A group of New Zealand Eastland Port forestry customers say they agreed to drop their dispute over the port’s wharfage and storage prices so all parties could “move on together”, although they still feel the port’s charges are not fair or reasonable. Source: Gisborne Herald
After assessing a complaint from Eastland Port Forestry Industry Customer Group (EPFICG), a preliminary assessment from the Commerce Commission noted that the commission would undertake a part 4 inquiry unless there were changes in any material circumstances that changed its views on initiating a full inquiry.
The commission agreed there was no need for a full inquiry, which could have resulted in the port becoming a regulated entity, because the matter had been resolved between the parties.
A statement from EPFICG, which comprises Kohntrol Forest Services, PF Olsen, Pacific Forest Products, Juken New Zealand, Ernslaw One and Hikurangi Forest Farms, said the port and port users had now agreed on mechanisms for setting prices.
“It is now more transparent going forward and there are means of settling disputes without involving the Commerce Commission.
“Prices will remain as they are for the current five-year pricing period, albeit still the dearest in the country, and the port users have agreed not to continue with the Commerce Commission case.
“However, the Port Forestry Customer Group (EPFICG) does not agree with the port view that its prices were fair and reasonable.
“The port is a community-owned asset, so it is important that the community gets a fair return on its asset, but equally forest owners want to know that the pricing is fair and reasonable. Currently, 75% of logs exported come from large forest companies but this is a reasonably constant level.
“Most of the growth of harvest in future … will come from other forests owners including iwi, mum and dad investors with shares in the investment forests and our own locally owned forests such as on Tauwhareparae Farms.
“We are in a symbiotic relationship, the forestry industry needs the port to export its product, but equally the port needs the forests to make use of the port infrastructure — otherwise it is a white elephant.
“Both parties had to stand up for what they believed is fair and reasonable. We have now settled the dispute and it is time to move on together.”
The group’s complaint to the Commerce Commission was made after Eastland Port raised its prices in 2011.
According to the statement this made it the dearest port to export logs in New Zealand by at least $2 per m3, and $3- 4/m3 more than most ports, which is significant when most ports are costing $5-6 /m3.
“Given that Gisborne already has significant challenges with the isolation, difficult and expensive roading and harvesting, paying high port charges makes things that much harder.
“There was consultation but the port users felt this was insufficient and there was not enough justification for the increases. Further discussions made no progress and eventually it was the port that suggested that if there was a problem, we should take it to the Commerce Commission.
“It was a decision not taken lightly but from what we knew, we could not understand the reasons for the pricing. Eastland is the third-largest log exporting port in NZ, so handles significant volumes and has one of the fastest turnovers of logs. So it is very efficient, yet is the most expensive.
“It is a monopoly, so there are no alternatives. It would cost an additional $30/m3 to transport logs to other ports such as Napier or Tauranga. The only option was to get someone else to examine it, so we went to the Commerce Commission. The Commerce Commission did a preliminary investigation and felt that there was a case to answer.
“They responded to the parties that they would conduct a full Part 4 inquiry in 2016 but if we were able to resolve it successfully between ourselves, the enquiry would not proceed. In reality, regulation should be avoided if possible so both parties went back to the table,” the report said.
Since then, Eastland Port had been more forthcoming with their pricing model and how the costs and revenues are determined.
Key aspects are the amount of capital investment, port valuations, which are difficult as they are not often bought and sold so there is no transactional evidence, and what are appropriate levels of return. The Commerce Commission will regulate only if returns are excessive, but not if they are just high.
