Synergies was engaged by Port of Townsville Limited (POTL) to assist with the development of a business case for its Channel Capacity Upgrade Project (CCUP), a $200 million project to widen existing navigational channels to allow larger vessels safe access to the port. Synergies conducted an assessment of the logistics supply chain to assess the economic benefits of the project in terms of Port of Townsville’s ability to both maintain existing trade and attract new containerised trade.
The Port of Townsville is the largest commercial port in Northern Australia but the shipping channel is the narrowest in the country. The current width of the navigational challenge represents a constraint on port throughput. Currently, vessels up to 238 metres can safely access the Port, but vessel sizes are increasing, often to more than 300m in length. Over time, an increasing number of larger cargo vessels, in particular containerised vessels, will be unable to enter the port, increasing the need for containerised cargo to be transported along the east coast via road and/or rail.
The Channel Capacity Upgrade Project (CCUP) is a $200 million project aimed at alleviating this constraint. After the completion of the CCUP, the port will be able to accommodate Post Panamax vessels with capacity of 4,500 to 5,000 TEUs.
POTL first needed to develop a business case to support an application to obtain State Government approval and funding to assist with the financing of the CCUP.
Synergies was engaged by POTL to assess the level of demand to support the CCUP business case.
Port price benchmarking
We first conducted a port price benchmarking exercise to demonstrate that POTL’s charges were consistent with comparator ports across its main commodities. The purpose of this task was to demonstrate that there was minimal scope to fund the CCUP through increased port charges. This strengthened the need for the channel upgrade to be funded by the port with assistance from government.
Logistics chain review
We then undertook a logistics chain review to identify the expected economic benefits associated with the CCUP. This involved a detailed review of the logistics chain for the containerised freight destined for North Queensland, including consideration of the extent to which containerised imports are currently bypassing the port and being transported into the region by road/rail. The report then assessed the extent to which the CCUP is likely to facilitate growth in containerised throughput at the port over the next 20 years, having regard to a range of factors including trends in the global shipping industry and the nature of containerised logistics operations in North Queensland.
One of our key findings was that, without the CCUP, the opportunity for POTL to attract weekly services from major shipping lines will not be realised, compromising its ability to service demand for containerised imports in the growing Townsville region. Enabling the port to accommodate larger vessels will allow POTL to increase its trade, and result in economic benefits to the wider regional economy. The source of these benefits is two-fold:
prevention of the loss of existing containerised trade and motor vehicle imports (and potentially other trades) at the Port of Townsville; and
future growth of containerised trade due to the attraction of larger containerised vessels to the Port of Townsville.
Our analysis assisted POTL to put forward a sound business case to Building Queensland and the Queensland Government for government support and funding.
The project was ultimately approved and is joint project of the Queensland and Australian Governments and POTL.
The channel upgrade is being delivered over a six year period, from 2018 to 2023.