Assessing the economic impacts of port maintenance dredging

Issue

Maintaining safe and efficient port access is crucial to thousands of businesses and communities that depend on a seamless flow of goods through key gateways in North Queensland. Critically, each of NQBP’s ports are located in highly sensitive environments, with three located in a World Heritage Area. Reflecting this, NQBP aims to take a leading approach to sustainable port management.

NQBP developed a Sustainable Sediment Management (SSM) assessment, which is an innovative approach to assessing sustainable approaches to managing sediment. A key component of the SSM assessment is to understand the economic impacts of the accumulation of sediment and subsequent loss of depth within existing seafloor navigational infrastructure within the Port.

Assessing the economic impacts attributable to a loss of port depth requires detailed consideration of the implications for each trade handed through the port. This includes direct impacts at the port and flow-on impacts throughout the relevant supply chains and, where applicable, other industries in the wider economy.

The Solution

Optimising the sustainability of dreging requires quantification of the benefits of the activity or conversely, the costs of inaction; three adverse economic impacts were identified under the ‘no maintenance dredging’ scenario:

• Increased vessel delays – Increasing sedimentation in the port impacts the window of accessibility for vessels to access berths creating vessel delays and increased demurrage costs
• Trade diversion – Where vessels are no longer able to access the port, trades will be diverted to alternative ports, resulting in additional road/rail costs and negative externalities.
• Loss of economic output – For some trades, loss of access to the Port of Mackay would result in economic activity (e.g. ethanol production) being foregone, as production would not be commercially viable in the absence of access to the port.

Synergies used a range of economic tools to assess and quantify the economic impacts where no maintenance dredging is undertaken at the Port of Mackay.

20-year vessel projections

NQBP vessel presentation data was assessed to develop long-term vessel projections for each trade at the Port of Mackay. This also involved 20-year forecasts to be developed for each trade in consultation with NQBP.

Constraint analysis

Identifying the impact of reductions in port depth on a trade-by-trade basis required analysis of tidal data given vessel navigation paths, required depths, and the outcomes of an engineering assessment on annual reductions in the depth of port areas under the ‘no maintenance’ dredging scenario to identify:

• The timing at which vessels will be subject to constraints in accessing berths
• The nature of the constraint in each year of the 20-year analysis period (e.g. vessel delay, diversion to alternative port).

The detailed tidal data analysis enabled precise estimates to be derived in terms of the increase in average vessel delay time.

Quantification of economic impacts

The demurrage costs associated with the estimated delay times were quantified using Synergies’ proprietary house shipping model. This model includes unit rates for bunker and charter costs, based on current and historic information and industry sources.

The constraint analysis identified that, for six trades, at some point in the 20-year evaluation period, the trades would no longer be able to access the Port of Mackay and would divert to an alternative port and supply chain.

Increased supply chain costs were quantified using Synergies’ proprietary shipping, road and rail models. These models quantify additional monetary and non-monetary costs (externality costs) incurred at each stage of the supply chain. Based on a trade-by-trade assessment of alternative supply chains, additional road costs were identified as accounting for the majority of the increased supply chain costs incurred under the ‘no maintenance dredging’ scenario.

Road costs consists of operating cost, value of time, and crash costs and externality costs primarily sourced from the Queensland Department of Transport and Main Road’s Cost Benefit Analysis Manual, Freight Metrics, BITRE and other publicly available sources.

Finally, for two commodities – refined sugar and ethanol – consultation with NQBP and industry stakeholders revealed that the loss of access to Port of Mackay would result in the production of these commodities no longer being commercially viable.

Quantification of the economic impact associated with this loss of production involved the application of Synergies’ non-linear input-output model to estimate the loss of economic output, Gross Regional Prodcut, labour income, and employment (FTEs) attributable to the foregone production.

The Benefits

The quantitative analysis detailed above produced the following outputs:

• An estimate of the additional economic costs incurred as a result of the constraints on access to the Port of Mackay under the ‘no maintenance dredging’ scenario, including increased road transport costs and externalities associated with the diversion of trades to alternative ports.
• The regional economic impacts (output, employment, labour income) associated with the loss of economic activity due to foregone production in relation to those activities no longer commercially viable in the absence of access to the port.

The analysis demonstrated that a failure to complete maintenance dredging at the Port of Mackay would not only impose additional costs on shippers but would also result in adverse environmental impacts and a contraction in the regional economy. Critically, the ‘no maintenance dredging’ scenario leads to a significant increase in heavy vehicle usage on regional roads.