Submission to Infrastructure Victoria

Second container port location advice

2

Contents

South East Melbourne (SEM) ............................................................................................................ 3

Our approach ................................................................................................................................... 3

Future demand, channel capacity and ship sizes ............................................................................ 4

Future demand ............................................................................................................................................................................ 4

Channel capacity, including Port Phillip Heads .................................................................................................................... 5

Changing ship sizes .................................................................................................................................................................... 6

Evidence for when a second port will be required ........................................................................... 7

South East Melbourne is a critical link in the state’s supply chain .................................................................................... 7

South east Melbourne: the city’s population centre ............................................................................................................. 8

Port of Melbourne transport constraints ................................................................................................................................ 8

Port of Melbourne capacity ..................................................................................................................................................... 9

Evidence for where a second container port should be located ..................................................... 10

Site considerations ................................................................................................................................................................... 10

Road and Rail ........................................................................................................................................................................... 10

Larger vessels and dredging ................................................................................................................................................. 12

Costing ........................................................................................................................................................................................ 12

Social and environmental impacts ........................................................................................................................................ 13

Conclusion ...................................................................................................................................... 13

3

SOUTH EAST MELBOURNE (SEM)

South East Melbourne—including the shires of Cardinia and Mornington Peninsula and the

cities of Casey, Frankston, Greater Dandenong and Kingston—is one of Australia’s most

dynamic regions. The area is home to more than one million people, almost a fifth of

Melbourne’s population, with approximately 120 new families moving in each week and

a future population of 1.4 million people in 15 years.

South East Melbourne is the economic powerhouse of Melbourne, with one National

Employment Cluster and three Metropolitan Activity Centres, an average annual growth

rate of three per cent, 24 per cent of Victoria’s GDP, and over $41 billion in Gross

Regional Product.

Importantly, South East Melbourne generates approximately 44 per cent of metropolitan Melbourne’s manufacturing

products, producing regional exports of $30.2 billion per year and employing half of Melbourne’s manufacturing sector

employees. However, South East Melbourne businesses face congestion and infrastructure gaps in getting goods to market

and people to work, jobs growth has not matched population growth, and SEM faces challenging unemployment rates and

high youth unemployment.

SEM councils firmly believe government policy must be targeted at fostering continued growth in the vital job-

creating location of South East Melbourne, Victoria’s economic engine.

OUR APPROACH

On Tuesday, 7 March 2017 Infrastructure Victoria released the information, data and analysis it has collected to date that

will inform its advice to the Minister by May 2017 on when and where the Government should invest in new container port

capacity for the State. This data and analysis consists of 70 reports, and over 7,000 pages of analysis focused on a

range of topics. In September 2016, in response to Infrastructure Victoria’s discussion paper Preparing advice on Victoria’s

future port capacity, The Agenda Group on behalf of SEM researched and compiled an 80-page comprehensive policy

submission on the merits of Port of Hastings over other port locations.

Infrastructure Victoria has been very thorough and relatively even-handed, but behind each one of the conclusions about

when a second container port is needed and where it should be located sit nuanced assumptions. This submission is not a

technical report or a detailed review of the highly specific technical work commissioned by Infrastructure Victoria.

However, SEM and its member councils owe it to the integrity of the process in this vital city-shaping multibillion-dollar

decision to challenge underlying assumptions and explore the potential consequences if those assumptions ultimately

contribute to a sub-optimal decision.

Through this process, IV research has exposed the role that Melbourne’s south east plays in the import and export supply

chain for Melbourne and Victoria. SEM believes that the future of Melbourne and Victoria is best served with a second

major container port in the demographic and manufacturing capital of Melbourne: the south east.

Choosing the Port of Hastings location ensures Melbourne’s future as the freight hub of Australia into the future under a

wide range of demand and ship size scenarios, while preserving the liveability and amenity of Port Phillip Bay for which

Melbourne is known worldwide.

SEM has concerns about the overall future accessibility of Melbourne’s south east. If nothing else, the

detailed reports Infrastructure Victoria released as part of this review show that regardless of

when a second port is needed and where it is located, south east Melbourne needs better freight

and transport infrastructure serving its population immediately to avoid city-wide congestion and

stagnation compromising growth.

South East Melbourne has

outlined its major concerns in

the order addressed in the

Infrastructure Victoria

evidence base discussion

paper.

4

FUTURE DEMAND, CHANNEL CAPACITY AND SHIP SIZES

Future demand

Numerous containerised freight demand studies have been conducted over

the past four years, and projections of future container demand have

varied widely. The methodology for these projections has been similarly

varied.

However, there has not been a convincing case made that these new 2016

demand projections have a more accurate reading of container demand than

other models and therefore more accurate projections of future demand.

If the predictive value of these new demand figures is similar to previous

estimates, this could change the determination of when a new port is

needed by years, even decades.

The 2013 Port of Hastings Development Authority (PoHDA) analysis was done

by Deloitte based on a Gross State Product multiplier, the Department of

Treasury and Finance 2014 figures have unknown methodology, and 2014

Bureau of Infrastructure, Transport and Regional Economics (BITRE) forecasts

incorporate population, income, exchange rates, export and import prices as

drivers of demand.

The 2016 forecasts updated for Infrastructure Victoria were also conducted by

Deloitte, with a “bottom up” aggregation methodology of commodity-level

forecasts in ratios based on historical Port of Melbourne volumes. The same

macroeconomic assumptions that feed into projecting future Gross State Product

and GDP similarly feed into projections of individual commodity demand.

The “bottom-up” aggregate

calculation of demand relies

on ABS and historical

estimates of the share of

various goods, and therefore

embodies certain assumptions

from the bottom up,

regardless of tying container

trade demands to GSP.

SEM acknowledges that there have been some long-term structural shifts to container trade demand, such as increased

miniaturisation, and that some of the industries that first moved to containerise their shipments are already reflected in the

last boom figures. This containerised shipping boom is not likely to be replicated.

However, container trade forecasts have varied widely over the last 20 years despite being conducted by the same firms,

but the methodology has not significantly improved in that time.

The sector is in flux. That much we know is true. The size of ships on order has increased while older, smaller ships are

being scrapped at an increasing rate as shipping lines consolidate and realign to take advantage of changing conditions

such as last year’s widening and deepening of the Panama Canal.

The updated projections in Infrastructure Victoria’s evidence base are fraught by the same flaws as previous models, and

therefore have no more predictive value than previous estimates. If these figures are off by magnitudes in either direction,

a second container port could be needed decades sooner than expected. Port of Hastings could be constructed earlier

than other locations due to the decades of planning work already completed.

SEM recommends that Infrastructure Victoria and the state government regularly (even yearly) update and publish container

demand forecasts based on updated information and assess methodology to ensure Melbourne has the required 10-15 year lead

time required to build a second port. 4

Financial year

PoHDA 2013

DTF 2014

BITRE 2014

IV 2016

2016 3.1 2.3 2.9 2.7

2020 3.8 2.8 3.7 3.1

2030 6.5 4.4 5.8 4.2

2040 9.7 6.9 n/a 5.6

2050 12.5 11 n/a 7.2

2060 n/a 17.1 n/a 9.3

5

Channel capacity, including Por t Phillip Heads

The Great Ship Channel through the Port Phillip Heads is a substantial constraint not only on Port of Melbourne reaching its

container capacity, but also a bottleneck through which larger ships would have to pass to reach a Bay West port

location. Without widening the Heads, the largest ships able to access Port of Melbourne and a Bay West port would be

14,000 TEU, but only with great difficulty and tidal assistance.

The width of the Great Ship Channel is currently a narrow 254 metres, and would need to be widened considerably to

425 metres to accommodate larger vessels.

SEM supports Infrastructure Victoria’s stance not to recommend widening the Heads, as this could cause untold

environmental and amenity damage to Melbourne’s greatest liveability asset, Port Phillip Bay.

However, it is short-sighted to build a second container port banking on projections that the majority of ships currently on

order, larger than 8,500 TEU (Twenty-foot Equivalent Unit or approximate container size) will never seek to visit

Australia’s second biggest and fastest growing market. Melbourne risks losing its strategic position as Australia’s freight

and logistics hub, and becoming a feeder port to other Australian locations such as Port Botany in Sydney that has

already deepened its channels and upgraded its infrastructure to accommodate larger vessels. The loss of this strategic

position could be irreversible.

The passage through the Heads is so narrow that only one large ship at a time may enter or leave the Bay, and vessels

larger than 8,500 TEU must use slack water and tidal assistance that only occurs every 6 hours. To operate two Port Phillip

Bay ports with these same constraints, a complex vessel traffic management system would need to be developed.

As seen at ports around the world, vessel traffic management of port congestion increases port costs. This erodes the

efficiency of port terminals and puts pressure on the ability of cranes, quay lines and terminals to handle an influx of

containers and increases the risk of a critical accident blocking the shipping channel and all access to two ports.

The effects of increased ship numbers, channel deepening and potentially widening of the Heads have not been fully

assessed to make an equal comparison with a port location in Westernport, where planning and environmental works for

Port of Hastings have progressed for decades.

Not enough hydrodynamic modelling has been done on the full effects of widening the heads on the Bay, including on

beach erosion and the cascading liveability effects for the millions of residents who live around the Bay.

Widening the Heads may not be difficult from a regulatory approvals standpoint, but it is untenable given the impacts on

the environment and liveability in the Bay. Choosing a Bay West port location without widening the Heads, however,

ensures no larger container vessels will ever be able to visit Melbourne, and risks Melbourne’s valuable position as

Australia’s freight hub, and increases the cost and risks to port operations for ships over 8,500 TEU.

5

6

Changing ship sizes

All the current data in Infrastructure Victoria’s summary evidence base and component reports indicates that due to the

shorter useable life and current size of ships on order, bigger ships will be coming more quickly to Melbourne. Because of

the 2016 Panama Canal expansion and recent increased moves to consolidate shipping lines, the industry is in flux. It is a

very risky decision, therefore, to rely on projections from a sector undergoing significant change to justify a decision

ensuring larger vessels will never visit Melbourne.

SEM recommends Victoria choose the port option with the maximum size flexibility to account for a wide variety of possible

future shipping fleets seeking to visit Melbourne: Port of Hastings.

According to reports conducted for Infrastructure Victoria, 64% of ships

currently on order are greater than 12,000 TEU, and over 80% are

greater than 8,000 TEU.

In decades past, the maximum useful life of a container ship was typically

about 20 years after which the vessel is scrapped. Therefore, most ships

currently sailing or on order will likely be scrapped by 2040 but due to

consolidation within the industry and new alliances, shipping lines are likely

to continue to combine their business and send fewer, bigger ships on the

same route.

Additionally, ships are increasingly being scrapped after just 10 years,

escalating the progression of bigger ships on order making their way from

larger East-West shipping routes to an Australian North-South routes. There

is clear incentive for this trend to continue, with the cost savings to Australia

of upgrading from a 5,000 TEU vessel to an 11,000 TEU ship at nearly

US$110 per TEU, depending on load factors and bunkering costs.

Other international ports are deepening their channels to accommodate

these larger vessels. The Drewry report conducted for Infrastructure

Victoria cited the Asia-US East Coast trade route as the strongest example

of a big ship increase, where the opening of the new Panama Canal

enabled carriers to introduce larger, more cost-effective ships.

Across America, public ports and their private sector partners will spend

more than $46 billion in port-related improvements through 2016,

according to the American Association of Port Authorities. "It's the era of big ships," said Richard Larrabee, director of the

Port Authority of New York and New Jersey, which is overseeing a $6 billion upgrade to its harbor, container terminals,

rail lines and bridges to draw the large ships. The Panama Canal "opened up the notion that we could see ships twice the

size we normally do once the canal was opened. That was the real impetus for us."

It’s not just international ports that have moved to upgrade infrastructure to handle larger vessels. Sydney and Brisbane

ports can accept and have accepted 8,500 TEU vessels. Sydney, with its short channel, 15.6 m draft limit and no length

constraints would be able to handle ships of over 10,000 TEU capacity. Port Botany handles the majority of containerised

trade for NSW at 2.247 million TEUs in 2014, just behind Port of Melbourne at 2.554 million TEUs. Port Botany and

Fremantle have imported Post-Panamax-compatible (the largest size possible) quay cranes, a clear move to accommodate

larger ships in the future.

Without modifications, Melbourne could lose out to Sydney or Brisbane as Australia’s freight hub – the wider economic

impact of this loss needs to be modelled to assess whether the loss of Melbourne as a strategic freight hub could ever be

reversed. According to a 2013 GHD report on the Port of Hastings, this could mean the loss of more than $2 billion in GSP

and 4,800 jobs for Victoria.

Given it will take over a decade to construct a second port capable of handling larger ships, the acceleration of the

scrapping of ships currently on order and cascading effect of larger and larger ships seeking to visit Melbourne,

constructing a second port within Port Phillip Bay risks losing Melbourne’s enviable freight advantage to other

Australian ports.

7

EVIDENCE FOR WHEN A SECOND PORT WILL BE REQUIRED

South East Me lbourne is a critical link in the state’s supply chain

Not only is the south east the natural import consumption centre of the city as the area with the greatest existing and forseeable

future population, south east Melbourne’s major industries play a crucial role in the state’s import and export supply chains.

One factor often cited as a major reason to choose a Bay West over Port of Hastings location is the major input of

agricultural product from the west. This has also been used as a rationale for the inclusion of the $5 billion Regional Rail

East in the Port of Hastings cost. However, the Port of Melbourne would still be operational after the construction of Port of

Hastings, so agricultural product (which makes up the minority of container trade) would still have a port in the west to

accommodate that trade. It makes sense to have two ports with an efficient split of different trade at different ports.

Container trade is overwhelmingly import-driven. The majority of imports naturally would be consumed in the area of

greatest population (retail trade and manufacturing). Goods consumption destinations should therefore be a greater

consideration for a second port location than agricultural export production locations.

According to the 2017 Institute of Supply Chain and Logistics study conducted in 2017 for Infrastructure Victoria, south

eastern Melbourne is the second largest import container destination, with 29 per cent of containers compared to the outer

west’s 30 per cent. If the eastern catchment is included in the analysis, 39 per cent of containers are destined for the south

east and eastern areas of Melbourne. In fact, 8 out of the top 25 container destination postcodes are in the south east of

Melbourne, further reinforcing south east Melbourne’s role in the import supply chain.

The sheer volume of containers making their way across the city to a region currently without substantial freight rail links or

a nearby port is testament to the strength of population and industry demand in the area. This is also supported by the

growing number of major businesses that have chosen to build headquarters and distribution centres in the south east, such

as the Woolworths Victoria head office, a Woolworths distribution centre, Bunnings distribution centre, and a $140m Aldi

distribution centre in Dandenong, one of the largest in the world.

The container truck study also found that about 60% of the truck trips were from manufacturing or processing businesses.

South East Melbourne is the epicentre of manufacturing in Victoria. Melbourne’s South East has the highest share of

manufacturing employment in Victoria (with over 56,000 jobs), and 25% of the manufacturing jobs in Melbourne.

South East Melbourne generates approximately 44

per cent of metropolitan Melbourne’s manufacturing

products, producing regional exports of $30.2 billion

per year and employing half of Melbourne’s

manufacturing sector employees. There are over

90,000 manufacturing jobs in south and eastern

Melbourne, bucking national job and employment

trends and making Melbourne’s South East one of the

most job-dense areas in Australia.

Manufacturing, associated wholesale trade, transport

and warehousing services account for over 30 per cent

of South East Melbourne’s output, much higher than

other parts of Melbourne and Victoria. Professor

Göran Roos in his landmark report Manufacturing into

the Future recognises manufacturing as a critical

component of any high-income economy, with a much

greater multiplier effect on the economy than other

employment sectors: $1.28 for every dollar spent

compared with just two and six cents for other sectors.

Put simply, investment in manufacturing in South

East Melbourne by building vital freight infrastructure promises far greater returns in jobs than other industries.

Melbourne -Inner,

15,000

Melbourne -Inner East,

13,100, 6%

Melbourne -Inner South,

15,700,

Melbourne -North East,

24,200, 11%

Melbourne -North West, 18,200, 8%

Melbourne -Outer East,

29,800, 13%

Melbourne -South East,

56,100, 25%

Melbourne -West, 39,700,

17%

Mornington Peninsula,

14,500

Manufacturing employment in MelbourneNovember 2016

1 Figures based on ABS Quarterly Labour Force data released at SA4 level.

8

South east Melbourne: the city’s population centre

The south east will continue to be the population centre of Melbourne, and therefore the dominant area of consumption

and import destination. High population growth rates in the west are often cited as a reason for a Bay West port location,

but the geographical population centre of Melbourne will remain in the southeast because the southeast is growing from a

much larger base.

Infrastructure Victoria has commissioned a more complete freight task and supply chain study to assess where goods are

consumed, and SEM supports this critical study. Consumption and import demand will largely continue to correlate with

population, and therefore regardless of where a second container port is built, freight linkages to the south east, a major

container destination, will be crucial to an efficient overal freight network.

Infrastructure Victoria has acknowledged that “regardless of deciding to locate a port at either Bay West or Hastings, we

will need to plan for significant cross-city movements as goods travel between the port, warehouses and retail locations… This

means cargo from unpacked containers will need to be moved east to service the significant population and retail centres in the

southeast.”

Therefore, regardless of whether Port of Hastings is built, in order for goods to reach their destination – the full cost of the

Melbourne Intermodal Ports system connection be included with both port costs. In fact, given the import container demand

in the south east will remain the same regardless of the second port location, there may be an argument for including the

cost of freight rail connections such as the Regional Rail East project in both port location costs.

Choosing a Bay West port location without drastically increasing south east Melbourne freight accessibility would

cut off Melbourne’s biggest goods destination, isolating thousands of retailers and manufacturers and millions of

consumers.

Por t of Melbourne transpor t constraints

Landside transport constraints at Port of Melbourne would have a much greater impact on when a second container port is

needed in Melbourne than the Infrastructure Victoria summary evidence base suggests.

Some landside constraints such as truck curfews, overnight operations, and calls for a $3.4bn elevated High Productivity

Freight Vehicle corridor over the Fishermans Bend Urban Renewal precinct are much firmer constraints than just ‘amenity

considerations.’ These constraints could trigger a need for a second port much earlier than expected.

Infrastructure Victoria acknowledged vocal resident concerns about truck traffic around the Port of Melbourne, saying

“Contrary to public perception, freight vehicles contribute little to congestion.” Currently there are 8pm-6am curfews on

roads affecting Webb Dock – and given there is the ‘public perception’ and protests about truck traffic in the inner West

– it is not at all feasible to think that these curfews will be removed, let alone 50 per cent night operations allowed, which

are critical factors for Port of Melbourne to reach its capacity.

If curfews persist with vocal public pressure, even with the Western Distributor, Webb dock is unlikely to be able to

reach close to its projected capacity. The deadline of when a second port is needed could therefore be escalated by

decades.

For example, Webb dock currently has no rail connection and will not benefit from the Western Distributor as Swanson

Dock will. The key intersections around Webb Dock are already under pressure from other land use plans and surrounding

residents’ amenity concerns.

9

At the moment in peak periods, traffic levels for the key Webb Dock intersections are approaching beyond VicRoads

Level of Service D. If night operations increased up to 30 per cent of movements, then local intersections could

accommodate about 3.2 million TEU capacity (71% of projected capacity) at Webb Dock and maintain Level of Service

‘D,’ but local amenity concerns are unlikely to decrease, and are more likely to be exacerbated as Melbourne grows.

Rail mode share at the Port of Melbourne is about 10 per cent, and although the implementation of metropolitan rail port

shuttle operations has been the subject of significant planning thus far the project has stagnated under pressure of

passenger rail concerns. The road constraints at Port of Melbourne are therefore unlikely to be alleviated by a major rail

share increase. Regardless of where a second port is built, freight rail and connections to south east Melbourne is a major

concern and should be reflected in the costs for both ports.

Por t of Melbourne capacity

Infrastructure Victoria put Port of Melbourne’s current capacity is about 5 million TEU per year, split between the capacity

to handle about 3-4 million TEU a year at Swanson Dock about 1.4 million TEU per year at the new Webb Dock terminal.

Infrastructure Victoria modelling also showed that beyond about 3 million TEU per year, additional trucks accessing the

port would need to progressively shift to night operations and there would need to be some intersection enhancement

around Swanson Dock. Infrastructure Victoria’s analysis shows little benefit in increasing Swanson Dock’s capacity

considerably given the immutable physical constraints of the port. Given the significant amenity and land use pressures

surrounding Swanson Dock, it is likely that into the future, full port operations will change to Webb Dock.

Webb Dock does not have a rail connection, so all cargo arrives and leaves the precinct by truck, but high volumes of non-

port related traffic and congestion around the port heavily constrain whether Webb Dock can ever reach its capacity in

the future. Infrastructure Victoria has estimated the capacity of the local network around Webb Dock for port traffic at

about 2.2 million TEU per year with 10 per cent night operations.

Webb Dock’s current capacity is 1.4 million TEU, and with adjustments could reach 5 million but only if the Bass Strait and

automobile trade is moved and significant multibillion dollar road freight infrastructure is constructed.

To reach 4.5 million TEU capacity per year (with changes to quay infrastructure) a ‘Freight Link’ is required. Freight Link is

a significant investment in a dedicated freight road and rail corridor linking Webb Dock to the Western Distributor and

the Tullamarine Freeway.

Infrastructure Victoria writes, “Freight Link would cost about $3.4 billion and require an elevated corridor across

Fishermans Bend and a new

crossing of the Yarra alongside

the Bolte Bridge. The Freight Link

needs to bypass the West Gate

and Bolte Bridges, which have

weight restrictions preventing them

from carrying High Productivity

Freight Vehicles.”

This Freight Link is fundamentally

incompatible with all current and

past government plans (such as

the Plan Melbourne refresh and

the Fishermans Bend Vision

released last year) for the

Fishermans Bend area.

This drastically increases the cost of

reaching capacity at Port of

Melbourne, and again could

trigger much earlier demand for a

second port.

10

EVIDENCE FOR WHERE A SECOND CONTAINER PORT SHOULD BE

LOCATED

Even though Bay West and Port of Hastings sites were evaluated in the Infrastructure Victoria report in separate

chapters, SEM has conducted a side-by-side comparison for greater clarity.

Site considerations

Land has already been reserved for Port of Hastings use for decades, and environmental and transport feasibility has

been extensively studied in the Western Port region. Port of Hastings has a unique (in the world) advantage of 3,500

hectares of land set aside for port use, and many transport reservations and works have already been completed or are

under way.

This is in contrast to a Bay West location where bounded by the Melbourne Water Western Treatment Plant, where

reservations and land have yet to be acquired and the closest available land over 13 kilometres from the Port, north of

the Princes Freeway.

There is ample land available in the Port of Hastings area for empty container parks and other port-related activities.

Infrastructure Victoria’s evidence base looked at the availability of empty industrial zoned land as a key determining

factor in choosing a port location, but a better determinant is easy access to industry sectors and consumers with the

greatest container demand. There are vast swathes of the west of Melbourne that remain undeveloped, while big

international businesses have chosen to locate in south east Melbourne, making it the second biggest destination for

containers in Melbourne despite its lack of easy port access, in contrast to the west, which is a staging ground for large

quantities of goods eventually destined for the south east.

Road and Rail

Port of Hastings landside freight connections would ease congestion on Melbourne roads by reducing truck movements

from one side of the city to the other. Years of studies have outlined the transport linkages necessary for the Port of

Hastings operation. Transport infrastructure needed in the South East and essential to the successful operation of the port is

already in serious consideration, and should progress regardless of where the port is built.

The Melbourne–Dandenong–Cranbourne rail corridor currently has limited capacity for additional freight movements, and

it is expected that this capacity will reduce in future as other traffic increases and be effectively zero by about 2040 if

left unchecked. This means that Melbourne’s area of greatest import demand and its manufacturing hub will essentially be

cut off from all freight rail connections by 2040 without government action. Infrastructure Victoria has in fact listed

metropolitan and regional passenger usage and Gippsland rail freight demand as drivers for Regional Rail East.

Infrastructure Victoria analysis found that to accommodate a conservative 10 per cent rail mode share at Hastings an

additional one track with passing loops would be required from Dynon, through Melbourne, to Dandenong and Lyndhurst

and the port shuttles would need to continue in earnest to the south east. To accommodate the target 30 per cent rail

mode share an additional two tracks would be required. This possible upgrade was generally described in Infrastructure

Victoria’s 30-year strategy as ‘Regional Rail East.’ The main driver for Regional Rail East is the freight capacity required

for a port at Hastings.

However, choosing either port location without investing in significant rail freight infrastructure South East would cut

off the city’s most productive and populous region.

10

11

It currently takes the same amount of time to get from Pakenham to the Melbourne CBD by train as it does from Ballarat,

nearly double the distance away. Port of Hastings is not the only driver for improving the efficiency of rail links to the

south east.

In fact, if Port of Hastings is considered the ‘driver’ of calls for a $5 billion rail link to the south east, Bay West is the

driver for building a multi-billion dollar road project out of sequence. Infrastructure Victoria’s own 30-year strategy called

for the Outer Metropolitan Ring road to be built within 15-30 years, but the North East Link to be built within 10-15

years.

Given the Outer Metropolitan Ring road would be crucial to connecting a Bay West port location to other areas of

Melbourne and interstate, the cost of accelerating the OMR ahead of other road projects competing for the same pool of

funding should be included in Bay West estimates.

The freight task and end destination of goods, not just containers, should be considered when assessing the essential

associated infrastructure for a port. If you consider the destination of goods, not just containers, then freight rail and

better freight road connections to the south east become essential to the construction of both port locations.

The Metropolitan Intermodal System (MIS) would elicit a 17 per cent reduction on port related transport emissions and a

reduction in truck distances travelled by up to 35 per cent, and port-related transport costs for importers and exporters in

the South East will be reduced by around 40 per cent.

The existing Dandenong South intermodal terminal has been funded by private enterprise, but a remaining rail connection

to link the inland port with

mainland rail still needs to be

funded, and the port shuttle

program restarted.

The intermodal terminal at

Dandenong South becomes more

crucial to alleviating congestion as

a longer lease at the Port of

Melbourne will inevitably create

more pressure on the freight

network. This stress could be

reduced by re-routing freight

operations to an intermodal

terminal in the South East meaning

containers could be freighted

directly, rather than being staged

or unpacked in the west and then

transported to the South East in multiple vehicles.

To think that rail and road infrastructure only needs to be upgraded because of Port of Hastings construction is short

sighted. These connections will need to be improved well before a second port is constructed and independent of

which location is selected for the second port.

11

12

Larger vessels and dredging

Given Infrastructure Victoria is not recommending widening the heads by 73 per cent to accommodate larger vessels, a

Bay West option is only useful in the event that none of the larger vessels ever seek visit Melbourne.

Again, given the unpredictability of the ship size projections and potential lack of predictive value in the demand figures,

it is risky to decide with certainty that larger ships will never need to visit Melbourne by choosing a Bay West location.

The impacts of dredging in Port Phillip Bay need to be fully considered before a decision is made. This would include full

hydrodynamic modelling of all the potential effects of not only widening the Heads (on coastal erosion and the like) and

additional dredging but also the amenity effects of increased container ship traffic in the Bay.

Costing

South East Melbourne has major concerns with the assumptions underpinning Infrastructure Victoria’s cost estimates

for both the Port of Hastings and Bay West locations.

Infrastructure Victoria had the cost of constructing a 3 million TEU port at Hastings at $3.1billion rising to $12.8 billion for

a 9 million TEU port due overwhelmingly to the inclusion of the $5 billion Regional Rail East. Bay West would cost

approximately $3.7 billion for a 3 million TEU port, rising to $6.4 billion for a 9 million TEU port.

Port of Hastings is not the only driver for Regional Rail East. Linking Melbourne’s consumption centre to an overwhelmingly

import-driven container port is essential regardless of where the port is located. Full Regional Rail East or some pared

down version, at the very least a connection to Melbourne Intermodal Ports system, should be included in the pricing of

both ports locations. Costing a Bay West port location without including freight linkages to the current destination for

39 per cent of all import containers artificially deflates the cost of Bay West and could lead to billions of dollars of

cost blowouts in future years.

Additionally, the cost of bringing forward the Outer Metropolitan Ring road should be included in the Bay West cost, as

Bay West would be the major driver for accelerating this project by decades, competing for funding with other valuable

freight infrastructure projects. Infrastructure Victoria itself called for the Outer Metropolitan Ring road to be built 15 years

after the North East Link in all of its options assessments and ultimately its 30-year strategy for Melbourne. Including the

full Regional Rail East in Port of Hastings costs without accounting for the full road linkages essential for Bay West is a

major discrepancy.

Land acquisition and acquisition for transport links to Bay West is an unknown cost, in contrast to the detailed planning

work and reservations already obtained for Port of Hastings. Comparing a hypothetical with a realistic plan is arbitrary

and belies what could be hundreds of millions of dollars worth of underlying costs.

Once you include south east freight connections in the cost for both ports, and the cost of accelerating the Outer

Metropolitan Ring road in the cost of Bay West, the cost for both ports become comparable. It is also crucial to

remember that in comparing a 9 million TEU port capacity for Bay West and Hastings, only one of those port

locations would ever allow for larger vessels to visit Melbourne: Port of Hastings.

It is also important to consider the benefit to the wider region of constructing a port in a specific location. A container port

at Hastings would deliver at least $1 billion per year in Gross Regional Product by the mid 2030s, rising to $3 billion per

year in the early 2050s with over 5,700 additional jobs created in the first decade of operation according modelling

conducted by GHD in 2013.

This is in addition to the millions of dollars and potentially thousands of jobs

added to the regional economy by enabling Victoria’s most productive

manufacturing region and largest centre of consumption through better

freight infrastructure links.

12

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Social and environmental impacts

Some of the losses of amenity, both to the areas surrounding Port of Melbourne but also to the wider Bay area due to a

Bay West location choice, such as congestion, beach erosion, recreational fishing and sailing effects should be weighted

strongly in the final consideration given the totality of Victorian Government plans such as the Plan Melbourne Refresh that

prioritise liveability as a fundamental concern for Melbourne’s future growth.

All these amenity effects need to be carefully evaluated in Infrastructure Victoria’s analysis, and considered in more

detailed reports.

Melbourne has been voted the world’s most liveable city years in a row. This must be preserved, and the impacts of a Bay

West location carefully considered. The environmental effects of a Bay West location need more detailed analysis,

including operational effects of the port such as ballast biodiversity effects. Bay West is decades behind Port of Hastings

in this assessment.

Bay West may be initially easier to get regulatory approval, but there has been nowhere near the level of environmental

analysis and modelling of the full hydrodynamic effects of widening the heads, dredging shipping channels, and erosion

effects of increased mega ship traffic in Port Phillip Bay. Comparing a known entity with an un-tested hypothetical is not a

sensible comparison.

Additionally, due to the massive amenity effects in addition to the environmental impacts, it is functionally

untenable for a second port in Port Phillip Bay to operate at capacity regardless of how easy it was to

initially receive the necessary offsets.

Port Phillip Bay is a very popular waterbody for recreational fishing and contributes

greatly to Melbourne’s reputation for liveability. Before the dredging to deepen the

channel for access to Port of Melbourne in 2008, there were widespread protests from

vocal bay users, and concerns about the effect on recreational fish stock.

Beach side residents also came out in force to protest channel deepening and

could reasonably be expected to resist any efforts to widen the Heads to

accommodate mega container ships as well as increased container ship traffic

throughout the Bay.

CONCLUSION

South East Melbourne members believe government policy must be

targeted at fostering continued growth in the vital job-creating location

of South East Melbourne.

SEM is concerned that new container demand figures used by

Infrastructure Victoria, like previous estimates, have very little

predictive value. SEM therefore recommends that Infrastructure Victoria

and the state government regularly update and publish container

demand forecasts to ensure Melbourne has the required 10-15 year

lead time required to build a second port.

South East Melbourne also recommends the port option with the

maximum size flexibility to account for a wide variety of possible

future container demand scenarios and shipping fleets seeking to visit

Melbourne: Port of Hastings. The alternative, a Bay West port location,

ensures no larger container vessels will ever be able to visit Melbourne

without widening the Heads and risks Melbourne’s valuable position as

Australia’s freight hub.

The south east is the natural import consumption centre of the city as

the area with the greatest existing and foreseeable future population,

and south east Melbourne’s major industries play a crucial role in the

state’s import and export supply chains.

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Investment in manufacturing in South East Melbourne by building vital freight infrastructure promises far greater increases

in jobs than other industries, and if a second port location is chosen on the other side of the city, thousands of retailers and

manufacturers and millions of consumers would be isolated by a lack of freight links.

SEM is concerned that estimates of when Port of Melbourne could reach capacity are fraught by vocal and persistent

opposition from nearby residents. Webb Dock and Port of Melbourne could not reach their estimated capacity due to

fundamental landside transport and nearby land use constraints. If Port of Melbourne reaches capacity sooner than

planned, this could accelerate demand for a second container port by years, even decades.

South East Melbourne firmly believes that regardless of where a second port is built, freight rail and connections to south

east Melbourne are a major concern and should be reflected in the costs for both ports. These connections will need to be

improved well before a second port is constructed and independent of which location is selected for the second port.

Freight and transport infrastructure are critical concerns for South East Melbourne members, residents and industry. A

second container port location should be selected to provide easy access to Melbourne’s population and economic centre in

the south east, and therefore SEM strongly recommends Melbourne’s second container port be located at Port of Hastings.

Contact

South East Melbourne

Level 1, 15 Queen Street

Melbourne Victoria 3000

(03) 9629 7752

info@southeastmelbourne.org