Ten-year freight alliance reached between Fonterra and Silver Fern Farms' JV, Port of Tauranga and Maersk

Freight and logistics management company Kotahi, a joint venture between Fonterra and Silver Fern Farms, has announced a 10-year deal with international shipping line Maersk and the Port of Tauranga.

The full announcement is below.

DELIVERING A STEP CHANGE FOR NEW ZEALAND INTERNATIONAL TRADE

Agreements will usher in era of ‘big ship’ visits for New Zealand and a new ocean freight service

Freight and logistics management company Kotahi and New Zealand’s freight gateway Port of Tauranga have struck a strategic ten-year freight alliance. This, along with a separate long-term agreement between Kotahi and Maersk Line, the world’s largest container shipping company, will deliver a ‘step-change’ for New Zealand’s $95 billion international trade sector.

Kotahi Chief Executive Chris Greenough said Kotahi is focused on helping keep New Zealand competitive on the world stage, by paving the way for the new generation of container vessels to call in New Zealand’s waters, delivering significant efficiencies for exporters and importers[1].

“New Zealand doesn’t have a big ship capable port and now is the right time for key players to work together to build a capability within New Zealand to receive these large vessels with all the efficiencies they will bring to New Zealand. 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.

“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,” Mr Greenough said.

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. 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,” Mr Greenough said.

“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,” he said.

Port of Tauranga Chief Executive Mark Cairns said: “The agreement with Kotahi will be immediately earnings accretive for Port of Tauranga and will transform the New Zealand supply chain.

“The cargo commitments give Port of Tauranga the certainty to proceed with the infrastructure to accommodate the 6,500 TEU ships. 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 programme in freight marshalling facilities across the country including: MetroPort in Auckland and more recently PrimePort Timaru and our new freight hub in Rolleston, Christchurch. Port of Tauranga will continue to provide shippers across the country the most efficient freight options to markets thanks to these investments.

“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.

“We are looking forward to expanding our already highly-productive relationship with Kotahi and to increased visits from the Maersk Line fleet,” Mr Cairns said.

Kotahi and Port of Tauranga are continuing to explore and negotiate other operational efficiencies.

Maersk Line New Zealand Managing Director Gerard Morrison said: “The new long-term contract with Kotahi represents a new model of collaboration for our business and provides certainty for Maersk Line to build on our 17 year track record of providing premium services 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.

“We now have a clear path to work on the introduction of Maersk Line’s 6,500 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 container unit, compared to the existing New Zealand industry average,” Mr Morrison said.

Details of the agreements:

Volume and container commitments: Port of Tauranga will issue two million shares to Kotahi, representing 1.5% 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 certain freight volume commitments over a ten year period.

Timaru Container Terminal (TCTS): Kotahi has agreed to commit export traffic to Port of Tauranga subsidiary TCTS, which holds a 35 year lease over the 10 hectares of terminal operating area at PrimePort Timaru. In exchange for the commitment, Kotahi will get a 49.9% 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.

Maersk Line: Kotahi has agreed to commit a significant volume of export cargo to Maersk Line for New Zealand coastal and South East Asia trans-shipment ports. This gives Maersk Line volume certainty to plan for the introduction of 6,500 TEU ships to New Zealand. Further information on the new services to be introduced will be provided when details are confirmed.

1 In 2010 the New Zealand Shippers Council released its report “The question of Bigger Ships: securing New Zealand’s international supply chain”. The report indicated the savings available to New Zealand exporters as a result of a New Zealand port becoming capable of handling big ships was of the order of $338 million a year.
2 Twenty-foot equivalent unit.