Prime Minister Scott Morrison in early March visited the Port of Newcastle which hopes to develop a container terminal capable of handling up to 2 million TEUs per annum but currently has to pay fees to Port Botany and Kembla operators if its annual container traffic exceeds 30,000 TEUs. Photo: Port of Newcastle
PLANS to develop a waterside container terminal at the Port of Newcastle (PoN) have suffered a setback with today’s announcement that the Federal Court has dismissed the Australian Competition and Consumer Commission’s (ACCC) proceedings against NSW Ports.
The dismissal means that PoN will have to pay a fee to Port Botany and Port Kembla operators if PoN container traffic exceeds 30,000 twenty-foot equivalent units (TEUs) per annum.
To this, PoN has plans to develop the Multi-Purpose Deepwater Terminal (MDT) at Mayfield to handle up to 2 million TEUs per annum.
Newcastle currently has limited container infrastructure and few vessels calling, which means it has been handling more like 10,000 TEUs per year since it was privatised in 2014.
Port Kembla has been handling approximately 1600 TEUs per year since it was privatised in 2013.
Port deeds stand
The Federal Court proceedings concerned agreements known as Port Commitment Deeds, which were entered into as part of the privatisation of Port Botany and Port Kembla by the NSW Government in 2013 for a term of 50 years.
They oblige the State of NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle exceeds 30,000 TEUS per annum.
Another 50-year deed, signed in May 2014 when the PoN was privatised, requires it to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla.
In a statement, the ACCC said this reimbursement would effectively double the cost of moving a container through Newcastle.
“This judgment provides an enormous hurdle for the Port of Newcastle to develop a container terminal to compete with Port Botany and Port Kembla, because of financial consequences arising from the deeds,” ACCC chair Rod Sims said.
“Less competition usually results in higher charges for businesses and consumers.”
The ACCC had argued that the Port Commitment Deeds had an anti-competitive purpose and effect, and 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.
The Court dismissed these claims.
At this stage, the judgment has been made available only to the parties’ lawyers, and on a restricted basis, pending resolution of confidentiality issues.
Therefore, the reasoning behind the Federal Court’s decision is not yet public.
PoN and ACCC are expected to comment on the court’s decision once the reasons for judgment are made public.
“We are disappointed by the Court’s decision today in the ACCC’s case against NSW Ports,” a PoN spokesperson said in a statement released today.
Mr Sims said the ACCC launched the action to remove a barrier to competition in an important market, the supply of port services, which had a significant impact on the cost of goods paid by Australian consumers.
“We alleged that making these agreements containing provisions which would effectively compensate Port Kembla and Port Botany if the Port of Newcastle developed a container terminal, was anti-competitive and illegal,” Mr Sims said.
“Absent new entry, NSW Ports will have an effective monopoly in moving containers in NSW for 50 years.
“Such barriers damage Australia’s productivity performance.”
In a statement released in early March following a site visit from Prime Minister Scott Morrison, PoN said the MDT would create a more cost-competitive supply chain for NSW businesses that trade internationally.
“Once penalties on container trade through the port are removed, Port of Newcastle is keen to move forward with the project and fuel the jobs and economic opportunities it will bring with it,” PoN said.
Background
In December 2018, the ACCC instituted proceedings against NSW Ports. 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.
NSW Ports operates Port Botany and Port Kembla under 99-year leases from the State of NSW Ports.
The compensation to be paid by the State of NSW under the Port Commitment Deeds to the operators of Port Botany and Port Kembla is equivalent to the wharfage fee the port operators would receive if they handled the containers.
Container traffic at the Port of Newcastle has not yet exceeded the specified cap, and therefore no payments have been made.
Under the 2013 Port Commitment Deeds, it was agreed the State of NSW would pay compensation to the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle exceeded a cap of 30,000 TEUs per annum (adjusted by an annual growth rate).
According to the NSW Ports website Port Kembla has been approved by the NSW Government as NSW’s next container port once Port Botany nears capacity.
NSW Ports is owned jointly by global fund mangers IFM Investors, Abu Dhabi Investment Authority’s Tawreed Investments, and four Australian super funds: Australian Super; Cbus; HESTA, and Hostplus.
PoN is owned jointly by The Infrastructure Fund, an Australian investor with domestic and offshore assets, and the Hong Kong-based China Merchants Port Holdings Company (CMPort).
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