New Zealand biggest port and biggest exporter are combining with the world's largest container shipping line to ensure the future of the Port of Tauranga as the country's major shipping hub.

Port of Tauranga, Kotahi and Maersk today announced a three-cornered deal that guarantees the cargo, and port facilities, take advantage of the looming shift to larger containerships that can't be accommodated at any New Zealand port at present.

Maersk is already a major Port of Tauranga customer. Kotahi is a joint venture between Fonterra Co-Operative and Silver Fern Farms, launched in 2011, and provides freight management services for customers from sectors including meat export, wool, dairy, timber, pharmaceuticals, horticulture and seafood.

Kotahi agrees to commit export traffic to Port of Tauranga subsidiary Timaru Container Terminal.

In exchange for the commitment, Kotahi receives a 49.9 per cent shareholding in TCTS. Operations at TCTS will be managed under a management contract with Port of Tauranga.

As a result of this agreement between Kotahi and Port of Tauranga, TCTS plans to invest in port infrastructure including another mobile harbour crane to handle the increased container traffic.

Port of Tauranga will issue two million shares to Kotahi, representing 1.5 per cent of Port of Tauranga's issued share capital, in two tranches. Kotahi's rights to the shares, including dividends, are subject to Kotahi delivering on freight volume commitments over a 10 year period.

The agreement will transform New Zealand's supply chain, says Port of Tauranga chief executive Mark Cairns.

'The cargo commitments give Port of Tauranga the certainty to proceed with the infrastructure to accommodate the 6,500 TEU ships,” says Mark.

'This will in turn spur the development of New Zealand's coastal shipping industry as freight consolidates on Port of Tauranga as a hub port for the country.”

The agreement recognises Port of Tauranga's long-term investment in freight marshalling facilities across the country including MetroPort in Auckland and more recently PrimePort Timaru and the port company's new freight hub in Rolleston, Christchurch.

'Port of Tauranga will continue to provide shippers across the country with the most efficient freight options to markets thanks to these investments,” says Mark.

'Our ability to accommodate the next generation of large ships will also address New Zealand's disadvantages in international export markets, including the country's distance from major transport routes and its relatively small and dispersed freight volumes.”

Kotahi and Port of Tauranga are exploring and negotiating other operational efficiencies.

Maersk Line New Zealand Managing Director, Gerard Morrison, says the long term contract between the port company and Kotahi provides certainty for Maersk to build on providing service to the New Zealand market.

'Reflecting this, and due to the guaranteed freight volumes, Maersk Line has committed to introducing a new 4,500 TEU service from October 2014, to Tanjung Pelepas in Malaysia, to provide additional capacity, and complement, the current Northern Star and Southern Star services,” says Gerard.

'We now have a clear path to work on the introduction of Maersk Line's 6500 TEU vessels to New Zealand.

'These ships are significantly more fuel efficient on a per-container basis and will reduce the carbon footprint of the ocean freight component of New Zealand exports by approximately 22 per cent per container unit, compared to the existing New Zealand industry average.”

Now is the right time for key players to work together to build capability within New Zealand to receive the larger ships and all the efficiencies they will bring, says Kotahi Chief Executive Chris Greenough.

'These ships will ensure New Zealand does not become a spoke to the larger hubs across the Tasman, which would add 7-10 days to export transit times,” says Chris.

'We can help level the playing field for New Zealand in international markets. Increased collaboration will smooth out the peaks and troughs of our agriculture-driven export sector and drive a step change in efficiency for the Kiwi export supply chain. These larger vessels will also be a catalyst for further efficiencies in land-based transport and the better co-ordination of truck and rail movements.”

The new arrangements are founded on the following:

• Kotahi has committed to provide up to 1.8 million TEU[2] export cargo containers to the Port of Tauranga over the next 10 years, commencing 1 August 2014;
• Kotahi has committed significant export cargo to Timaru Container Terminal (TCTS), for the next 10 years commencing 1 August 2014;
• The Port of Tauranga has committed to investment in infrastructure to enable visits from the larger 6,500 TEU container ships within the next few years;
• Port of Tauranga will, subject to certain conditions, issue shares to Kotahi and Kotahi will take a stake in TCTS; and
• Kotahi has committed to provide up to 2.5 million TEU export cargo containers to Maersk Line for the next 10 years, commencing 1 August 2014.

'A key aspect of the agreements outlined today is the continuing support for the long term viability of New Zealand's regional ports,” says Chris.

'Reflecting the strong growth of dairying exports from the South Canterbury region over the past three years, it has been possible to resume container ship calls to the Port of Timaru while also retaining significant volumes through Port of Lyttleton and maintaining, long-term, container ship calls at a number of other regional ports.

'We recognise that ports play a key role in the livelihoods of local communities and believe the changes outlined today will help regional communities stay connected as we enter the era of bigger ship visits to New Zealand.”