Port of Tauranga ties up 97% of North Island dairy exports after Coda deal

Port of Tauranga [NZX: POT], New Zealand's biggest port by volume, now handles almost all of the North Island's dairy exports following its Coda joint venture with Kotahi, the logistics company owned by Fonterra Cooperative Group and Silver Fern Farms.

Kotahi combined its Dairy Transport Logistics business with Tauranga's Tapper Transport unit, container packing facility MetroPack and its stake in container repair and storage business, MetroBox, to form 50-50 owned Coda Group, a land-side logistics partnership, in May.

The changes are slashing the number of empty containers and trucks between Auckland and Palmerston North, for example, while routing more export volumes through Tauranga. Ports that have lost dairy include Taranaki and Napier. Dairy export volumes across Tauranga's wharves rose 12.6% to 1.75 million tonnes in the 2015 financial year.

Tauranga's share of North Island dairy exports rose to 97% in 2015, from 70-75% percent in the previous year, chief executive Mark Cairns said.

"Coda's getting early runs on the board in terms of the optimisation of trains and trucks," Mr Cairns said. "We're seeing a much better flow, especially in the lower North Island."

Coda's freight load is forecast to be more than five million tonnes of containerised and bulk cargo a year.

Tauranga's annual profit growth slowed to 1% as log export volumes, which drove growth in 2014, declined, leaving total export volumes unchanged. Revenue growth also stalled.

Export volumes were unchanged on the prior year at 13.3 million tonnes with gains in dairy, meat, kiwifruit and general freight offsetting declines in logs, sawn timber, apples, onions and steel.

Mr Cairns said trade volumes are expected to pick up in 2016, while log volumes would be broadly unchanged. A lower dairy payout is also expected to dent imports of fertiliser and dairy food supplement volumes.

In a briefing to analysts last week, the company produced before and after diagrams of logistics flows in the North Island, showing the elimination of empty domestic trucks and containers travelling north to Auckland, and the end of empty Fonterra freight space moving south. Napier doesn't feature in the 'after' diagram for Fonterra's dairy products and empty containers.

Another diagram shows the number of containers being sent empty overseas has been declining this calendar year, having climbed in 2014.

Coda builds on the 10-year freight alliance Kotahi and Tauranga signed in June last year under which Kotahi committed to push up to 1.8 million TEU export containers through Tauranga over 10 years, while also agreeing to commit export cargo to Tauranga's 50%-owned Timaru Container Terminal. In turn, Tauranga has pledged to have dredged its harbour to accommodate 6500 TEU vessels by August 2016.

Mr Cairns says the arrival of the larger vessels is forecast to generate $300 million in annual transport costs for New Zealand shippers.

(BusinessDesk)