teu, up from 2.2 million teu in 2013.

If any restrictions in any lease arrangements are unlawful, obviously, it is in the public interest that they are rectified. One solution to competition ”issues” would be for NSW Ports and Port of Newcastle Investments to combine their resources and become a rail freight operator for containers between Newcastle and an intermodal terminal at Eastern Creek or Badgerys’s Creek. General freight that currently enters Sydney by truck can also  be carried by rail.

A rail freight bypass is NSW Government policy.

As The Newcastle Herald observed on 31 October: ”The Coalition, far from undoing the wrong perpetrated on Newcastle by its political opponents, has simply set the inequity in stone by inserting terms into its port sale agreements that effectively shut Newcastle out of competing for a serious slice of the container trade.”

The challenge before the NSW Government is to clear the record.