Welcome to the second episode of our new four-part podcast series, Moving On Up. Today, Emile Donovan talks to Head of Export Development, BNZ, Jason Reeves, about massive changes in the shipping industry, using a ‘blue highway’, and being nimble when you’re so far away from the main shipping lanes.
The COVID pandemic has changed the way we look at international shipping – and has accelerated plans to have a more sustainable shipping fleet. Head of Export Development, BNZ, Jason Reeves, says there’s a move to renewables, and hydrogen is probably the one most likely to play a part in our future.
“New Zealand is actually in a quite a good position, in the sense that we can harvest New Zealand green hydrogen that may be used in the future to power marine vessels across the globe,” he tells Emile Donovan.
“I’m quite excited about New Zealand’s prospects producing green hydrogen - I think that’s a real option to replace carbon fuel. I think it has enormous opportunity.”
He sees it first rolling out for trucks, then shipping fleets.
While larger capacity ships are also part of greater sustainability, Reeves believes actually reducing carbon emissions is the key.
“And probably the best way to do that is to utilise green carbon for shipping fleets.”
New Zealand is somewhat vulnerable when it comes to shipping, for obvious reasons – our small population, and our distance from main hubs. Reeves says large companies have their own long term arrangements in place, so they are reasonably secure, but small businesses live simply at the whim of the big shipping companies.
“They’re not in a position to directly negotiate or to command vessel space, so it’s been quite challenging for the whole covid period, whereby ships have been re-routed to more lucrative routes. We’ve kind of been starved to a certain extent of regular shipping schedules for the past two or three years.”
The west coast of the US and the east coast of China were the most lucrative ports – an explanation as to why supermarket and hardware shelves have had great gaps recently, and why businesses have found it difficult to get their exports to market.
“It’s improved slightly from what it was, say, 18 months ago, but I think it’s going to remain a challenge for New Zealand going forward unless we can make it a more attractive environment for shipping companies to come here on more regular visits.”
Before COVID-19, the shipping industry was one of very low profitability – vessels were being retired, there was too much supply and not enough demand. Then came a massive stimulation of global demand through banks putting money into the economy during the pandemic. “We estimated that global trade increased by something in the region of four percent… a monumental figure. You had factories that were producing goods on a grand scale, ships that were going across to China and the US to cater for this large demand … and there was a massive shortage of vessel space.
“The law of supply and demand – capital goes to where it gets its greatest return – so I wouldn’t say we were starved but we certainly had a reduction in the number of vessels that could go to New Zealand because they could ply their trade and get better returns elsewhere.
“For small business, they really struggled to get their inwards goods into the country to make their finished products; and then to get their finished products out to export markets. They don’t have the clout to negotiate directly with shipping companies.
“It has improved to a certain extent, but I think the fundamentals remain - we just need to make New Zealand a more attractive destination for the shipping companies to call upon in regular visits.”
So what are the potential answers?
“It’s fair to say we don’t have the most efficient use of ports in New Zealand,” he says. “Maybe if there was a port on the east coast of Australia, say somewhere between Sydney and Melbourne, that could be called for example, ‘Destination New Zealand’. You could offload 90 percent of Australasia’s cargo there … how efficient would that be? From New Zealand’s side, to maintain a vibrant shipping industry in New Zealand, have coastal shipping … from New Zealand, to go to that super port in Australia, to pick up the cargo to deliver to New Zealand’s regional ports.
“For a port like Nelson it would be quite a sensible idea for coastal ships to go from (there), to a port in Australia on a regular basis. It provides us with surety in terms of getting volumes into our city; it provides employment for our ports; stability for the local growers in that region to say ‘yes, ships are going to come, pick up our cargo, take it to Australia where it be put into large vessels and can go to export markets.”
New Zealand has 12 ports – a huge number for a small population. It’s not attractive for major shippers to call into smaller ports, for example, like Bluff. Strong coastal shipping could make a compelling case for those little ports to feed into that offshore hub.
“(For small businesses,) knowing you have confirmed space on a vessel to take their goods to market, that’s the concern for them.”
The case for coastal shipping is boosted when you look at the country’s roading infrastructure – a blue highway would help relieve the pressure. Reeves says we should centre our shipping around two ports, Lyttleton and Tauranga. And yes, that means talking about Auckland port’s future.
“We really need to prioritise the importance of exporting, in other words, getting our goods to market. How can we easily facilitate that? I think Northland is quite a sensible solution because it’s because it’s one of two natural deep water ports in New Zealand - but it’s going to require a dramatic improvement in infrastructure to get there. Both in road and rail from Whangarei to Auckland, but I don’t think it’s insurmountable. We need to think about the big picture rather than what’s just in front of you. It’s in our long term interest to do so.”
Reeves also talks about how small companies have been nimble through the covid disruptions to get their products to market, and how they’ve worked together to create a critical mass.
But they need plenty of support.
"It got to the stage where offshore customers frustration levels were being severely tested. I wouldn’t say it had run out, but they were certainly getting a little impatient with covid.” Fortunately, it didn't get to the stage where they were substituting New Zealand's product for another country’s. But they’re telling us they need to carry on with their businesses … with or without us.
“That would be the worst scenario,” says Reeves, and when the export sector produces 25 percent of our GDP, that’s a problem for everyone.
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