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Submission on Second Container Port Advice

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Submission on Second Container Port Advice 03 April 2017 Chief Executive Officer Infrastructure Victoria Level 16, 530 Collins Street MELBOURNE VIC 3000 Dear Mr Masson, SUBMISSION ON SECOND CONTAINER PORT ADVICE EVIDENCE BASE LeadWest and the Western Transport Alliance welcome the opportunity to provide Infrastructure Victoria with a joint-submission in response to the discussion paper on the second container port advice Evidence Base. LeadWest is the regional organisation for Melbourne's west. Focused on advocacy for the region, LeadWest is a nonpartisan and not-for-profit, membership-based organisation. LeadWest’s objective is to foster and undertake actions that will support sustainable growth and development of Melbourne’s west. LeadWest was formed by the six local governments in Melbourne's west and they are joined in LeadWest’s membership by major companies and other organisations, each with substantial operations or interests that are based in Melbourne's west. LeadWest also has a growing number of affiliates, primarily not-for-profit organisations and each playing a significant role in our region. You can access more information on LeadWest at www.leadwest.com.au The Western Transport Alliance was also formed by the six local governments in Melbourne's west and is a coalition of organisations including VicRoads, the RACV, the Victorian Transport Association, transport and distribution businesses, and the Habitat Trust. It is currently chaired by Mr Stephen Wall, a director of LeadWest and the chief executive officer of Maribyrnong City Council. OVERVIEW LeadWest and the Western Transport Alliance support the balanced, evidence-based approach adopted by Infrastructure Victoria as a basis for its advice to the Minister. We appreciate that it is complex to choose when and where to invest in new port capacity and welcome the invitation to submit: • any information that is different or contrary to the evidence put forward by Infrastructure Victoria • any evidence that expands the information that can be drawn on by Infrastructure Victoria. LeadWest and the Western Transport Alliance agree that container demand projections, navigating the Port Phillip Heads, and future ship size are key factors relevant to both when and where to invest in container capacity. We also support the emphasis placed on the important role that Melbourne’s west plays in the import and export supply chain for Melbourne and Victoria. There are however some areas of the evidence base where LeadWest believes further information should be gathered to ensure that a full and accurate picture of the future of containerised freight in Victoria is developed. Specifically, we believe that further work should be considered on the following areas of evidence: 1. whether the demand growth modelled by Deloitte, particularly post 2040, is too low; 2. detailed mapping of the exact origin and destination of containerised freight demand across Melbourne and Victoria, particularly accounting for significant growth predicted for Melbourne’s west; 3. further modelling of how both the geographic and modal structure of supply chains to the Port of Melbourne could change from its present state in the medium to long-term future; 4. reconsideration of the view that rail mode will not exceed 30 per cent, and what impact a greater rail mode share would have on future port capacity. 5. further evidence regarding the impact of growth in the suburbs surrounding the Port of Melbourne on road and rail capacity, as well as tolerance for social and environmental impacts; 6. a thorough economic analysis of the opportunity cost of increasing capacity at the Port of Melbourne, on both existing and alternative future use of land and supporting infrastructure; Page 2 of 11 7. consideration of the current and future impact of freight traffic travelling to the Port of Melbourne on the health and safety of cyclist and pedestrians in Melbourne’s inner west; 8. consideration of the potential economic benefit of synergies between Bay West, Avalon Airport and a future Western Interstate Freight Terminal as part of the business case for a Bay West port option; and 9. consideration of the potential economic benefit of future channelling improvements being shared between all harbours in the Port Phillip Bay area. FEEDBACK ON DEMAND FORECAST LeadWest and the Western Transport Alliance agree with Infrastructure Victoria that it is important to estimate future demand for both import and export containers. Given that the Port of Melbourne is not currently at capacity, it is this growth that will by the principal driver of when and where additional port investments are required. We note however that the long-term demand forecasts (particularly past 2040) provided by Deloitte for this report are a lot lower than other recent reports - most notably the 2014 analysis conducted by the Victorian Department of Finance. More detailed consideration should be given to this discrepancy, including whether Deloitte's model is too low. Demand will obviously impact when a second port will be viable, with higher demand meaning that the Port of Melbourne will reach capacity ahead of predictions and a second port may be required sooner. 1. We encourage Infrastructure Victoria to assess: a. whether the demand growth modelled by Deloitte, particularly post 2040, is too low in comparison to other recent models; and b. What impact a higher demand than any of the Deloitte modelling would have on when and where a second part may be required. LeadWest believes that the geographic location of both current and future demand across Melbourne, Victoria and South-eastern Australia is a critical factor in deciding how this demand can be accommodated. At present, the discussion paper only considers overall growth in demand for containerised freight, and not where this demand (both import and export) will be generated. This information will be a key factor in the cost-benefit of both continued operations at Melbourne and the potential benefits of both options for a future second port. Page 3 of 11 As noted later in the report on pages 50-54, most future residential and industrial growth is likely to occur in Melbourne's north and west. We agree that these regions, along with their hinterlands, are the future growth areas for Melbourne. Victoria in Future predicts that the population in Melbourne’s west will grow to 1.17 million by 2031, in Melbourne’s north to 1.23 million, in central Melbourne to 760,900, and in the regions to the north and west of Victoria to 1.47 million (i.e. a total of 4.57 million); whereas in contrast the population in Melbourne’s east will grow to 1.23 million, in Melbourne’s south to 1.6 million and in Gippsland and Alpine to 333,700 (i.e. a total of 3.16 million). Clearly, most of Victoria’s future population will be located to the north and west of Melbourne. LeadWest would argue that this disproportionate weighting of growth is likely to make both increased capacity at the Port of Melbourne and a second port at Bay West more favourable options in comparison to a second port at Hastings. Furthermore, the transport links into the western region and the Port of Melbourne serve a large south east Australian hinterland with export production and population centres largely to the north and west of Melbourne, including large parts of South Australia and the NSW Riverina, in addition to Victorian regional centres such as Ballarat, Bendigo, Mildura and Warrnambool. 2. We encourage Infrastructure Victoria to: a. commission detailed modelling of where demand will come from geographically within Victoria and Australia; and b. consider how the point-to-point movement of this growth in container freight would impact on the viability of a second port location. FEEDBACK ON SHIP NAVIGATION SIMULATION LeadWest and the Western Transport Alliance agree with Infrastructure Victoria that critical to decisions on when and where to invest in new container capacity is assessment of the size of ships and number of ships that can access Port Phillip Bay through the Port Phillip Heads. We broadly support the evidence presented regarding these capacity constraints and do not see any major flaws in this analysis. We note and agree with the conclusion reach on page 37: that regarding ship size and call frequency, there is ample capacity with the use of ships up to the size of 14,000 TEU to accommodate all demand through The Heads until mid-2100. Page 4 of 11 FEEDBACK ON SHIP SIZES LeadWest and the Western Transport Alliance agree with Infrastructure Victoria that assessment of likely future ships sizes is pre-requisite to an informed decision on when and where to invest in future container capacity. LeadWest and the Western Transport Alliance note the assessment of the Victoria University Institute of Supply Chain Logistics1 that it is problematic to assume that Post Panamax Plus vessels will visit Australian ports. Market size drives the TEU capacity requirement and thus the size of the vessel sent to a particular port. As expressed in the discussion paper, ships need to be close to full and without significant industry consolidation there is not enough demand to fill 18,000 TEU vessels for Australian services for decades and we are unlikely to see such ships before 2066. LeadWest and the Western Transport Alliance also agree with the evidence and conclusion reached on pages 43-44: that while The Heads present a theoretical constraint to ship sizes above 14,000 TEU entering Port Phillip Bay, the likelihood of ships above 14,000 TEU serving Melbourne is limited by the size constraints at Eastern Australia’s other major ports in Brisbane and Sydney. As noted in the paper, constrained capacity in one of these three ports will almost certainly create a flow-on constraint on all three ports.
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