The Impact of a Direct Maritime Freight Service for the Pilbara Final Report
Total Page:16
File Type:pdf, Size:1020Kb
Pilbara Development Commission The impact of a Direct Maritime Freight Service for the Pilbara Final Report Final issued | 11 February 2019 This report takes into account the particular instructions and requirements of our client. It is not intended for and should not be relied upon by any third party and no responsibility is undertaken to any third party. Job number 262552-00 Arup Pty Ltd ABN 18 000 966 165 Arup Level 5 151 Clarence Street Sydney NSW 2000 Australia www.arup.com Document Verification Job title The impact of a Direct Maritime Freight Service for Job number the Pilbara 262552-00 Document title Final Report File reference Document ref Revision Date Filename Draft 1 2 1 Dec Description First draft 2018 Prepared by Checked by Approved by Name Frank Boyce Tristan Durie Philip Fisher Signature Draft 2 2 5th Jan Filename 2019 Description Final draft Prepared by Checked by Approved by Name Frank Boyce Tristan Durie Philip Fisher Signature Final 1 1 Feb Filename 2019 Description Final issued Prepared by Checked by Approved by Name Frank Boyce Tristan Durie Philip Fisher Signature Filename Description Prepared by Checked by Approved by Name Signature Issue Document Verification with Document | Final issued | 11 February 2019 | Arup Pilbara Development Commission The impact of a Direct Maritime Freight Service for the Pilbara Final Report Contents Page 1 Introduction 3 2 Background 4 2.1 Pilbara Region 4 2.2 Freight Needs 5 2.3 Current Inbound Logistics 6 2.4 The Proposed Option 8 3 Approach 9 3.1 CGE Modelling 10 3.2 Additional economic analysis 11 4 Economic benefits 16 4.1 CGE modelling 16 4.2 Additional economic benefits 19 5 Conclusion 23 5.1 Further work 23 | Final issued | 11 February 2019 | Arup Pilbara Development Commission The impact of a Direct Maritime Freight Service for the Pilbara Final Report Transport and infrastructure Council. (2018). ATAP Guidelines (T2 Cost Benefit Analysis). Transport for NSW. (2016). Principles and Guidelines for Economic Appraisal of Transport Investment and Initiatives . US Federal Highway Administration. (2001). Freight BCA Study. Table 1: Allocated inbound road freight volumes by LGA Table 2: Calculated freight cost savings by LGA Table 3: Maritime market share capture inputs Table 4: Effects of Improved Freight Transport and Logistic Re-organisation (US Federal Highway Administration, 2001) Table 5: CGE results by region ($ million) Table 6: Sensitivity testing results ($ million) Figure 1: Real Pilbara GRP, % gain from the DMFS (CGE results) Figure 2: Pilbara Ports (Department for Transport, Western Australia) Figure 3: Cargo flows in and out of Pilbara Region (excl. Minerals) 2017-2018, Source: Sea Freight: Pilbara Port Authority (2018), Road Freight: Main Roads WA (2018), and as per advice from the Western Roads Federation Figure 4: Product flows by method of transportation Figure 5: Western Australia Major Highways Figure 6: Baseline growth paths for the Pilbara, RoWA and RoA (Source: Centre of Policy Studies, Victoria University (CoPS)) Figure 7: Labour market CGE results (Source: CoPS) Figure 8: Real GRP CGE results (Source: CoPS) | Final issued | 11 February 2019 | Arup Pilbara Development Commission The impact of a Direct Maritime Freight Service for the Pilbara Final Report Executive Summary The Pilbara region is situated in the north of Western Australia, lying approximately 1,200 km north of Perth and representing around 20% of Australia’s land mass. The Pilbara region generated revenue of $60.2 billion in 2017 (REMPLAN) of which $42.1 billion was derived from mining, $8.9 billion from construction and $1.9 billion from manufacturing. The Pilbara was responsible for 12.3% of revenue in Western Australia. The Pilbara Ports Authority (PPA) operates five ports in the Pilbara region including the two major ports of Port Hedland and Dampier. These are two of the world’s largest bulk ports and export significant quantities of iron ore from the mines to destinations across the world. Inbound flows of freight to the Pilbara region are generally imported over land via road trains from Fremantle or Perth. Northbound road trains utilise two major highways from Perth to the Pilbara, the North West Coastal Highway (NWCH) and the Great Northern Highway (GNH). Many Pilbara-based companies note that road-based freight from Fremantle is currently limiting their business with several congestion points on the road network impacting logistics efficiency. In order to address the problem of high import costs, alleviate the issues facing road-based inbound cargo to the Pilbara as well as offering wider economic benefits to the region, the Pilbara Development Commission (PDC) propose the creation of direct maritime freight service (DMFS) into the Port of Dampier. CGE modelling, simulating the shock of lower import freight costs, indicates that the DMFS would result in a positive economic gain to the Pilbara, increasing real GRP for the region by 1.12% in 2022. The gain is sustained throughout the forecast period, reaching 1.14% in 2030, and is largely attributable to the productivity improvement driven by the savings to inbound freight costs. CGE results also indicate a cumulative gain to national welfare (measured in household and government consumption) of $1.1 billion over the twelve-year study period (2019- 2030). These results were generated based on a parallel study into the potential import cost reduction using a DMFS, compared to importing freight into Perth and transporting to the Pilbara by road. The model assumed the DMFS would attract a 20% market share of contestable freight, phased in evenly over the first four years of the study period (2019-2022). Figure 1 illustrates how the DMFS impacts real GRP over the study period. | Final issued | 11 February 2019 | Arup Page 1 Pilbara Development Commission The impact of a Direct Maritime Freight Service for the Pilbara Final Report Real GRP 1.20 1.00 0.80 0.60 0.40 0.20 % gain from the DMFS thefrom gain% 0.00 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Figure 1: Real Pilbara GRP, % gain from the DMFS (CGE results) Outside the quantified benefits to the economy from the CGE modelling, the major benefit of such a service appears to be in achieving significant import freight cost reductions for Pilbara businesses allowing them to become more competitive across Western Australia, Australia as a whole and possibly globally. These firms are likely to experience increased demand, stimulating jobs and further investment into the region. A direct maritime freight service would also offer local businesses access to a greater range of export markets across Australia and internationally. Aside from stimulating growth in the region, removing land-based transport may offer significant benefits to stakeholders across Western Australia. Accident and road maintenance costs may be reduced while environmental benefits such as reduced greenhouse gas emissions are also realised. | Final issued | 11 February 2019 | Arup Page 2 Pilbara Development Commission The impact of a Direct Maritime Freight Service for the Pilbara Final Report 1 Introduction Arup were engaged by the Pilbara Development Commission to understand and demonstrate the direct and indirect impacts to the economies of the Pilbara, Western Australia and Australia of reducing transport costs in the Pilbara for goods using a direct and regular maritime freight service. The scope of our engagement included using Computable General Equilibrium (CGE) modelling to quantify the potential impacts of a reduction of the cost of goods into the Pilbara at a regional, state and national level as well as a qualitative analysis into any additional relevant impacts such as environmental or safety benefits. This report details our findings and is structured as follows: - Background: In this section we outline the context of the project including an outline of the Pilbara region, the current inbound and outbound freight tasks and the proposed solution. - Approach: In this section we describe our approach to the analysis including how we derived inputs to the CGE modelling as well as listing some of the potential additional economic benefits. We also include a summary of the stakeholder engagement exercise. - Economic Benefits: This section describes the results of the CGE modelling and includes a discussion of additional economic benefits that may be achieved from a direct shipping service. - Conclusion: We conclude on the results of our study and make recommendations for potential next steps. | Final issued | 11 February 2019 | Arup Page 3 Pilbara Development Commission The impact of a Direct Maritime Freight Service for the Pilbara Final Report 2 Background 2.1 Pilbara Region The Pilbara region is situated in the north of Western Australia, bordered in the east by the Northern Territory border and, in the west, by the Indian Ocean. The region lies approximately 1,200 km north of Perth and represents around 20% of Australia’s land mass. The Pilbara is rich in natural resources with mining, mineral processing and energy the fundamental drivers of growth and development in the region. The Pilbara region generated revenue of $60.2 billion in 2017 (REMPLAN) of which $42.1 billion was derived from mining, $8.9 billion from construction and $1.9 billion from manufacturing. The majority of mineral value in the Pilbara is Iron Ore (97% of total mineral value in 2017-2018 according to the Western Australia mineral and petroleum statistics digest 2017- 2018). The Pilbara was responsible for 12.3% of revenue in Western Australia. The Pilbara region is made up of four local government authorities (Ashburton, East Pilbara, Port Hedland and Karratha) and has a population of approximately 61,000. The mining and construction industries provide the largest number of jobs, 29,000 and 11,000 respectively in 2016 (ABS Census, 2016). The Pilbara Ports Authority (PPA) operates five ports in the Pilbara region including the two major ports of Port Hedland and Dampier.