Melbourne Urgently Needs More Container Capacity

Op-Ed by Sandy Galbraith

I have spent the past 25 years closely observing Australia’s Victorian ports industry and in the past six years in particular, since becoming a consultant, have worked on a number of development projects in all four of the major commercial ports in the state – Melbourne, Geelong, Hastings and Portland. 

First, let’s briefly look at the Victorian ports as they are today. 

Melbourne is Australia’s largest container port. Melbourne is also a prominent player in the bulk shipping industry – particularly with respect to grain and cement. 

The next port in terms of scale is Geelong. Despite having a relatively low profile in national terms; there are not too many similarly sized ports in Australia, indeed the world, which can boast such a broad base of cargoes. 

Then we have Portland, in the far west of the state. Over the next five to ten years, the port’s volume is expected to more than double, adding approximately $1 billion in trade value every year. 

Hastings, on the eastern side of the Mornington Peninsula, is something of an under achiever in comparison with its state neighbors, but as we know, that may be changing provided, of course, the state holds firm to its plans to develop that port as the replacement container importation point for Victoria. To this end, the Victorian Government has committed to expanding the small working port at Hastings and is spending $110 million on planning work.

In the containership market, we have had an outbreak of gigantism. Where, not so very long ago, the container shipping industry was operating fleets with ships mostly in the sub-8,000 TEU range and talking of 12,000 TEU ships being about as high as we need go for some years to come; today, the majority of containership deliveries are in the 8,000 to 18,000 TEU range. 

The shipping lines are in the midst of a crisis, seeking out alliances with others so as to reduce their mounting costs and losses. Some of the biggest ones are discussing the prospect of hubbing in Australia; in other words, making one port call in the country instead of five, with boxes distributed around the country by related coastal shipping services. This is already starting to occur in the other southern trades – South America, Africa and New Zealand. Currently, container ships on our major trades work in a cycle through the nation’s five container ports – (Brisbane, Sydney, Melbourne, Adelaide and Fremantle). 

Several shipping lines have been signaling their intention to upsize the ships calling into Australian ports – and we are not talking about vessels of 6,000 TEU, which is what the port planners for years have been factoring in; that generation of container vessel was largely skipped in the rush towards gigantism. What we are talking about are vessels of 8,000 TEU plus. 

These are longer and wider than our ports had planned for and they will be filtering down into our trades much, much sooner than our governments and ports had anticipated. 

Most ports have been working on the comfortable assumption that they have at least until the end of the decade to address the issue. They would be well advised to urgently rethink their planning models; for as more and more giant containerships come out of the shipyards to enter the east-west trades, the pressure grows on the big shipping lines to deploy the 8,000 TEU vessels in the north-south trades.  We could see them in Australia within two years.

This will bring enormous challenges to the Australian ports – not least Melbourne, where Swanson Dock cannot accommodate such vessels. Currently, Sydney’s Port Botany is the only port geared up to accommodate these larger ships. 

Melbourne is left behind. The slow decision making that has been a feature in our state for many years with respect to container port development is going to come back to bite us, and while obviously we will still see high volumes of boxes moving through our port – for population drives trade – Melbourne will inevitably lose its Number One container port status to either Brisbane or Sydney, whichever port the shipping lines chose as their national hub.

There are many examples around the world of once great ports that failed to take note of changing trends in shipping – look for instance at London, New York or Amsterdam. These ports are all pale shadows of what they once were in international shipping terms.

London is an interesting case in point. There was the capital city, a global trading center and home to the largest conurbation in the UK. You would have thought that it would be the nation’s largest port in perpetuity. Well, that’s what the port authority assumed, little recognizing that a tiny, seemingly inconsequential ferry port 150 kms north of it, called Felixstowe, would rapidly transform itself into the largest container port in the UK, whilst London faded, eventually all but giving up and converting the bulk of its working docks into expensive real estate. 

Marseilles in France presents a fascinating contrast. Its port authority listened to the shipping industry’s message that it was in the wrong place, had no room for development and was subject to extensive congestion. What did the port authority do? It took the bold decision to move the bulk of its port activities about 50 kms west, to the sleepy little fishing town of Fos-sur-Mer. Today, Fos dominates trade in that part of the western Mediterranean, moving more than 80 million tons per year and generating 45,000 jobs. The population of the Marseilles/Lyon region is 1.6 million.

I use these examples to illustrate my point that shipping dictates a port’s success or otherwise. If a port has to move, then the landside supply chain infrastructure has to - and does - very quickly adapt to the changed environment.

Let’s turn to Bay West as a site for another container terminal. Given what I have just said, it should be clear that I am not a supporter of this scheme. I say that on the basis of some genuine concerns.

First up, is the urgency being sounded within the shipping industry that Victoria should ready itself as soon as possible for what are considerable changes in the operating environment. My understanding is that on coming to government, the Labor Party would direct Infrastructure Victoria to conduct a comprehensive and transparent cost-benefit analysis to test Bay West against all other possible siting alternatives. This will cause delay at a time when Victoria can little afford it.

Secondly, a Victorian Department of Transport investigation found Bay West would require dredging of 66 million to 84 million cubic meters of material, including rock, from the sea floor. This is three to four times more than was dredged in 2008-09 and it risks causing significant sea level rises.
 
Bay West was never envisaged as a container terminal. At least five years ago, I was involved in early discussions on the concept and can reveal that it was conceived as a replacement port for Geelong, not Melbourne, and was to be located at Point Wilson at the mouth of Corio Bay, very close to the existing Geelong shipping channel.

The concept itself is elegant in its simplicity and practicability. Geelong, as a city, is in the process of beautifying its waterfront – very successfully so far - and the prospect of opening up that waterfront further, to include the existing port, would bring enormous opportunities to improve the economy of the city.

Moving the existing bulk cargoes out of Geelong harbor to a greenfield site with plentiful potential berth frontage at Point Wilson would considerably ease traffic congestion and allow bulk shippers the opportunity to operate from state of the art cargo handling facilities. Equally, with the closure of refinery operations at the Shell - soon to be Vitol - facility, crude oil and other petroleum imports could be moved by pipeline from Point Wilson to storage facilities at the existing site in Geelong obviating the need for oil tankers to sail up the shipping channel past the city.

All of these developments would greatly improve bulk freight efficiency in Victoria, whilst providing Geelong with an enviable platform to develop its waterfront and Corio Bay into one of Australia’s finest coastal cities and on-water playgrounds.  

So, in summary, what I am saying is: let’s drop the idea of Bay West as an alternative container port. It is not a viable solution. Focus on the reality that is, that the shipping industry needs Victoria to complete the port of Hastings development as quickly as possible. There is an urgency here that I don’t think government yet recognizes. In terms of retaining direct international calls from some container trades – notably, the key one, North Asia – it may already be too late.

It is recognized that there are significant shipping channel, land and environmental issues to be overcome in Westernport Bay for Hastings to be completed, but don’t delay the addressing of them to await the findings of yet another report. 

And don’t for a minute think that those prominent logistics players who are making such a noise about Bay West are not already hedging their bets and buying up great chunks of land in the South East Corridor with a view to developing logistics parks on them. For, they are. Take a look at what is going on around Dandenong next time you drive down EastLink.

And don’t be distracted by the concerns about freight trains running 24/7 up and down a new rail freight corridor to the city, disturbing a large chunk of the population’s sleep. If volumes dictate - and inevitably they will - then shipping could and should provide the solution. 

There would be a very sound case for one or two container vessels to operate a shuttle service up and down the Bay from Hastings through to Melbourne. These vessels would provide the economies of scale to, on a single voyage, take the equivalent of many, many trainloads of containers. And let’s not ignore the fact that ships represent an environmentally better solution that will neither impact on your sleep nor your ability to catch the train on time to work in the morning.

Here again, instead of focusing narrowly on domestic problems and imagining that they are insoluble, look internationally to find the solution. The concept of shuttle container vessels is well established in Europe, the US, South America and parts of Asia. It is a concept that is as successful as containerization itself.

Sandy Galbraith is director of Maritime Trade Intelligence, Australia. He has 40 years’ experience in the global maritime and transport industry in a career that has spanned international seagoing operational roles, senior editorial positions in the UK and Australia, maritime consultancy on major projects for governments, government agencies, industry organizations and the private sector, as well as industry education, media training and crisis management.