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Port of Newcastle maintains container hopes despite federal dismissal

Newcastle port and coal loading facilities at Carrington. Newcastle is the largest coal export port in the world loading freights with black coal.
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The Port of Newcastle will continue its aim to build a container terminal in New South Wales (NSW), Australia, despite a federal judgement rejecting the proposal.

The port, which mainly transports coal, aims to build a container terminal in order to increase container cargo throughput.

However, since 2013, NSW State Government has imposed a TEU cap on the Port of Newcastle in favour of containerised cargo travelling via the Ports of Botany and Kembla, owned by NSW Ports, further south on the coast near Sydney.

Port Botany and Port Kembla were privatised in 2013 under 99-year leases from the State of NSW Ports.

A 50-year Port Commitment Deed, implemented as part of the 2013 privatisation, required the State of NSW to compensate the ports if container traffic at Newcastle exceeds a TEU cap.

A separate commitment in May 2014 required the Port of Newcastle to reimburse the State of NSW for any compensation paid to Port Botany and Kembla.

In December 2018, the Australian Competition & Consumer Commission (ACCC) instituted proceedings against NSW Ports Operations Hold Co Pty Ltd, arguing that the Port Commitment Deeds had “anti-competitive purpose and effect”.

In 2019, NSW Ports made a cross claim against the State of New South Wales and the Port of Newcastle entities, joining them to the ACCC’s proceedings.

The ACCC argued that the 2014 Port of Newcastle Deed was the anti-competitive result of the Port Commitment Deeds which made the development of a container terminal at the Port of Newcastle uneconomic.

On 29 June 2021, the Federal Court of Australia dismissed these claims.

In her judgment, Justice Jayne Jagot noted that the prospect of Port of Newcastle developing a container terminal in the foreseeable future while Port Botany has capacity “is fanciful, far-fetched, infinitesimal or trivial”. 

NSW Ports said in a statement that the judgment supports the principle of NSW’s container port strategy: that container terminal development should be conducted in sequence, with existing capacity at Port Botany utilised first, followed by Port Kembla and only then Port of Newcastle. 

The ACCC will decide whether to appeal the Court outcome, expected in the week beginning 26 July.

Container traffic at the Port of Newcastle has not yet exceeded the specified cap, and therefore no payments have been made by the State of New South Wales under the 2013 Port Commitment Deeds.

Reaction

Port of Newcastle maintains its real-world view that a container terminal is “entirely viable – and necessary,” at the port, argued Craig Carmody, CEO, Port of Newcastle.

“The judgment clearly accepts that Port of Newcastle has the ability to compete in the same market as Port Botany. The only factor preventing the port from building the container terminal is the unfair restrictions placed on container movement above a TEU cap at the Port of Newcastle.

“If there’s any doubt we’d build the container terminal, simply lift the penalty. Enable Port of Newcastle to maximise our commercial potential freely, and watch us build it.”

Carmody added that there is “appetite and support” for a container terminal in Newcastle from NSW and international suppliers.

“Development of another container terminal in NSW, even whilst Port Botany still has capacity, would provide viable alternative and more cost-effective export routes for regional NSW suppliers, increasing their competitiveness and enabling Port of Newcastle to contribute even more to the state’s economy,” he said.

“This legal decision does not alter Port of Newcastle’s desire to build a container terminal, nor our confidence that a container terminal at the port is a diversification opportunity the port, Newcastle and the Hunter Region needs.”

ACCC Chair, Rod Sims, said without a new container terminal, NSW Ports will have an “effective monopoly” in moving containers in NSW for 50 years.

“We took this action to remove a barrier to competition in an important market, the supply of port services, which has a significant impact on the cost of goods paid by Australian consumers. Such barriers damage Australia’s productivity performance,” Sims said.

“We will carefully consider the judgment.”

NSW Ports CEO, Marika Calfas, said the outcome was “an emphatic win for the State of NSW and NSW Ports.”

“Premature development of another container terminal in NSW whilst Port Botany still has capacity would increase the overall cost of moving freight in NSW, to the detriment of the State’s economy,” Calfas said.

“NSW Ports will continue to focus on ensuring the key trade gateways of Port Botany and Port Kembla deliver efficiently and sustainably for the people and businesses of NSW.”  

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