On The Case For Investing In Coastal Shipping

The endur­ing dam­age done by the eco­nom­ic reforms of the 1980/1990s is still play­ing out in the com­mu­ni­ties that lost thou­sands of well-paid full time jobs, and with a sub­se­quent influx of drugs, domes­tic vio­lence and men­tal health prob­lems. A far less vis­i­ble vic­tim of the mar­ket mania for de-reg­u­la­tion has been coastal ship­ping. As Mar­itime Union nation­al sec­re­tary Craig Har­ri­son recent­ly point­ed out:

We had 34 New Zealand flagged ships in 1994. Today we have just one Kiwi flagged con­tain­er ship. That’s an incred­i­ble loss. We used to pro­tect our coastal ship­ping by requir­ing domes­tic freight to be shipped only by New Zealand reg­is­tered ves­sels oper­at­ing under New Zealand law. We did this because we recog­nised ship­ping was vital to our eco­nom­ic inter­ests. When that pro­tec­tion was removed in the dereg­u­la­tion of the 1990’s, the fleet dwin­dled in the face of inter­na­tion­al com­pa­nies, run­ning crews who weren’t pro­tect­ed by New Zealand’s min­i­mum employ­ment stan­dards.

In stark con­trast, the home of free mar­ket cap­i­tal­ism has always for­bid­den that sort of thing. Under the Jones Act, the US still requires goods shipped between U.S. ports to be trans­port­ed on ships that are built, owned, and oper­at­ed by US cit­i­zens or per­ma­nent res­i­dents. We are still pay­ing the price for doing the oppo­site. Essen­tial­ly, we have made our­selves cap­tive to the pri­or­i­ties of large inter­na­tion­al ship­ping lines that dump incom­ing freight at the likes of the Port of Auck­land (POAL) or Tau­ran­ga, fuelling port con­ges­tion and freight delays. Most of this car­go is reliant on trucks and ( belat­ed­ly) on rail. Export goods orig­i­nat­ing in all parts of the coun­try face the same prob­lems in reverse.

What Har­ri­son has been call­ing for is more of a hub and spoke oper­a­tion where coastal ships that are more attuned to the deliv­ery needs of our rel­a­tive­ly small scale import/export trade are deployed to shift con­tain­ers to and fro from hubs like Tau­ran­ga, POAL and Lyt­tle­ton to region­al spokes like Nel­son, Timaru, Napi­er, Bluff, New Ply­mouth etc. It just isn’t worth the while of inter­na­tion­al con­tain­er ship­ping to ser­vice the region­al NZ trade.

Char­ter Them

Obvi­ous­ly, we wouldn’t have to build or to buy this new domes­tic fleet. The ships would be avail­able for char­ter. These small­er, domes­ti­cal­ly flagged and crewed ships could then respond flex­i­bly to mar­ket demand, while reduc­ing con­ges­tion and cre­at­ing full time jobs both on the water and in provin­cial ports. These jobs would help off­set any job loss­es in truck­ing. Talk­ing of which…since few­er trucks would be on our roads, there would be less of the cur­rent cost­ly dam­age to our road­ing net­work, and few­er truck-relat­ed traf­fic acci­dents. Over­all, it could only be a win/win out­come if ships and rail could be made to func­tion in uni­son to car­ry a good deal more of this country’s imports, exports and per­ish­able goods to and fro from the major port hubs.

The pro­mo­tion of coastal ship­ping is not mere­ly con­sis­tent with the belat­ed revival (by Labour and New Zealand First) of the provin­cial rail net­work, but is an essen­tial adjunct to it. There would be envi­ron­men­tal gains as well. This week, the Cli­mate Change Com­mis­sion draft report sig­nalled the need for New Zealand to de-car­bonise the trans­port sec­tor. Much of the sub­se­quent debate has been about the tran­si­tion to elec­tric pas­sen­ger vehi­cles, and the grad­ual phas­ing out of pri­vate cars reliant on fos­sil fuels. Yet our depen­den­cy on truck­ing is an area where gains can be made, and with­out wait­ing for Elon Musk and his rivals to come up with viable self-dri­ving and bat­tery oper­at­ed trucks.

The real­i­ty is that – right now- more of our freight could be being moved by rail and coastal ship­ping net­works less prone to emis­sions, and open to fur­ther advances from elec­tri­fi­ca­tion. As men­tioned, there would be imme­di­ate emis­sions reduc­tion gains by reduc­ing the num­ber of trucks pound­ing up and down the road­ing sys­tem. Fur­ther ahead, the tech­nol­o­gy for bat­tery-pow­ered and/or hydro­gen pow­ered con­tain­er ships is already well under way. This advance won’t arrive overnight, for rea­sons point­ed out in this Wired mag­a­zine arti­cle. Yet with a recent 8 mil­lion euro injec­tion funds from the Euro­pean Union, deliv­ery of

Norway’s green hydro­gen ship pro­to­type is already in sight :

The good ship Tope­ka will run on a 1,000-kilowatt-hour bat­tery and a spe­cialised hydro­gen fuel cell, which means the ves­sel would emit no green­house gas emis­sions from the moment it launch­es, cur­rent­ly sched­uled for 2024…the Tope­ka will be our first step towards scal­able LH2 [liq­uid green hydro­gen] fuelled mar­itime oper­a­tions. We shall cre­ate a full LH2 infra­struc­ture and com­mer­cial ecosys­tem, while at the same time remov­ing year­ly some 25,000 trucks from the roads,” Per Brinch­mann, vice-pres­i­dent of spe­cial projects at Wil­helm­sen, the project’s coor­di­na­tors, said in a state­ment.

Basi­cal­ly, if we can put the char­ter­ing infra­struc­ture for coastal ship­ping in place, we would then be well posi­tioned when the de-car­bonised ship­ping fleets begin to arrive in five or ten years time, which is rough­ly the “put up or pay up” time for New Zealand to meet its Paris cli­mate change com­mit­ments.

Point being : a coastal ship­ping revival would not be a nos­tal­gia trip like­ly to re-empow­er the wharfies for a replay of the 1951 lock­out. Instead, it would be a for­ward-fac­ing pol­i­cy con­sis­tent with the press­ing needs to (a) de-car­bonise the trans­port sec­tor (b) work in har­mo­ny with rail and © pre­pare this small trad­ing nation for the trad­ing envi­ron­ment of the future, in which we will be con­stant­ly need­ing to re-assure our cus­tomers in for­eign mar­kets that New Zealand is doing all it can to reduce its glob­al car­bon foot­print. Arguably then, each of the three emis­sion reduc­tion bud­gets cit­ed in the Cli­mate Change Com­mis­sion report should set out the progress being made on turn­ing the coastal ship­ping revival into a real­i­ty, with line items cit­ing the funds being allo­cat­ed to make it hap­pen.

And natural disasters

Final­ly… There are a few oth­er poten­tial advan­tages from a size­able gov­ern­ment invest­ment in this sec­tor. As we saw in the after­math of the 2016 Kaik­oura earth­quake, the trans­port links to and from New Zealand’s pop­u­la­tion cen­tres can be extreme­ly vul­ner­a­ble to nat­ur­al dis­as­ters. In the wake of a major earth­quake Welling­ton – for instance — could well be cut off for months. Almost inevitably, a major quake would do dam­age (a) to the city’s frag­ile water sup­ply lines, some of which run adja­cent to fault lines along the Hutt Road. and (b) to the rail net­work and © to the grand total of two roads (ie up Ngau­ran­ga Gorge and to the Hutt Val­ley) that link the cap­i­tal city to the rest of the North Island. After a quake, Welling­ton could well become entire­ly depen­dent on coastal ship­ping. If only it exist­ed, in a mean­ing­ful way.

Foot­note: At present, “New Zealand’s lead­ing ded­i­cat­ed coastal ship oper­a­tor and sus­tain­able domes­tic car­go carrier”is the Paci­fi­ca Ship­ping Line, which fer­ries freight to and from our region­al ports via the MV Moana Chief. Iron­i­cal­ly though, Paci­fi­ca was bought in 2014 by the Chi­na Nav­i­ga­tion Com­pa­ny, which is the deep sea ship own­ing and oper­at­ing arm of the mul­ti-nation­al Swire Group, a Hong Kong and Lon­don based con­glom­er­ate start­ed by John Swire in Liv­er­pool in 1816.

The Swire Group has been active in Chi­na since 1866, where it is bet­ter known as Taikoo. Since 1948, Swire has owned the Cathay Pacif­ic air­line among a raft of oth­er enter­pris­es, from hotels and office build­ings on sev­er­al con­ti­nents to fleets of con­tain­er ships and tankers to sug­ar fac­to­ries etc. Chi­na Nav­i­ga­tion itself was found­ed by John Swire’s son in 1872, ini­tial­ly to fer­ry freight up the Yangtze Riv­er. Lit­tle of this his­to­ry is on Pacifica’s web­site, but the web­site is still worth check­ing out.