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FREIGHT, WIDER POLICY CONSIDERATIONS AND IMPLICATIONS FOR TASMANIA’S PORTS Gary Swain - Deputy Secretary Strategy and Policy Department of Infrastructure, Energy and Resources Presentation to the AusIntermodal 2013 Conference Thursday 10 October 2013

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Text of Gary swain

FREIGHT, WIDER POLICY

CONSIDERATIONS AND IMPLICATIONS

FOR TASMANIAS PORTS

Gary Swain - Deputy Secretary Strategy and Policy

Department of Infrastructure, Energy and Resources

Presentation to the AusIntermodal 2013 Conference

Thursday 10 October 2013

Public funding scarcity.

Rising community expectations/demands for transparency.

Greater need for integration/optimisation of investments.

Incremental demand but lumpy supply.

Low returns to government from ownership.

Community resistance to price increases and use of developer charges.

Calls for greater private sector involvement (super funds).

INFRASTRUCTURE TRENDS IN AUSTRALIA

2

The Tasmanian Government plays a lead role in providing

road, rail and ports

infrastructure; rail services;

Bass Strait passenger

shipping services and to a

lesser degree freight

services; and public bus

transport.

TASMANIAS TRANSPORT SYSTEM

3 Data sources: Department of Infrastructure, Energy and Resources 2011-12 Tasmanian Freight Survey and TasPorts 2011-12 Import / Export data

The on-island freight system is characterised

by a dominant freight

corridor with a finite

number of major feeder

routes.

Forecast compound annual economic growth

of 1.7% per annum,

compared to mainland

equivalent growth of 2.4%

per annum.

TASMANIAS TRANSPORT SYSTEM

4 Data sources: Department of Infrastructure, Energy and Resources 2011-12 Tasmanian Freight Survey and TasPorts 2011-12 Import / Export data

Generally little road congestion.

Urban congestion is time and location specific.

The average peak delays in Hobart are around six minutes.

Some Tasmanians believe we have congestion but clearly it cannot be compared with other capital cities.

TASMANIAS TRANSPORT SYSTEM

5 Graph shows average AM peak travel times for Hobarts arterial routes and the difference from off-peak (day) travel times.

27km 26km 18km 17km 25km

03

:10

05

:46

06

:31

05

:03

06

:22

00:00

05:00

10:00

15:00

20:00

25:00

30:00

Brooker EastDerwent

South Arm SouthernOutlet

Tasman

Tra

ve

l T

ime

(m

inu

tes

)

Travel times for AM peak and off peak inwards journeys with peak/off-peak delay - 2011

AM Peak In

Peak Delay(from offpeak)Off Peak In

Major business focus on freight service availability and cost, particularly for international exports.

Around two thirds of Tasmanias total freight task is goods moving into or out of the state.

85 per cent of the shipping task is through Port of Melbourne

Due to physical separation, Tasmanias freight system relies on air and sea links - 99% of goods by volume are moved by sea.

The Tasmanian Freight Equalisation Scheme (TFES) is critical to alleviating the sea freight transport cost to shippers of eligible goods.

The TFES is embedded in the system including business models of

companies.

TASMANIAS FREIGHT TASK

6

Freight ports located at Burnie, Bell Bay, Devonport and Hobart - with a total throughput (imports and exports) of 11,214,930 tonnes in 2011/12.

Changes in demand and port throughput between 2007/08 and 2011/12:

Total tonnes (import and export) from 16,222,533 to 11,286,566;

Total TEU from 491,485 to 456,825;

Decline in TEU throughput through Bell Bay from 89,458 TEU to 5,885 TEU. Increases in Devonport (171,036 to 200,695) and Burnie (227,237 to 242,284).

Burnie Port capacity expansion project to commence 2014:

Estimated increase in capacity up to 350,000 TEU per annum; Burnie predicted to reach capacity in approximately 2020.

WIDER POLICY CONSIDERATIONS

7

The Freight Logistics Coordination Team (FLCT) was established in November 2012 by the Tasmanian

Government with funding support from the Australian

Government.

The FLCT is an independent expert advisory body comprised of 19 senior industry representatives and is

chaired by Phil Clark AM.

The FLCT has a clear focus on outcomes that deliver improved freight efficiency for Tasmanian businesses and

support business growth.

FREIGHT LOGISTICS COORDINATION TEAM (FLCT)

8

Individual commodity supply chains efficient but there are opportunities for system-wide improvement based on

greater collaboration.

Sample arc/node diagram (Aurecon).

FLCT KEY FINDINGS TO DATE

9

Bass Strait shipping is around 24% more expensive than similar European services; however, identifiable costs (labour costs and fuel)

are estimated to be 23% more expensive than European costs.

The loss of a direct international shipping service is hurting exporters.

The Tasmanian Freight Equalisation Scheme plays a critical role in adjusting domestic freight costs.

FLCT KEY FINDINGS TO DATE

10 Source: Aurecon Supply Chains in Tasmania, prepared for the FLCT

Freight demand is approaching the limit of existing vessel capacity during peak periods of the year.

All current shipping services across Bass Strait are high frequency and high quality and do not provide for low-cost, infrequent needs of many

shippers.

FLCT KEY FINDINGS TO DATE

11

Supply

Chain

Name

Commodity

Pe

ris

ha

ble

Ov

ern

igh

t

Tim

e

Se

ns

itiv

e

Pri

ce

Se

ns

itiv

e Volume

FY

2011/12

(TUE)

Volume %

Fresh Vegetables, Fish, Fruit X X X 35,000 15%

Low Cost Zinc, Aluminium, Scrap Metal,

Pulp and Waste Paper,

Furniture, Timber

X

30,000 13%

Low

Inventory

Newsprint, Paper, Misc.

Manufacturers, Beer, Crude

Fertiliser and Minerals,

Animal Foods

X

52,000 23%

Perishable Confectionary, Butter and

Cheese, Misc. Food

Preparations, Livestock,

Meat, Frozen Vegetables

X

X

29,000 13%

Empty Empty Containers X

74,000 33%

Unclassified Various 7,000 3%

Total 28% 15% 51% 46% 227,000

FLCT KEY FINDINGS TO DATE

12

Tasmanian shipping services are regarded by the market as efficient, timely and reliable.

Coordination with transport services means products can get to mainland markets within 24 hours.

Many businesses have designed their supply chains around this level of service with minimal on-island warehousing

(make and ship logistics model a feature of the market).

There is some market interest in direct international shipping services which is being explored.

Structural change is occurring in the Tasmanian economy, which are likely to produce modest growth in freight

demand.

Share of Gross Value Added by Industry, Tasmania, 1991-92 to 2011-12,

original annual data (excluding ownership of dwellings)

WIDER POLICY CONSIDERATIONS

13 Source: Tasmanian Department of Treasury and Finance Structural Change in the Tasmanian Economy. Data: Australian National Accounts: State Accounts, ABS Cat No 5220.0

Significant public/private investment in irrigation; dairy and acquaculture expansion; several new mining operations.

Expanded arrangements with Asia on the Governments agenda based on export oriented economy.

Transport infrastructure is an enabler for productivity, economic growth and social amenity.

Concentration in infrastructure service provision is a potential issue in a regional economy.

WIDER POLICY CONSIDERATIONS

14

Freight is on the agenda to stay.

A transparent long-term ports strategy is needed that aligns with road and rail arrangements, and critically, customer needs.

Ports specialisation occurring already:

Bulk minerals at Burnie and dry bulk terminal at Bell Bay;

Specialised terminal (passenger, cement) at Devonport;

Priority container terminal (location still being developed).

Hobart increasingly being used as a port for Antarctic and cruise vessels.

TasPorts strategy involves the short term development of container terminal and intermodal capacity at Burnie to meet 0-5 year volume

forecasts.

IMPLICATIONS FOR TASMANIAS PORTS

15

Improved commercial returns through cost reductions required to create enhanced options for private sector involvement.

Governance arrangements for government owned entities provides for joint venture arrangements with third parties and long-term contracting

for capex and opex projects.

Need to maximise existing capacity while planning for long-term capacity increases under multiple scenarios.

Government has levers it can/does/could use performance benchmarking linked to KPIs through its shareholder role; economic regulation and structural reform but changes need to be carefully thought through.

IMPLICATIONS FOR TASMANIAS PORTS

16

Policy thinking in this space is developing now, we are open to ideas/suggestions/engagement that:

supports the growth and diversification of the economy;

reduces future funding requirements without creating unmanageable market design risk; and

meets long-term community and stakeholder needs.

IMPLICATIONS FOR TASMANIAS PORTS

17