ACCC confirms new inquiry into Port of Newcastle privatisation

The Australian Competition and Consumer Commission confirmed its interest after the Newcastle Herald obtained a copy of a letter the ACCC sent to industry figures and organisations just before Easter.

The ACCC letter is headed “Arrangements affecting container terminals at NSW ports” and opens by saying the regulator has “concerns about arrangements that may limit or prevent the development of a container terminal at the Port of Newcastle”.

Read more: Sights are set on a container terminal for Newcastle

“The purpose of this letter is to seek information relating to the viability of a container terminal at the Port of Newcastle and the impact of such a terminal on competition,” the ACCC’s enforcement director for NSW and the ACT, Sharon Clancy, wrote.

Ms Clancy said the ACCC was inquiring into the movement of containerised goods throughout NSW, the import and export of containerised goods on the Australian east coast, and the delivery of “landslide services at ports” on the east coast.

“The ACCC will use this information to assist with our assessment of whether competition issues may arise under the Competition and Consumer Act 2010,” Ms Clancy wrote. She referred to Section 45 of the Competition Act, which she said prohibited “contracts, arrangements or understandings which have the purpose or effect of substantially lessening competition”.

Read more: Why the port of Newcastle will diversify

Asked what had prompted the inquiry, an ACCC spokesperson said: “We have considered these issues over time, however, there are some recent developments that have renewed our interest.”

The ACCC inquiry has been welcomed by the Port of Newcastle, with its chairman Professor Roy Green saying the organisation is now “strongly committed” to a container terminal in the port.

The state member for Newcastle, Tim Crakanthorp, said it was “about time the issue was taken seriously”, and he was keen to know what “recent developments” had “finally sparked the ACCC’s interest”.

The ACCC inquiry is expected to look closely at a “strictly confidential” arrangement that the Coalition government promised to the private operator of Port Botany and Port Kembla to compensate it against any competing container terminal in Newcastle.

With then-treasurer Mike Baird driving the deal, Botany and Kembla were leased for 99 years to a single operator in April 2013 for $5 billion. Newcastle went on a 98-year lease, a year later, for $1.7 billion, just days after Mr Baird’s elevation as premier.

Comment: A new push for a container terminal

Rumours soon emerged about restraints on Newcastle’s ability to compete with Botany on containers, but the government insisted despite more than 100 parliamentary questions that there was no legislative barrier to a Newcastle terminal.

It was not until July 2016, when the Herald obtained a copy of a “port commitment” document, that the government confirmed that Newcastle could build a container terminal, but if it did, it would have to compensate Botany for any containers it handled above a limit of 30,000 a year. The fee was equivalent to what Botany would charge if it was handling the containers, effectively doubling Newcastle’s costs by adding about $1 million a ship.

As the Herald reported at the time, it was no wonder Coalition politicians were saying a Newcastle container terminal was not financially viable.

Records kept by the industry peak body, Ports Australia, show that Newcastle has generally handled about 10,000 to 15,000 containers a year since 2000. In that time, container trade through Botany has more than doubled to 2.4 million boxes.

A Newcastle container terminal was first proposed in the late 1990s by BHP as the best commercial use of its Mayfield site once the steelworks was demolished after closure in 1999. The Labor state government then took up the proposal, but nothing came of early attempts to set up a promised “multi-purpose terminal”.

Under the Coalition, the state-owned Newcastle Port Corporation had been negotiating with a preferred tenderer – a consortium led by a company called Anglo Ports – and it was the actual state of these negotiations at the time of privatisation that has proved a stumbling block to previous ACCC interest in the issue.

ACCC head Rod Sims has repeatedly expressed concerns about the fee, but the regulator has previously said it had no powers to intervene in the situation because the government was not carrying out a business in the port at the time of its privatisation, therefore there was no breach of competition law.

Former BHP figure Greg Cameron, who has fought a long and largely solo campaign to keep the terminal before the public eye, says the ACCC’s opinion has never been tested because of a confidentiality agreement with the government. He welcomed the ACCC’s renewed interest, but said the matter should be determined by a court.

 Management of the privatised port had generally declined to buy into the debate but this changed in December when Professor Green, a former Novocastrian and head of the Queensland Competition Authority, was appointed Port of Newcastle chairman.

Port of Newcastle has told the government its the Mayfield site could handle more than 2 million containers a year with “minimal government investment”, compared with the billions it says the government has acknowledged must be spent on roads and rail to put more containers through Botany and Kembla.

“This is not only about regional diversification, as important as it is,” Professor Green said on Tuesday. “It is also about de-congesting Sydney.”

A Newcastle container terminal  would help build “an optimal freight and ports system for NSW, cutting transport costs for regional exporters and making the state more competitive.