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Ferry investment questions by shipping industry advocate

Contributor:
Fuseworks Media
Fuseworks Media

by Pam Graham of NZPA

Wellington, June 23 NZPA - KiwiRail's plans for its Cook Strait ferries will cost tax payers $220 million and be a commercial failure, a shipping industry figure says.

KiwiRail operates three Cook Strait ferries, only one of which -- the 25 year old Arahura -- it owns. It would like to increase the length of the Aratere by 30 metres and reshape its bow, fit rails to the Kaitaki and replace the Arahura by 2015.

The KiwiRail ferries are traditionally part of the national rail network because wagons can be shunted on them. Thomas Davis, general manager Interislander, says that without rail-capable ferries there is no national rail network.

Rod Grout, a director of Maritime Transport Consultancy, said KiwiRail's ferry projects were a recipe for commercial failure.

He said the "iron bridge" concept for the Cook Strait was rooted in the 1960s and had no justification today.

"KiwiRail says its national network must be all or nothing and include rail ferries, but the reality is it would be much better off without them.

"It would attain profitability sooner by developing point-to-point bulk haul routes within the North and South Islands, better servicing the needs of regional manufacturers and exporters.

"At the same time it should retain its main trunk Auckland-Wellington and Invercargill-Christchurch lines for intra-island volumes."

"However, much KiwiRail backs the virtues of keeping an inter-island link open, money spent on specialised rail ferries is a waste of public funding and will do little to improve freight efficiency," said Mr Grout, who is a well known advocate for the coastal shipping industry.

He said it would cost around $35m to lengthen the Aratere, $65m to make the Kaitaki rail-capable and convert terminals for it and $130m to replace the Arahura. The Kaitaki was introduced by previous owners Toll Holdings and is not rail-capable.

"Such a major investment would require a substantial hike in rail freight charges to be recouped over the lifetime of the upgraded vessels.

"Given the competition that exists from overseas and local ships on inter-island freight rates, the prospect of commercial return is highly improbable, if not impossible," he said.

Rival Cook Strait ferry operator Bluebridge does not have rail-capable ferries.

The $220m would purchase six near-new coastal ships each capable of carrying 700 twenty-foot equivalent containers.

"In fact you wouldn't even need to buy the ships -- they can be chartered for a fraction of this amount and introduced progressively to the coast.

"They would provide a daily cargo service linking Auckland, Tauranga and possibly other North Island ports directly with Canterbury.

"Any number of these ships are available, whereas compatible rail ferries are not and any replacement would need to be built from scratch."

The demise of inter-island rail freight would not be a backward step, but a sensible and overdue move toward transport sustainability.

KiwiRail's turn around plan identifies Auckland to Christchurch as a key route.

The other key rail routes are Auckland to Tauranga, a busy route that services the Port of Tauranga and the forestry lines in Waikato and Bay of Plenty.

The coal route from Westport to Lyttelton and the milk route from Oringi to Whareroa, and the route from Edendale to Dunedin, Timaru and Lyttelton are also seen as key. Metro lines and Wellington and Auckland and the Cook Strait are the only other key routes KiwiRail has so far identified.

Industry observers have long asked if a rail industry is feasible with only regional routes.

Back in 1992 a Treasury scoping study prior to the privatisation of Tranz Rail said New Zealand did not need a rail network to move freight and probably only needed passenger trains in Wellington.

The network was developed when regulations required that freight travelling long distances had to be carried on the rail network.

Rail became over-capitalised and work practices were famously bad. The dismantling of the regulations from 1977 to 1985 led to a halving of land freight costs between 1980 and the early 1990s. By 1992 New Zealand Rail had lost 30 percent of its market.

These days companies like Mainfreight, which grew as a result of deregulation of transport, are keen to move freight on the rail network.

"The Government's decision to assist KiwiRail with increased funding is welcome, if not overdue. Improving rail infrastructure for future freight growth and supply chain efficiency is crucial for New Zealand, just as port reform also needs addressing," the company said when releasing its annual result.

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