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.