Turning Northland Rail into a Self-Sustaining Business · Turning Northland Rail into a Self-Sustaining Business Strategies Available to the Northland Regional Council Public release

Turning Northland Rail into a

Self-Sustaining Business

Strategies Available to the

Northland Regional Council

Public release version

Written by Kelvin Taylor

June 2012

Kelvin Taylor 2012 Page ii

1 Acknowledgments

I wish to acknowledge my tutors Lou van Es, John Cook and Peter Bruce

for their support and encouragement, the businesses that have completed

the survey, all the people who provided information and finally my family

for their support and extreme tolerance.

2 Disclaimers

Due to commercial sensitivity, some information has been removed for

this publically released document. In these situations publicly available

information or estimated figures have been used.

Kelvin Taylor 2012 Page iii

Contents

1 Acknowledgments .......................................................................... ii

2 Disclaimers ................................................................................... ii

3 Executive Summary ....................................................................... 1

4 Introduction .................................................................................. 2

5 Overview ...................................................................................... 4

5.1 New Zealand Rail ..................................................................... 4

5.2 Roads ................................................................................... 12

5.3 Northland Regional Council ...................................................... 14

6 Business Surveys ......................................................................... 16

6.1 Business Surveys: Results ....................................................... 16

6.2 Business Surveys: Analysis ...................................................... 27

6.2.1 Fonterra ......................................................................... 27

6.2.2 Imerys Tableware ............................................................ 28

6.2.3 Golden Bay Cement ......................................................... 29

6.2.4 Affco. ............................................................................. 30

6.2.5 Silver Fern Farms ............................................................ 30

6.2.6 CHH Whangarei ............................................................... 31

6.2.7 Kaihu Valley Sawmill ........................................................ 32

6.2.8 CHH Futurebuild .............................................................. 32

6.2.9 Juken ............................................................................. 33

6.2.10 Marusumi ....................................................................... 33

6.2.11 Forest Loaders ................................................................ 34

6.2.12 Ballance Fertiliser............................................................ 34

6.2.13 Ravensdown Fertiliser ...................................................... 35

6.2.13 Steel ............................................................................. 36

6.2.13.1 Fletcher Steel ........................................................... 36

6.2.13.2 Steel and Tube .......................................................... 37

6.2.13.3 Vulcan Steel ............................................................. 37

6.2.14 Delta Produce ................................................................. 38

6.2.15 Progressive Enterprises.................................................... 38

6.2.16 Foodstuffs ...................................................................... 39

Kelvin Taylor 2012 Page iv

6.2.17 The Warehouse ............................................................... 40

6.3 Business Surveys: Transferable Freight ..................................... 41

6.4 Business Surveys: Capital Expenditure ...................................... 43

6.4.1 Rail Costs ........................................................................ 43

6.4.2 Tunnels ........................................................................... 45

6.4.3 Weights ........................................................................... 46

6.4.4 Northport ........................................................................ 47

7 Conclusions and Recommendations ................................................ 48

8 References .................................................................................. 52

9 Appendix .................................................................................... 57

9.1 Appendix 1 ............................................................................ 57

9.2 Appendix 2 ............................................................................ 60

10 Researcher ................................................................................ 67

Kelvin Taylor 2012 Page 1

3 Executive Summary

This report is written to provide the Northland Regional Council (NRC)

with options to retain redevelop the Northland rail network.

The Northland rail network is restricted by insufficient rolling stock, an

inability to carry Hi-Cubed containers or to carry containers at their

maximum weight capacity. Current non rail users would like to see an

effective Door to Door service, not currently available.

With the proposed funding of Low Rider Wagons by the NRC, the issue of

the ability to carry Hi-Cubed containers is removed, freeing up flat deck

wagons for other Northland rail users. This will allow KiwiRail to

concentrate their resources on removing weight restrictions on the Kauri

to Auckland section of the Northland rail network.

It is beyond the scope of this report to calculate a breakeven point of

Northland rail being economically viable; this will be significantly

enhanced by the following measures:

A significant increase can be achieved by converting the remaining

135,000 tonnes per year of wood chip produced at Carter Holt

Harvey (CHH) Whangarei, currently trucked, onto rail for transport

to CHH Kinleith (Tokoroa).

Other small, but significant increases can be achieved by

containerising the Otiria and Dargaville rail yards. This has potential

to allow both Affco and Silver Fern Farms, to rail an estimated

15,000 and 20,000 tonnes per year respectively. Imerys have

indicated that they would consider increasing their rail freight from

Otiria to Whangarei.

It is feasible to obtain increased rail freight volumes with relatively low

cost. However, to dramatically increase the rail freight volumes there will

need to be significant funding from KiwiRail and support from NRC in

planning, development and funding to facilitate the transfer of freight

onto the Northland rail network.

The NRC can support the Northland rail network by instigate the following

policies:

Setting up of a regional logistic master strategy.

Financial aid for feasibility studies.

Provision of grants for rail sidings.

Investment in freight hubs

Investment in rail infrastructure.


4 Introduction

This report focuses on the investigation of the freight requirements of 19

businesses, the requirements of KiwiRail to be able to meet these

demands and the associated cost in road damage, should KiwiRail close

the Northland rail network. Also, what policies that NRC could adopt to aid

the retention and redevelopment of the rail network in Northland?

The social impact of closing the Northland rail network is not covered in

this report, but the Northland Intersectoral Forum has commissioned

Quigley and Watts Ltd to produce the report “North Auckland Rail Line

Closure Social Impact Assessment Scoping Report” which is expected to

be released in July 2012.

On the 18th March 2010, the New Zealand government announced an

investment package in KiwiRail. As part of the deal, KiwiRail developed

the KiwiRail „turn-around plan‟, a 10 year plan to create a sustainable rail

business. This plan suggests closing minor lines (including Northland) if

major clientele cannot be found.

The NRC is very concerned about the possible closure of the Northland rail

network. It is forecasted over the next 35 years, freight volumes to

increase by 75% (Paling, 2008). NRC has developed a 30 year transport

plan (NRC, 2010) where heavy reliance is placed on rail to cater for a

large portion of the expected increase in freight volumes.

As indicated in the report by McElwain (2009), Northland rail had

problems. In the United Kingdom it was indicated by Woodburn (2004)

that the same problems were experienced. Are these problems still a

factor in the decisions on the preferred freighting methods in Northland?

Nineteen Businesses were included in a written survey with data collected

regarding the use of rail in Northland. Thus providing data to determine

the following points:

What needs to be done to overcome the perceived limitations, of

rail, by the targeted businesses and the associated financial costs?

Formulation of different options that could be pursued by the

Northland Regional Council to facilitate the retention and

redevelopment of the Northland rail network.


The first businesses to convert to rail are likely to be those that currently

have a rail siding, followed by the businesses with a rail line in close

proximity. In the longer term it may be possible to build rail lines to other

larger businesses.

Businesses that either currently or historically have used rail are more

likely to consider increased use of rail if their requirements can be met.

KiwiRail (NRC, 2007) has indicated that they will only consider the

Northland rail network as viable if the Marsden Point rail is built. What is

the potential demand from the surveyed businesses and what other

services would they require?

Vaughan Cooper, a senior project manager at Northland Regional Council

has agreed to be the stakeholder. Vaughan has envisaged that this

project and the announcement of “The rail turn-around plan” by KiwiRail

will assist in providing direction to guide the thinking about the

redevelopment of rail in Northland, thus enabling rail to become a viable

and productive enterprise in the foreseeable future.


5 Overview

5.1 New Zealand Rail

On the 20th May 2010, the government and KiwiRail announced the

„turn-around plan‟ for KiwiRail (see Appendix 1). In the plan KiwiRail

stated that there would be a review of minor lines, which, if they could

not become profitable, they may be closed down. The current government

has indicated, in the „turn-around plan‟ that they want KiwiRail to be a

self-sustaining business within 10 years. The government has committed

$750 million over 3 years from July 2010 (Joyce, 2010) for infrastructure

redevelopments.

In 1980, New Zealand rail carried approximately 30% of all goods.

Deregulation of the long haul freight market lead to the loss of rail‟s

monopoly. This caused rail‟s market share to drop to 6% of all goods.

Currently less than 2% of Northland‟s freight is transported by rail. The

approximate volume of freight moved by all modes in Northland in

2006/07 was 12.36 million tonnes and of that 267,000 tonnes by rail

(NRC, 2010).

Compared with the Waikato region, the rail carries 17% of the in region

freight and 23% of the through region freight (Environment Waikato,

2010). This indicates the potential of rail.

In 2002, the Port of Whangarei (where there was rail access) started

moving to Marsden Point where there is no rail access. This resulted in

the volumes of goods travelling by rail in Northland falling significantly

from nearly 1 million tons in 2000 to less than 300,000 tons in 2008.

Currently there are typically 2 return trains per weekday between

Whangarei and Auckland, one for logs and one for general freight

(containers). There are 11 return trips per week. The average daily

volumes per weekday are (Sinclair Knight Merz, 2010):

General containers 55-60

Logs out of Northland 400 tonnes

Containers of woodchip 10

Logs to Marusumi 800 tonnes


There are two major destinations for Northland rail freight. Logs and wood

chip goes to Tokoroa and containers go to the Ports of Auckland.

The containers go to the Ports of Auckland due to Northport being non-

containerized. In the UK, 75% of all containers pass through the ports in

the South East of England (Woodburn, 2007a). This indicates that the

Ports of Auckland and Tauranga could handle all the containerized freight

and Northport could to stay non-containerized in the foreseeable future.

KiwiRail has indicated that they only see Northland rail viable if the

Marsden Point line is built. With the current debate associated with the

future of the Ports of Auckland, this may potentially change in the future.

Since the deregulation of long distance freighting in the 1980‟s, rail has

been unable to compete in a non monopolist environment. To generate a

profit, rail has had to cut costs which have impacted on maintenance, the

upgrading of the rail network and rolling stock. This has resulted in

KiwiRail being unable to cope with the current market requirements.

Technology has also moved on. The Hi-Cubed containers that are being

used are 31cm higher than the previous standard containers. Five of the

13 tunnels on the Northland line are currently too low for the Hi-Cubed

containers. The weight capacity of the containers has also increased. This

means that the majority of the bridges in Northland need upgrading to

cope with the increased weights.

The Hi-Cubed container has the same width and length as the standard

40 foot container but is 312 mm (1 foot) higher. This results in the

volume of the container increasing from 67m3 in the standard 40 foot

container to 72m3 in the Hi-Cubed Containers.

Internationally, low floor or pocket wagons (see figure 1) have been used

to transport Hi-Cubed containers until the lines are capable of carrying

the Hi-Cubed containers on conventional flat deck wagons (tunnels made

bigger). This is achieved by setting the container closer to the rail. There

is a cost to this, in higher manufacturing costs, higher operating cost and

lower efficiencies. Consumers see low floor wagons as a short term

measure, but not as a suitable long term measure (Woodburn, 2004).

KiwiRail has some low floor wagons that have been operating on the

Gisborne to Napier line (Dick, 2010). The restricting tunnel has been

lowered which may mean the wagons are available.


Low Rider or Pocket Wagon with Hi-Cubed container

Cut-away showing how the Hi-Cubed container sits lower to the rail

Figure 1 Low Rider or Pocket Wagon (source Smith, 2003)

In 2008, KiwiRail had around 4,400 wagons. Approximately half of the

fleet are container flat deck wagons. Around 70 percent of the container

fleet is made to a 1970 design and based on a 14 tonne axle load

capacity. Currently, an axle load of at least 18 tonne is needed. Due to a

shortage of wagons, old wagons, that should have been scrapped, are still

being used which makes them more prone to structural failure. KiwiRail is

aiming to purchase 300 new flat deck wagons, every year over the next

10 years (KiwiRail, 2008).

In 2008 the average locomotive age was 30 years; the youngest having

been built in 1988 (KiwiRail, 2008). One-third of the fleet was built in

1965 and is considered underpowered and obsolete by today‟s standards.

New locomotives are more efficient than the current locomotive stocks.

KiwiRail is in the process of upgrading the locomotives with the purchase

of 20 new 3600hp locomotives in 2010 with another 20 to arrive in 2012.

It is possible to remanufacture the locomotives in New Zealand using the

current rail workshop facilities. Remanufactured locomotives consist of a

new engine, upgraded electronics and new components at a lower cost

than a new locomotive.

In the 2008 year 40 km of rail was replaced (KiwiRail, 2008). Because

there is a total of 4000km in New Zealand it would take approximately

100 years to replace every sleeper. Softwood sleepers have a 25 year life.

More expensive concrete sleepers have a 40 year life

Of all the rail bridges in New Zealand, one third of the bridges (more than

550) are 80 plus years old and 23% are 90 plus years old (KiwiRail,


2008). Substantial bridge renewals will be required in the very near

future. Due to the bridges carrying heavier weights than they were

designed for, the trains need to travel slower over the bridges, this

increases travel time and operating costs.

Up until 2011, the West Auckland line had been a major limiting factor

restricting freight movements, from Northland, to a few hours at night.

This line was singled tracked which the passenger services having priory.

This line has now been double tracked which has resulted in more efficient

freight services.

Currently rail in New Zealand is split into 2 separate businesses. They are

KiwiRail and TranzLink. OnTrack has recently been merged back into

KiwiRail. KiwiRail is responsible for the maintenance, upgrading of the

railways and providing the transportation of goods on the lines. TranzLink

(which has been purchased by Toll) operates the trucking operations.

Internationally, many different business structures have been for tried

rail. The current trend is to separate the rail businesses into rail

operations, rail maintenance and the logistics. There appears to be no

other structure that delivers a better performance. The most limiting

factor appears to be the age of the business. In the UK the more

responsive logistics companies tend to be the newer entrants (Woodburn,

2001).

In the USA some short haul rail lines have been sold to local communities

which are responsible for all facets of the rail operations. The Indiana

Northeastern Railroad Company operates approximately 200 km of rail

and was formed by rail users to protect and preserve the rail in their area.

The line has similar characteristics, as the Northland line in being run

down, losing customers and end of the network. However a major

difference is that the topography in Indiana is flat.

Indiana Northeastern Railroad began operations, in 1992 with the

purchase of financially troubled railway operations that had a deferred

maintenance issue. It was difficult for trains to travel from one end of the

railroad to the other without experiencing minor derailments. Through

careful management of resources, the company has been transformed

into a profitable business that continues to grow, even, now, in this

economic climate (IN, 2012).

The efficiency of Northland rail is expected to improve if management is

given more autonomy in making strategic and operational decisions.

Higher degrees of managerial autonomy enable management to respond

quickly to new opportunities and circumstances, thus keeping the firm


competitive in an ever changing market (Oum, 1994). This indicates that

an autonomous Northland rail operation could be more productive and

efficient, resulting in a speedier growth in volumes than a national

business.

In September 2011, KiwiRail appointed a business development manager

to Northland. This may increase the responsiveness of the organisation.

The manager is located in Auckland.

According to KiwiRail, the Northland line broke even for the 2010/11 year

(Laird, 2001). Income generated from trains carrying logs and wood chip

from Auckland to Tokoroa is not included in the Northland income. But

information provided to the Auckland Regional Council‟s (ARC) Transport

Committee (ARC, 2012) KiwiRail states that the Northland line earns

revenue of $8 to $9 million per year. This covers the cost of train

operations but not the cost of infrastructure maintenance which ranges

from $3 to $5 million per year.

In the report by McElwain, (2009), several of the businesses interviewed

describe rail as having the following problems.

Unreliable

Load restrictions

Slow

Preferential treatment given to bigger businesses

Lack of suitable wagon

Poor logistics

Apathy

Golden Bay Cement has approached rail operators on different occasions

and note that every time the response was “apathetic” (McElwain, 2009).

Research by Jeffs (1990) indicated that businesses consider the following

attributes important. They are given here in descending order of

importance:

service level of customer

reliability of transport mode

ready availability of transport when required

avoidance of damage to goods when in transit

control over delivery time

control over despatch

security of goods in transit

transit time

minimum transport cost

length of haul

size of consignment


Generally speaking, speed of freight transport is less important than the

prompt despatch of goods at the required time and the guaranteed

predictability of the transit time. To ensure a good transport service to the

customer, the degree of control has been found to be a crucial parameter,

especially over delivery. Control over delivery is often the over-riding

criterion for choice of a particular mode. Persistently erratic delivery times

will prompt the decision-maker to look for alternatives (Jeffs, 1990).

Woodburn (2003) indicated that the strategy railways should adopt has,

three elements:

A focus on markets and customers, to ensure rail offers a

competitive edge in a context which is mainly one of growth

A technical strategy to tackle the cost base and system

performance.

Delivery processes that span the public sector specification/private

sector delivery modal which is mainly Door to Door delivery.

KiwiRail indicated to a hearing, in connection with NRC‟s 30 year transport

plan, that estimated cost of upgrading the North Auckland line would be

$200 million and approximately cost $100 million to build the Marsden

Point rail line. Northport extension would cost another $280 million (Laird,

2011. Roberts, 2011). KiwiRail has indicated to NRC it may be more

feasible to develop the Marsden Point line first and get a significant

volume of Northland freight back onto rail. KiwiRail indicated to NRC that

if this occurred, it would then be economically viable to operate and

maintain the rail line within Northland, then upgrade the Northland line.

There is no indication of the time frame for the upgrading, however in the

KiwiRail „turn-around plan‟ it is envisaged that the infrastructure

redevelopment will be completed within 10 years. KiwiRail intends to grow

revenues through targeting investments to achieve “quick wins”, so that

early investment decisions result in tangible returns by way of increased

revenue. It is likely that emphasis will be placed on the main trunk

routes. However because the Northland line is so run down, it is very

unlikely that any early major expenditure would generate a return.

In Northland there are 13 rail tunnels. Tunnels 1 to 11 are located on the

line between Auckland and Waiotira (Junction where the Dargaville line

starts). The other 2 tunnels are on the Dargaville line. It has been

indicated that 5 tunnels need lowering between Auckland and Whangarei.

It is unknown which ones need lowering or if any on the Dargaville line

need lowering.


Number Length Name Number Length Name

1 250 Waitakere 7 343 Topuni

2 573 Makarau 8 171 Tunnel 8

3 447 Tahekaroa 9 481 Bickerstaffe

4 388 Ahuroa 10 343 Huarau

5 503 Hoteo 11 604 Golden Stairs

6 335 Ross Hill 12 334 Mareretu

13 240 Waikiekie

Table 1 Northland tunnels and lengths

Throughout New Zealand, other projects completed by KiwiRail that have

resulted in Hi-Cubed containers being able to travel through tunnels have

included:

$3.1 million for day lighting 60 metres of the Manawatu Gorge (De

Lacy, 2008).

$200,000 for lowering one tunnel north of Napier (Dick, 2010).

$5 million for by passing 200 metre long Kia iwi tunnel north of

Wanganui (De Lacy, 2009).

$1 million for day lighting 90 metre on Midlands line (Christchurch

to Westport) (KiwiRail, 2009).

The current estimate by KiwiRail to allow Hi-Cubed containers through the

Northland tunnels is approximately $100 million (Roberts, 2011),

however, KiwiRail General Manager of Freight, Iain Hill told a public

meeting in Whangarei in October 2011, that it is estimated to cost $40

million to improve tunnel clearances (KiwiRail, 2011). The reason for the

differences between the two figures is unknown, but it is probably related

to the $100 million being the “wish list” of KiwiRail and the $40 million the

bare minimum requirements to allow Hi-Cubed containers through the

tunnels.

There are currently 5 tunnels that need lowering. This is an average of

$20 million for each tunnel, 4 times the cost of the next most expensive

project in New Zealand, the Kia Iwi tunnel by pass (De Lacy, 2009).


The Northland rail network is restricted, due to the weight restrictions on

the bridges. For the purpose of this analysis, Northland rail has been split

into 5 distinctive sections. The number of bridges is indicated in Table 2.

Number of

Bridges Route

16 Dargaville to Waiotira

32 Otiria to Kauri

9 Kauri to Whangarei

8 Whangarei to Waiotira

41 Waiotira to Auckland

106 Total

Table 2 The number of bridges on different Northland sections

Kauri (which is 13 km north of Whangarei) is the key point in the line.

From North of Kauri, only logs are freighted by rail. The current Northland

rail container freight is restricted to the route from Kauri to Whangarei,

then to Auckland. This line would benefit from being able to carry heavier

weights. There are 58 bridges on this route that would need to be capable

of carrying 18 tonnes axle weight (or heavier). The other 48 bridges (32

from Kauri to Otiria and 16 on the Dargaville line) in Northland would not

need to be capable of carrying the heavier weights and could be left until

normal replacement time. When this occurs, the bridges can be upgraded

for the 18 tonne axle weights. This would have the effect of reducing the

capital requirement for the network upgrade.

Number of

Bridges Specific Routes

58 Kauri to Auckland

32 Kauri to Otiria

90 Otiria to Auckland

Table 3 The number of bridges on different sections

of the Auckland to Otiria line

No information was provided by KiwiRail related to this topic. The lengths

of the bridges are unknown. Information provided by a consultant (name

unavailable) estimated that a new bridge would cost between $30,000

and $40,000 per metre. For double tracked bridges the figure will double


and the cost for shorter bridges is more than the cost per metre for

longer bridge.

There is a weight restriction on the Northland rail network that is 16.3

tonne per axle allowing container weighting 32.6 tonne to be carried. The

requirement is for an 18 tonne per axle allowing containers weighing 36

tonne to be carried. A truck is limited carrying 26 tonne.

5.2 Roads

In 2007, between 1000 and 1200 trucks were travelling on State Highway

1 between Auckland and Whangarei, daily day. There are a further 86

trucks of freight carried by rail (NRC, 2007). If rail freight was to be

transferred to road, the impact could be an increase in deaths, injuries,

road wear and congestion, reduced productivity would also be a factor.

Road planners use the “Fourth-power” rule of road wear. According to the

rule, if you double the load on an axle, the road damage is increased by a

factor of 16. This implies that a standard 44 tonne 8 axle truck does

20,000 times more damage than a car.

If the Northland rail network was closed then the increased truck volumes

would be directly proportional to the increase in road damage sustained.

Currently Northland rail carries about 2% of the freight. This means that

the distance of truck travel would increase by 4% and therefore 4% more

damage would be done to the roads. This would imply that a proportional

increase in maintenance funding is needed. In 2006/2007 (NZTA, 2010)

financial year there was $28,356,000 spent on replacing and repairing

Northland Highways. Transit NZ would need to provide an extra

$1,130,000 ($28,356,000x4%) in funding per year (based on 2006/2007

figures) to achieve the same level of services. This does not include the

damage caused by trucks that travel outside Northland. Trucks currently

pay for approximately 65% (Booz, 2005) of the damage done to the road

when they actually do close to 100% of the damage.

In New Zealand for every 100 million kilometres driven by trucks there

are 2 deaths and 30 injuries (NZTA, 2011) so if the Northland rail network

was closed then there would be an extra 5.7 million kilometres driven by

trucks. This may result in an extra 0.114 deaths and 1.71 injuries per

year in Northland.


Large trucks have a much bigger effect on congestion than cars because

they are longer, less manoeuvrable, and underpowered, compared with

typical cars. They accelerate more slowly, need larger gaps, more lane

width, more time to make turns and slow down on long grades (TRB,

1990). On a level, multi-lane Highway, a large truck is equivalent to 1.7

passenger cars [i.e., a large truck equals 1.7 “passenger car equivalents

(PCEs)].” If there are steep grades or sustained grades, the trucks will

slow down and represent 8 PCEs on freeways or even more on 2-lane

Highways where passing opportunities are limited (TRB, 1990).

This indicates that the issues with the State Highways in Northland are on

the hilly sections of road with limited passing opportunities.

Photo 1 Slow travelling truck in Northland


5.3 Northland Regional Council

The current New Zealand Government has indicated that it no longer

wishes to fund KiwiRail, as a business, it will need to be self-supporting.

This is indicated in the KiwiRail „turn-around plan‟ announced jointly by

the Government and KiwiRail.

Internationally, central and local governments have been trying to find

ways to maintain or redevelop rail services. Dablanc (2009) identified

policies that have been instigated:

Investment in rail infrastructure.

Investment in freight terminals.

Part ownership of freight companies.

Provision of grants for rail sidings.

Provision of direct subsidies to freight operators.

Financial aid to feasibility studies.

Setting up of regional logistic master plans.

Act as intermediaries between local parties.

So what policies can NRC use to retain and redeveloped the Northland rail

network? It is likely that the majority of policies listed above will aid the

NRC to achieve this goal and more than one policy will be needed in each

situation.

It is very unlikely that NRC will ever fund the part ownership of freight

companies or provide direct grants to transport operators to remove

product from the rail. These options are generally undesirable to the

public. Direct subsidies lead to an inefficient rail system that becomes

more dependent on subsidies (Oum, 1994), Unfortunately this creates

little incentive to improve productivity.

There is an example of Transit NZ paying a trucking firm $3 per tonne of

logs to use rail instead of the road in the Wellington region. This was not

received very well by the public. The money used comes from the

potential savings resulting from the possiblel reduced road damage

(Churchouse, 2009).

Regional Logistics Master Plan

The first item required is a plan; a regional logistics master plan. This

would cover not only the outcomes, but also provides strategy for the

NRC to achieve these goals.


Financial Aid for Feasibility Studies

Initially, the potential freight needs to be scoped for suitability and

profitability to transfer by rail. This requires a feasibility study. If these

studies were funded (or partially funded) by NRC, then possibly

businesses that previously had not considered rail, may be persuaded to

convert to rail.

Provision of Grants for Rail Connections

Grant funding has been used in the UK to support and aid the

development of new or replacement assets that retain or attract freight

onto the rail network (Department for Transport, 2005). The main reason

for the grants was related to the high capital costs for new rail facilities,

which often cannot be justified by companies on a purely commercial

basis, certainly not in the short- to medium-term (Woodburn, 2007). By

the NRC fully (or partially) funding the development or redevelopment of

the rail sidings, the use of rail freight would become more economically

viable.

Investment in Freight Terminals

Currently the Northland rail network is restricted to bulk produces such as

logs, wood chip, and containers for export. To increase the usage of rail,

the rail needs to be able to cater for smaller volumes of product. The

development of freight hubs is the key to catering for this potential

demand. The preliminary work has been done in the report produced by

McElwain (2009) titled “Northland Inland Port/Distribution Hub. Pre-

Feasibility Study”.

Infrastructure Funding

The current estimate to redevelop the Northland rail network is $200

million which has a 10 year time frame. Can the NRC provide strategic

funding to facilitate the transfer of freight onto the rail network?

Currently, it is unlikely KiwiRail would have sufficient rolling stock to cater

for a large increase in freight. The NRC has proposed funding the

purchase of some Low Rider wagons.


6 Business Surveys

Two surveys were conducted.

The first survey in October 2010 concentrated on 10 businesses located in

Northland that shipped product out of Northland. Nine of the businesses

replied, but unfortunately only a summary of the results was retained.

For that reason it was decided to conduct a second survey in March 2012

and nineteen businesses were surveyed. The survey was a more refined

version of the first survey with the aim of collecting the same information

but using a shorter survey. Nine of the ten businesses surveyed in

October 2010 were resurveyed. The new businesses surveyed included

businesses carrying produce into Northland. Six surveys were returned

and two businesses completed both surveys.

6.1 Business Surveys: Results

Aim of the surveys was to find freight that can quickly and easily be

transferred onto rail and what policies the Northland Regional Council can

put in place to facilitate the transfer.

Surveys were tailored to identify the potential freight volumes. The

requirements and attitudes of the businesses were also identified.

Therefore, a different survey was sent to each business. The questions

were worded to suit the surveyed business to eliminate irrelevant

questions and to make the survey as short as possible. A return rate of

37% was achieved (7 /19 surveys).

Questions asked in the survey for Imerys Tableware have been included

as an example in the blue highlighted boxes. See appendix 2 for a copy of

the Imerys Tableware survey.


Question 1

Contact details of the participants.

The businesses that responded to the survey were:

Imerys

Fletcher Steel Silver Fern Farms

Ravensdown Ballance

Foodstuffs Auckland Progressive Enterprises

Questions 2 to 6

The questions in the section identify the current situation for the surveyed

businesses. Information is collected on materials, volumes, methods and

destinations as well as the closeness of rail to the business to allow direct

loading for potential rail users.

Q2 What volumes of major goods do you freight by all means from your site?

(tonnes/year)

Q3 Give a brief description of the processes once your final product leaves

your site. eg Loaded into container, transported to Whangarei by truck,

rail to export port.

Q4 Which ones from the following list, applies to your business?

a. We have a rail siding

b. Rail runs through or on the boundary of our property, but no siding

c. Rail is close to our property, but no siding

d. Rail is too far away to consider a siding

Q5 What distance is the Otiria rail siding from your business?

Q6 Do you currently freight any of your products by the Northland rail

network?


Q2 Q3

Volumes Direction of Flow Type

Imerys

Out of Northland General containers

Fletcher Steel

Into Northland Bulk flat deck

Silver Fern Farms

Out of Northland Refrigerated containers

Ravensdown

Into Northland Bulk specialised

Ballance

Into Northland Bulk specialised

Progressive Enterprises

Into Northland Pallets/Curtain sided Truck

Foodstuffs Auckland

Into Northland Pallets/Curtain sided Truck

Table 4 Volumes of freight from the responding businesses

Due to confidentially the volume figure from question 2 are unable to be

released.

Ballance has rail running through the site and the plant but no longer use

rail. Rail was used to transport bulk raw materials from Port of

Whangarei.

Imerys does not have a rail siding but uses rail to its maximum capacity.

Progressive Enterprises has had the rails removed at one of their

distribution centres in Auckland.

Fletcher Steel‟s distribution centre, in Auckland, appears to have had a

rail siding, but it is not currently present.

Question 7

This identifies businesses that have considered rail, but do not or cannot

use rail to their desired level of requirements. There are likely to be

limiting factors that apply to all businesses and can be prioritised by

Kiwirail and NRC for urgent attention.

Q7 Are there any limiting factors, related to rail that prevent your business

transporting larger volumes of product by rail in Northland?

There was no area in the questionnaire for businesses to write the limiting

factors. This may have resulted in little useful information gained from

this question.


Questions 8 & 9

Since the closure of Port of Whangarei in 2007, the volume of freight

carried by rail in Northland has dropped from 1,000,000 tonnes to

300,000 tonnes in 2008 (McElwain 2009). Has this been the key factor or

are there other factors involved in the decline?

Q8 Over the last 10 years, has the volume of products being freighted on rail,

in Northland by your business changed?

Q9 Over the last 10 years, what effect have the factors below had on your

Northland rail freighting patterns? (Scale 1 Minor to 5 Major)

a. Closure of Port Whangarei

b. Company policy is to use rail if possible

c. Rail better able to meet our requirements

d. Road better able to meet our requirements

e. Cost of rail vs. road

f. Production volume changes

g. New products/discontinued products

h. Removal of loading facilities at Otiria

i. Others (please state)

Balance was the only business that was influenced by the closure of the

Port of Whangarei.

One of four businesses indicated that rail was better able to meet their

requirements. Three of four businesses indicated road was better able to

meet their requirements. At the same time two of the three businesses

that indicated that road was better able to meet their requirements would

like to use rail in Northland, but are unable to. Three out of the four

businesses indicated that cost was a major factor. The other business

cannot use rail.


Question 10

There is likely to be a direct correlation between the perception of rail and

method of freighting. The businesses that perceive rail to be cheaper but

do not use rail should be targeted by KiwiRail. Differences between

businesses in similar situations can be identified and investigated further

to explain the irregularities.

Q10 How do you perceive the cost of freighting from door to door, using rail

compared to road?

a. Rail is more expensive

b. Rail is similar

c. Rail is cheaper

Rail Cheaper Rail Similar Rail More Expensive

Imerys Ravensdown Ballance

Silver Fern Farms Fletcher Steel

Progressive Enterprises Foodstuffs Auckland

Table 5 Perception of the cost of rail compared to road

Rail Is Cheaper

Imerys: Rail is used where possible. Imerys would use more rail freight if

there were container facilities at Otiria.

Silver Fern Farms: Does not use rail in Northland, but would consider rail

if container facilities were at Dargaville.

Progressive Enterprises: Rail is now being used, but not in Northland. The

model needs to be correct before rail is a viable option.

Rail Is Similar

Ravensdown: Rail is used when the distance between the rail and road is

similar lengths. Because the manufacturing plant is in Napier, with rail,

the produce has to travel to Palmerston North, then up to Northland.


Rail Is More Expensive

Ballance: Raw materials are delivered and stored at Northport which is

not serviced by rail. The manufactured produce is only used in Northland.

Fletcher Steel: Relatively small volumes, but may be feasible to use rail.

Foodstuffs Auckland: Because of the location of the distribution centres in

Auckland, road is more efficient.

Questions 11 to 13.

With the announcement of the „turn-around plan‟, have the surveyed

businesses noticed any change from KiwiRail? In September 2011 KiwiRail

appointed Keith Holdsworth as the Northland Business Development

Manager. He is located in Auckland. Have the businesses been contacted

by him? How wide has KiwiRail searched for potential customers?

Q11 Has any person from KiwiRail contacted your business in the last 2 years

attempting to procure more business for the Northland rail network?

Q12 Are you aware that KiwiRail has appointed Keith Holdsworth as Northland

freight development manager?

Q13 Has Keith Holdsworth, from KiwiRail, contacted your business?

Silver Fern Farms did not answer these questions.

Ravensdown have been contacted by Keith Holdsworth.

Imerys is a current user and has been contacted by Keith Holdsworth.

The other 4 businesses stated they had not been contacted, at the time of

the survey by KiwiRail or Keith Holdsworth regarding Northland rail.

Progressive Enterprises has been in contact with KiwiRail regarding other

routes and have changed to rail on these routes.


Questions 14 & 15

With the 2009 financial crisis, have the surveyed businesses examined

their freighting policies and how seriously was rail considered? What were

the major factors that lead to review? Factors listed covered a wide range

of potential variables. Decisions made about freighting by senior

management are not necessarily based purely on cost. Non commercial

factors may influence the decisions and how much influence non-

commercial factors have on decisions.

Q14 How seriously was using more rail freight considered by your business in

the last two years?

a. Not considered

b. Slight consideration

c. Considered

d. Seriously considered

e. Changed to rail (already us rail)

Q15 What has made your business review rail freight in the last two years?

a. Not considered

b. Regular review

c. Freight/fuel prices

d. Road congestion/travel time

e. Changing company ethics/values

f. Public opinion

g. Contact by KiwiRail

h. KiwiRail “turn-around plan”

i. Other (please state)

Four businesses, who are current rail users in New Zealand, indicated

they were influenced by The KiwiRail „turn-around plan‟, Freight/fuel

prices and as part of a regular review. Progressive Enterprises also added

changing company ethics and road congestion in Auckland.


Question 16

All the factors have been obtained from the literature as issues that have

been identified as limiting factors to rail growth in other countries and/or

New Zealand (McElwain 2009), (Jeffs 1990).

Further research will enable the responses be ranked in order of

importance. This will indicate what the surveyed businesses require from

the rail network. This will give KiwiRail and other interested parties an

indication of the priority areas for development.

Q16 For your business to initiate or increase the use of the Northland rail

network, how important is the following factors? (Scale 1 Minor to 5

Major)

a. A different train schedule

b. A more reliable service

c. The Marsden Point rail line

d. Quicker delivery to Whangarei

e. Quicker delivery to Auckland

f. Quicker delivery through Auckland

g. Able to handle Hi-Cubed containers

h. Able to carry heavier loads

i. Suitable rolling stock

j. Storage facilities at Otiria rail siding

k. Door to Door services

l. Freight hub at Otiria

m. Security at Otiria rail siding

n. Reduced damaged goods

o. Reduced misplaced products

p. Other(please state)

The 2 businesses that have not considered rail want the service to be

similar to trucking. They see the issues below as major:

A different train schedule

A more reliable service

Quicker delivery time

Door to Door service

Only 1 out of the other 5 businesses that do or are likely to use rail

ranked the same points as of some concern, but they had other areas of

higher concern.


Five out of the six businesses that do or are likely to use rail were

unconcerned about the train schedule, a more reliable service or quicker

delivery times. This indicated that they were prepared to work around

these limitations.

Almost all of businesses (6 out of 7) indicated the lack of door to door

delivery as a major issue. The same businesses also indicated a high level

of demand for freight hubs at Whangarei, Otiria and Dargaville.

The requirement for rail to be able to carry heavier loads is only relevant

to businesses that do not need to use road to move the product.

There does not appear to be any requirement for Hi-Cubed containers,

but this may be related to the businesses that replied not needing them.

Northport

Northport is the port of Whangarei which is located at the entrance of

Whangarei harbour. It was established in 2002 when it was realised that

the previous location was inappropriate for the potential freighting

demands. Unfortunately the rail was not included in the redevelopment.

The port is currently able to cater for the new generation, larger vessels

that the shippers wish to use.

The current production of logs in Northland is 1.6 million tonnes. By 2015

the volume is expected to be about 4 million tonnes (MAF, 2009). There

will some increase in processing demand, but most of the logs will be

exported out of Northport. The number of logging trucks on the road to

Northport could be up to 270 per day. It has been proposed to develop

log collection points at Otiria (North), Tangowahine (West) and to the

south, then freighting the logs by rail to Northport. This will remove a

significant amount of logging truck traffic of the roads.

As part of KiwiRail‟s submission to the Northland Regional Council,

regarding infrastructure, KiwiRail said that they would only consider the

Northland rail network viable if the line to Northport is built (McElwain,

2009).

It is estimated that the rail will cost about $100 million and take 4 years

to build (McElwain, 2009). Northport has indicated that it will cost $160

million to provide container services (McElwain, 2009).


Is there any demand from the surveyed businesses for rail and container

facilities at Northport to justify this level of capital development?

Q1 Do you currently import and/or export any product through Northport?

Q2 What volumes do you currently freight through Northport?

Q3 If Northport had rail access (non containerised), how likely is it that your

business would use rail to freight through Northport?

a. Very unlikely

b. Unlikely

c. Likely

d. Very likely

e. Extremely likely

Q4 If Northport had container facilities (assuming all other factors equal to

Ports of Auckland and Tauranga), how likely is it that your business would

freight containers, by road, through Northport?

a. Very unlikely

b. Unlikely

c. Likely

d. Very likely

e. Extremely likely

Q5 If Northport had rail and container facilities (assuming all other factors

equal to Ports of Auckland and Tauranga), how likely is it, that your

business would freight containers, by rail, through Northport?

a. Very unlikely

b. Unlikely

c. Likely

d. Very likely

e. Extremely likely

Ballance is the only business that currently uses Northport. They are

unlikely to use rail, but it may feasible to freight the bulk raw materials by

rail.

Fletcher steel is unlikely to use Northport at all.

The other 5 businesses would very likely use Northport if containerised.

Both Progressive and Foodstuffs would look at importing through


Northport, then transferring to the distribution centres in Auckland.

Ravensdown would import product directly for the Northland stores.

Imerys and Silver Fern Farms would look at exporting through Northport.

Rail would be considered on its merits. These businesses have all

considered the longer term in relation to transportation.

Progressive enterprises would unload the containers at Northport,

palletise and then back load to the distribution centres in Auckland in the

trucks that delivered the groceries to the store in Northland.

From 2010 survey

From the 2010 survey, the current usage of Northport is limited to some

non containerised wood products from CHH Futurebuild and export timber

from CHH Whangarei.

Seven out of eight respondents indicated that they would consider

Northport, more, for exporting, if able to meet all their requirements. The

two main provisos required were container facilities and a shipping

schedule that would meet their requirements. The regular shipping

schedule is totally under the control of the shipping companies who have

been reducing the number of ships coming to New Zealand.

There is only one business (CHH Woodproducts) that would only use road

to freight to Northport and only one business (Fonterra) that would only

use rail. The other five businesses would consider either option. CHH

Futurebuild would consider rail for freighting logs to their plant.

The businesses that freight export logs were not covered by either

survey, but these businesses would be a major consideration in

construction of the Marsden Point rail line.


6.2 Business Surveys: Analysis

Information has been included about businesses that did not return the

surveys. It was decided to provide as much information as possible to

allow for a better understanding of the current freighting patterns in

Northland.

6.2.1 Fonterra

(Fonterra did not respond to the 2012 survey but responded to a survey

conducted in October 2010).

Fonterra‟s major plant in Northland is located at Kauri about 13

kilometres north of Whangarei. There is a rail siding which is used. The

production is estimated at 110,000 tonnes per year which is all freighted

by rail. Fonterra is one of the major users of the Northland rail network.

Fonterra freights approximately 45,000 tonnes per year in general

containers. The product is packed into containers at the Kauri site, loaded

onto rail wagons and then transported to the port of export.

Fonterra freights approximately 65,000 tonnes per year as refrigerated

product to the Northport cool store at the end of Port road, Whangarei, by

truck. The product is then transported in refrigerated containers by rail to

the port of export.

The inability of the Northland line to cater for Hi-Cubed containers is an

annoyance for Fonterra. The refrigerated products would use the Hi-

Cubed containers.

Fonterra is very likely to use rail to Northport and the container facilities.

Fonterra‟s smaller plant is located at Maungaturoto approximately 70

kilometres South of Whangarei and within 1 kilometre of the rail line. Rail

is not used due to no rail connection, rail siding or onsite storage

facilities. It is unknown, if these issues were addressed, if rail would be

used.


6.2.2 Imerys Tableware

(Imerys responded to both surveys).

Imerys are located at Matauri Bay, 54 kilometres from the rail siding at

Otiria. Currently 12,500 tonnes per year (595 containers) of refined china

clay are freighted in containers by truck to Whangarei, then by rail to Port

of Auckland for export.

Imerys would like to use the rail from Otiria, but are currently unable to

because there is no container forklift available. They perceive rail to be

cheaper and better able to meet their requirements. They would like to

see a freight hub at Otiria.

As Imerys are part of an international organisation, they are very

conscious of their reputation. They regularly review their freighting

arrangements. The current freight and fuel prices along with the KiwiRail

„turn-around plan‟ have been factor in the past reviews.

Imerys would be extremely likely use container facilities at Northport, but

rail freight would need to be competitive compared to road freighting.

KiwiRail and/or Keith Holdsworth have contacted Imerys since the release

of the KiwiRail „turn-around plan‟.

Case Study: Imerys

Currently Imerys freight by road from Otiria to Whangarei due to no container

service being offered at Otiria.

The road section from Otiria to Whangarei is 61 kilometres. Imerys produces 595

truck trips per year. This section of road cost Imerys about $261,000 per year

(*see Note 1). If rail was used then the freight cost could reduce to $101,000

per year (*see Note 2). This could result in a saving of $160,000 per year.

For Imerys there would be not any changes to any of the systems currently used

and no capital investments required.

KiwiRail could generate $101,000 per year of extra revenue by providing

container facilities at Otiria. It is likely that once there was container handling

facilities available at Otiria, then other businesses would also want to freight by

rail. It may be possible to contract the loading to Forest Loaders as they

currently have staff at the Otiria rail yard.


Note 1.

The trip from Otiria to Whangarei is 61 kilometres or 122 kilometres return.

United Carriers change $3.60 per kilometre. There are 595 trips per year.

122 kilometres x 595 trips x $3.60 per kilometre

$261,324

Note 2.

The rail trip from Whangarei to Auckland is 185 kilometres and costs $518 per

container. For this example it is assumed that the Otiria to Whangarei will cost

33% of $518 at $170. There are 595 containers per year.

595 containers x $170 per container

$101,150

6.2.3 Golden Bay Cement

(Golden Bay Cement did not respond to the 2012 survey, but responded

to a survey conducted in October 2010. Volumes were obtained from the

report titled “Northland inland port/distribution hub, Pre-feasibility study.

McElwain, S. 2009.”).

Golden Bay Cement has their processing plant at Portland, Whangarei.

The quarry at Portland produces about 66% of the limestone and the

quarry at Hikurangi produces the other 33%. The total production is

850,000 tonnes per year. About 600,000 tonnes of the finished product is

bulk transported by ship to Auckland, Tauranga, Napier, Wellington and

Gisborne. About 150,000 tonnes are trucked to Auckland and 100,000

tonnes is bagged for either local market or export.

The inputs that are imported through Northport from Australia are 30,000

tonnes of gypsum and 90,000 tonnes of coal. The coal has in the past

come from Huntly.

From Huntly there are 25,000 to 50,000 tonnes per annum of fly ash and

35,000 tonnes of slag per annum.

Prior to the 1970‟s, the Hikurangi quarry was next to the rail line and the

limestone was moved by rail. When the quarry moved to the current

location the rail was not connected. The rail is still present in the Portland

processing plant. Currently there are 100 trucks of limestone rock per day

transported from Hikurangi to Portland, a distance of about 35 km. This is

300,000 tonnes per year.

In the past Golden Bay Cement has expressed an interest in using rail,

but have been met with an apathetic response from the railways

(McElwain, 2009).


6.2.4 Affco.

(Affco did not respond to the 2012 survey, but responded to a survey


Affco‟s Northland processing plant is located at Moerewa about 100

metres from State Highway 1 and about 2 kilometres from the Otiria rail

yard. The estimated production is 15,000 tonnes of meat per year. In the

past there have been rail facilities at Affco, but the line has been

removed. The line has now been converted into part of the national cycle

way.

Currently all meat products are stored on site. As the product is ordered it

is loaded into containers and trucked to the port of export. Local market

product is loaded into hard sided refrigerated trucks and trucked to the

purchaser.

Currently rail is not considered because there are no loading facilities at

Otiria and containers are not currently carried on the Otiria to Whangarei

line. The addressing of these two factors would allow Affco to reconsider

rail as the method of freighting.

The containerisation of Northport would lead Affco to investigate the

exporting of containers through Northport.

6.2.5 Silver Fern Farms

(Silver Fern Farms responded to both surveys. No information was

provided related to KiwiRail).

Silver Fern Farm‟s Northland processing plant is located on Tuna Street,

Dargaville about 100 metres from State Highway 14 and about 5

kilometres from the Dargaville rail yard. An estimated 20,000 tonnes of

meat is produced per year. There is also about 15,000 tonnes of

rendering and raw skin products

Currently all meat products are stored on site. As the product is ordered it

is loaded into containers and trucked to the port of export. Local market

product is loaded into hard sided refrigerated trucks and trucked to the

purchaser.

The raw skins and rendering products are loaded into bulk units or

specialised units and transported by truck for further processing. These


products are time sensitive and require further processing within 12 hours

of slaughter which would make rail too slow.

Silver Fern Farms consider rail to be cheaper. Freighting is regularly

reviewed. There has been weight and speed restriction on the Dargaville

rail line that has prevented Silver Fern Farms from considering rail. These

restrictions have only been lifted in 2012. Facilities to cater for containers

associated with the Dargaville rail yard would lead to Silver Fern Farms

reconsidering rail.

The containerisation of Northport would lead to Silver Fern Farms

investigating the exporting of containers through Northport. The service

would need to be comparable to that of the Ports in Auckland and

Tauranga. There is no preferred freighting method from Dargaville to

Northport.

6.2.6 CHH Whangarei

(CHH Whangarei did not respond to the 2012 survey, but responded to a

survey conducted in October 2010).

CHH Whangarei is located on Union East Street, Whangarei. The rail runs

past the site, but is not connected. CHH Whangarei is about 2 Kilometres

from the Whangarei rail yard. In 2010 CHH Whangarei produced 180,000

tonnes of timber and 200,000 tonnes of woodchip.

The majority of the timber is for the local market. Currently the timber is

dispatched from Whangarei by truck which then takes the timber directly

to the purchaser. This method is preferred and it is unlikely that rail will

ever be more efficient or convenient.

For the timber that is exported, about 85% is bulk loaded at Northport

and the other 15% is exported in containers. The timber is sent to

Auckland by truck and then loaded into containers. This is to allow the

containers to be filled up to their weight capacity.

There is 200,000 tonnes of wood chip produced per year. This is currently

purchased by the CHH Pulp and Paper Kinleith plant. The purchaser is

responsible for the freighting choices. Currently about 65,000 tonnes is

freighted by rail and the other 135,000 tonnes by truck. The reason for

the use of both road and rail is unknown.


The chip is loaded into open top 20 foot containers that are then

transported to the Whangarei rail yard by truck. The whole container is

then loaded on a flat decked rail wagon.

There is potential to use rail for some logs to CHH Whangarei. Some of

the processing machinery has been relocated to other parts of the site.

This has freed up areas next to the rail line. With the development of the

Marsden Point line, there is potential to use rail to freight the export

timber.

6.2.7 Kaihu Valley Sawmill

(Kaihu Valley did not respond to the 2012 survey).

Kaihu Valley Sawmill is about 15 kilometres North of Dargaville on State

Highway 12. They supply finished timber products directly to the

customer and green sawn timber to other businesses.

Currently all green sawn timber is transported by truck to the purchaser.

The main purchasers are Kiwi Timber Protection in Whangarei and

Lumbercorp in Huntly.

It may be feasible to use rail to transport timber to Huntly as the

receiving business is located within 100 metres of the rail. Loading

facilities are required in Dargaville and infrastructure at Lumbercorp,

Huntly.

6.2.8 CHH Futurebuild

(CHH Futurebuild did not respond to the 2012 survey, but responded to a

survey conducted in October 2010. Volumes obtained from NRC‟s Heavy

Traffic Volumes Report (NRC 2007a)).

CHH Futurebuild is located on Rama Road, Ruakaka. It is next to the

Marsden Point Oil Refinery. Production is 80,000 tonnes per year.

The majority of the product is shipped through Auckland in containers.

Some non containerised products are shipped through Northport.

CHH Futurebuild would consider using the Marsden rail for freighting logs

to their plant and freighting to Auckland. The containerisation of

Northport could lead to increased volume exported from Northport.

It is likely that the glue comes from Taranaki from the same source as

Juken.


6.2.9 Juken

(Juken did not respond to either survey).

Juken produces about 150,000 tonnes per year of wood products from

their Kaitaia mills (NRC 2007a). The product is freighted directly to

Northport.

Juken‟s plant is about 80km North of Otiria. The use of rail is not feasible

due to the need to use two truck trips to get the product to the Northport.

If the Marsden Point line is built, then using rail may be feasible. The rail

trip will be about 100 kilometres.

Currently Juken brings two trucks of glue up from Taranaki per day. The

back load is Tri Board that is then exported from Port at New Plymouth.

This method is used because of a bad experience with rail. A glue sack

was punctured and the glue ended up in the Otiria stream (MOE 2009).

Transporting glue by rail is very likely to be cost efficient but the previous

bad experience is likely to influence any future decisions.

6.2.10 Marusumi

(Marusumi did not respond to the 2012 survey, but responded to a survey


Marusumi produces 210,000 m3 per year of wood chip at their plant in

Portland, Whangarei. This is then exported through Northport to the

parent company in Japan. Marusumi consider rail to be an important part

of their operation.

Forest Loaders are contracted to supply the logs to Marusumi. Rail is used

from Otiria, Dargaville and South of Whangarei. The logs that are closer

to Portland are trucked.

Marusumi used rail to Port of Whangarei, but with the closure of Port of

Whangarei, had to start using trucks to freight to Northport, a distance of

25 kilometres. Rail would be reconsidered once the Marsden Point rail was

completed.


6.2.11 Forest Loaders

(Forest Loaders did not respond to the 2012 survey).

Forest Loaders are one of the major users of the Northland rail network

and are credited with preventing the Otiria line from closing.

Forest Loaders are contracted to freight logs to the Marusumi chip plant

at Portland. The logs are transported on rail from Otiria, Dargaville and

South of Whangarei. The logs that are closer to Portland are trucked.

6.2.12 Ballance Fertiliser

(Ballance Fertiliser responded to the 2012 survey).

The Whangarei plant is located of Lower Port road, Whangarei.

Ballance currently has rail in their plant, but is not connected to the rail

network. In the past rail was used from the Port of Whangarei. The

Whangarei plant produces some 130,000 tonnes of super-phosphate

fertiliser per year. All the raw materials come in through Northport.

Currently the materials are unloaded and stored at Northport. They are

transported by truck as required. If there was a Marsden rail, Ballance

would still be unlikely to use rail. The reasons given are costs and

timeliness. Timeliness should not be an issue with bulk goods that can be

stored until required.

Another product identified by Stewart McElwain (McElwain 2009) in the

Northland inland port/distribution hub. Pre-feasibility study was 20,000

tonnes of Sulphur pellets that was freighted from Whangarei to the Mt

Maunganui plant. Further studies are required to identify if this could be

carried by rail.

Ballance has a bulk fertiliser store on the rail line in Wellsford, but it is

uneconomic to use rail and the facility. It is easier and cheaper to freight

from Whangarei by truck directly to the customers.

KiwiRail and/or Keith Holdsworth have not yet contacted Ballance since

the release of the KiwiRail „turn-around plan‟.


6.2.13 Ravensdown Fertiliser

(Ravensdown responded to the 2012 survey).

There are two Ravensdown Fertiliser bulk stores in Northland and two

Lime plants. The Dargaville store is located 322 Day Street and the

Whangarei store is located on Dyer Street. The Whangarei store will be

relocating by mid 2012, to Mata Lime on Cotton Road, approximately 20

kilometres south of Whangarei and one kilometre off State Highway 1.

Approximately 70,000 tonnes is moved into Northland either by road or

coastal shipping. Whangarei receives approximately 63,000 tonnes and

Dargaville 7,000 tonnes.

The new Whangarei store at Mata will be too far away from the rail to

consider a siding. However the proposed Marsden Point line will run past

the site and Ravensdown would require a rail siding. Ravensdown is very

likely to reconsider rail for bulk fertiliser from Auckland but is unlikely to

use the rail to Northport as it is only 15 kilometres away and this distance

is too short to be cost efficient.

The Dargaville store is located within 200 metres of the Dargaville rail

yard. There appears to be land available for a rail connection. The land is

flat and clear of buildings. Ravensdown would require a rail siding, more

suitable rolling stock and the rail able to handle heavier loads before rail

would be reconsidered.

If Port of Northport was containerised, then Ravensdown would be likely

to directly import about 40 containers per year.

Ravensdown considers the cost of rail and road to be similar but currently

road is better able to meet the current requirements into Northland. Rail

is used extensively from the Napier manufacturing plant to New

Plymouth, Wanganui, Gisborne, Taihape and Feilding. The limiting factor

preventing more rail being used are a shortage of Bulk Hopper Wagons

and the turnaround time for wagons into Northland (hence low

utilisation).

KiwiRail and/or Keith Holdsworth have been in contact Ravensdown since



6.2.13 Steel

The steel industry in Whangarei consists of four different distribution

centres for three different national businesses. They are Steel and Tube,

Steel and Tube Roofing, Fletcher Steel and Vulcan Steel. All are located in

the industrial area at the southern end of Whangarei. All businesses use

trucks to receive their steel.

Fletcher Steel is the only business that replied and due to the competitive

nature of the industry they were unable to disclose any volume figures. It

is estimated that the volume of steel imported by all businesses into

Northland is in the range of 10,000 to 20,000 tonnes per year.

6.2.13.1 Fletcher Steel

(Fletcher Steel responded to the 2012 survey. No information was

provided on volumes).

Fletcher Steel is located on Rewarewa Road, about 1 kilometre from State

Highway 1 and about 4 kilometres from the Whangarei rail yard. The

business is too far away from rail to consider a direct connection. It is

estimated that between 3,000 and 6,000 tonnes of steel are sold each

year from Whangarei.

Currently, the steel is freighted up from Auckland by truck. The trucks are

dispatched from Auckland and arrive in Whangarei at 11 pm. The current

system is efficient and cost effective mainly because backloads can easily

be found for the trucks. Trucking is the preferred freighting method.

The Auckland distribution warehouse is located on 575 Great South Road,

Penrose. This is located next to the railway lines and there does appear to

be land available for a rail siding. It appears that a building could be set

up for rail services.

The Whangarei branch owns a truck that could be used to collect the steel

from the Whangarei rail yard.


6.2.13.2 Steel and Tube

(Steel and Tube chose not to participate in the 2012 survey. Steel and

Tube Roofing did not respond to the 2012 survey).

Steel and Tube is located on the corner of Hewlett Street & Fraser

Crescent, Whangarei. The rail line is about 100 metres away from the site

but there is a major road between the two. This would make a direct

connection non viable. The rail yard is about 2 kilometres away.

Steel and Tube Roofing is located at 9 Southend Avenue, Whangarei. This

is about 200 metres from State Highway 1. The rail yard is about 5

kilometres away.

The Auckland distribution centres appear to be spread throughout

Auckland. There does not appear to be a manufacturing plant associated

with Steel and Tube.



6.2.13.3 Vulcan Steel

(Vulcan Steel did not respond to the 2012 survey).

Vulcan steel is a relatively new business with the Whangarei branch

located on 110 Lower Port Road, Whangarei. The head office and

distribution centre is located on 29 Neales Road, East Tamaki, Auckland.

The Whangarei branch is next to the railway line but is not connected.

The Auckland distribution centre is about 5 kilometres from the Wiri rail

facilities.

It may be feasible to freight the steel directly to the Whangarei branch by

rail in the future. It is likely that the current trucking arrangements are

the preferred option.




6.2.14 Delta Produce

(Delta was not surveyed in 2012, but replied to a survey conducted in

October 2010)

Delta produces 6,000 tonnes of Kumaras per year. They are located on

State Highway 14, about 5 kilometres from the Dargaville rail yard.

Production is mainly for the local market.

Product is sent by truck to various fresh produce auctions or directly to

the two supermarkets distribution centres. It may be feasible to send the

produce by rail if the receiving business has a rail siding.

6.2.15 Progressive Enterprises

(Progressive Enterprises responded to the 2012 survey).

Progressive Enterprises supplies the Countdown Supermarkets. There are

7 supermarkets in Northland, 3 in Whangarei, 3 north of Otiria and 1 in

Dargaville. There are about 50,000 pallets delivered per year by truck.

The volume is about 78,000 to 100,000 tonnes per year (McElwain 2009).

There are 5 distribution centres in Auckland that service Northland. They

are:

National distribution centre

Regional distribution centre

Chilled and frozen products

Fresh produce

Meat and fish

One of the distribution centres had a rail siding, but the rail has been

removed.

Progressive Enterprises is unable to use rail into Northland for the

following reasons:

Lack of suitable rolling stock

Tunnel size

Logistics and the freighting costs in Auckland

Poor Northland rail package

Progressive Enterprises consider rail cheaper if the model is right. Freight

has been reviewed and a change to rail has occurred for other routes. The

factors that have influenced the review are freight/fuel prices, road


congestion/travel time, changing company ethics/values and the KiwiRail

“turn-around plan”.

The containerisation of Northport would allow Progressive Enterprises to

backload their trucks to their distribution centres in Auckland. The

products would need to be palletised before freighting to Auckland. This

would also provide an empty container for a Northland user. This would

reduce the number of empty containers being unloaded in Auckland.

Progressive Enterprises would consider either road or rail from Northport

to Auckland.

Communication has occurred with KiwiRail regarding other routes but not

the Northland route.

6.2.16 Foodstuffs

(Foodstuffs Auckland Ltd responded to the 2012 survey).

Foodstuffs operate the Pak‟n‟Save, New World and Four Square

Supermarkets. They have four Supermarkets in Whangarei, three north of

Otiria as well as a large number of Four Square Supermarkets and

independents. About 160,000 pallets per year are delivered by truck. The

estimated volume is 240,000 tonnes per year.

The Auckland distribution centres are located on Roma Road, Mt Roskill. It

is not close to the railway. The Wiri rail freight hub is about 20 kilometres

South on the South Western Highway.

Due to the location of the distribution centre, rail freight is considered

more expensive and has not been used for distributing groceries. A

reliable and secure door to door service would also be required.

Foodstuffs consider the development of Northport for containers to be

important to their supply chain of imported goods. The Ports of Auckland

has been identified as an area of risk (even before the 2011/12 industrial

dispute) as well as the increasing size of the container vessels. For the

freighting of containers from the Northport to the Auckland Distribution

centre, Foodstuffs would consider either rail or road.

KiwiRail and/or Keith Holdsworth have not yet contacted Foodstuffs since



6.2.17 The Warehouse

(The Warehouse did not respond to the 2012 survey. All information is

obtained from the report titled “Northland inland port/distribution hub,

Pre-feasibility study. McElwain, S. 2009.”).

There are five Warehouse stores in Northland. They are in Whangarei,

Dargaville, Kerikeri, Kaitaia and Kaikohe. The Whangarei store receives

approximately 20,000 tonnes per year. The other stores in Northland

receive approximately 30,000 tonnes per year. Rail is not used into

Northland.

There are two distribution centres that supply Northland which are both

located in South Auckland.

Photo 2 Dargaville rail yard


6.3 Business Surveys: Transferable Freight

From the data collected, there does not appear to be any freight that can

be quickly transferred onto rail. There are limiting factors, restricting

transfer of freight onto rail.

Imerys would like to use the rail more. To do this, they would

require container facilities at Otiria. This will transfer 12,500 tonnes

onto rail from Otiria to Whangarei.

Affco would reconsider rail if Otiria had container facilities. This

could result in an estimated 15,000 tonnes being freighted from

Otiria to the Ports of Auckland.

Silver Fern Farms is located 5 km from the Dargaville rail yard. If

there were container facilities available, Silver Fern Farms would

reconsider using rail. This could result in an estimated 20,000

tonnes being freighted from Dargaville to the Ports of Auckland.

CHH Kinleith (Tokoroa) mill currently freights an estimated 200,000

tonnes of wood chip from Whangarei to Kinleith. Currently about

65,000 tonnes is freighted by rail and the balance of 135,000

tonnes by road. The reason for this split is unknown. It is very likely

that there is insufficient rolling stock available to cater to the

demand. Rectifying this could result in an extra 135,000 tonnes

being freighted from Whangarei to Kinleith.

CHH Whangarei is located next to the rail lines. It may be possible

to transport a portion of the logs sent to the mill by rail.

Transferring all of Golden Bay Cement‟s business onto rail in the

long term is likely to make the Northland rail network a profitable

business. In the short term it is possible to freight a portion of the

inputs by rail. In the future, with the development of rail facilities to

the Hikurangi quarry and specialised wagons it is likely that 300,000

tonnes of limestone rock would be transferred by rail a distance of

35 km from Hikurangi to Portland. There is also potential to freight

cement to New Zealand destinations by rail.

Ravensdown uses rail from Napier to lower North Island stores.

Currently the train travels back to Palmerston North, then up to

Auckland. For Ravensdown to use the rail to Dargaville there would

need to be a rail connection to Ravensdown store at Dargaville and

more available wagons. The potential volume is estimated at 7,000

tonnes from Napier to Dargaville.

Progressive Enterprises are interested in using rail. For Northland it

is probably a long term proposition. The whole supply chain would


need to be redeveloped to cater for to Door to Door deliveries and

the use of swap bodies.

Fletcher Steel is a business that is happy with the current trucking

situation, but could be converted to rail if a rail siding was provided

in Auckland. The provision of a rail siding could also provide

opportunity to freight to other centres south of Auckland.

Kaihu Valley Sawmill has potential to freight green sawn timber

from Dargaville to Huntly if infrastructure was provided at both ends

of the journey.

Fonterra Maungaturoto has potential to use the rail. However, there

would need to be a rail siding into the plant or container facilities as

well as storage facilities at Fonterra. (This business was not covered

in the survey).

Kamo Scrap Metal is located within 100 metres of the rail line. They

supply scrap steel to South Pacific Steel, Auckland who have rail

facilities. (This business was not covered in the survey).

Businesses that have potential to convert some freight to rail within the

next year:

Imerys Affco

Silver Fern Farms CHH Kinleith

Businesses that have potential to convert some freight to rail in two to five years time:

Golden Bay Cement

Businesses that have potential to convert some freight to rail in the longer

term or have potential to use rail but have not considered rail freight:

Ravensdown

Progressive Enterprises CHH Whangarei

Kaihu Valley Sawmill Fonterra Maungaturoto

Fletcher Steel Kamo Scrap Metal


6.4 Business Surveys: Capital Expenditure

The following section indicates what is required to meet the demands of

the businesses to potentially transfer their freight onto rail. All solutions

will require capital expenditure.

As information requested has not been made available by KiwiRail so far,

the estimates below are based on publicly available information.

6.4.1 Rail Costs

Currently there are two return train trips per weekday from Auckland to

Whangarei (11 return trips per week). One of them is general freight to

Auckland and the other is logs and wood chip to Tokoroa. According to

KiwiRail the Northland line broke even for the 2010/11 year (Laird, 2001),

but the income generated from the trains carrying Northland freight

outside of Northland is not included in the Northland income.

However in the agenda for the Auckland Regional Council, Transport

Committee meeting on March 7th 2012, it was indicated from KiwiRail that

the Northland rail network earns revenue of $8 to $9 million per year.

This covers the cost of train operations but not the cost of infrastructure

maintenance. This ranges between $3 and $5 million per year, just to

keep the lines in their current state, and is not to the standard needed to

support growth.

Containerising of both the Otiria and Dargaville rail yards on the proviso

that Imerys and Affco use the Otiria container facilities or Silver Fern

Farms use the Dargaville container facilities will generate an immediate

increase in freight. It is possible that Forest Loaders could be contracted

to operate both yards since they currently have staff present for loading

logs onto the rail. Used container forklifts cost about $100,000 each.

One train per week day travels from Whangarei to CHH Kinleith

(Tokoroa), but only 65,000 tonnes out of 200,000 tonnes of wood chip

produced at CHH Whangarei is carried by rail. The reason for this split is

unknown. No information was obtained from either CHH Kinleith or CHH

Whangarei. If the total volume of wood chip produced at CHH Whangarei

could be converted to rail then the volume carried on rail would be an

increase of about 50% of the tkm carried in Northland. It is unknown how

many wagons are used but if we assume there are 20 flat deck wagons

currently being used, then there would need to be another 40 flat deck

wagons. These cost about $100,000 each. There would also need to be


another 80 twenty foot containers with the tops cut out at a cost from

$4,000 each. It is likely that KiwiRail could purchase these at a cheaper

wholesale rate.

Golden Bay Cement has expressed an interest in using rail again.

Converting 300,000 tonnes per year of limestone rock to rail from

Hikurangi to Portland would increase the Northland rail freight by an

estimated 20%. With this transfer there would be a greater public

expectation of other businesses to use rail freight. There are also other

inputs brought into the region and cement that could be transported by

rail. No information was provided by Golden Bay Cement. The transfer of

Golden Bay Cement products to rail is likely to be a long term project.

The price for a rail line into Golden Bay Cements Hikurangi quarry is likely

to be a similar price per kilometre as the estimated $500,000 per

kilometre for the Marsden Point. There would need to be about 2

kilometres. Wagons could cost an estimated $200,000 each and there

would need to be at least 10 capable of carrying 18 tonnes each. Golden

Bay Cement would need to invest in more machinery to crush and clean

the rock at Hikurangi. It can therefore be assumed that the rail could cost

about $1 million and the wagons $2 million. The line between the two

points would need to be upgraded to cater for the increased volumes.

There would also need to be a rail crossing, across State Highway 1.

Depending on the requirements of Transitnz this could either be a level

crossing or a bridge. This project will require resource consents which

make it a medium to long term proposition.

Requirement Estimated Cost

Otiria Rail Yard Container Forklift

Flat deck wagons(6)

$100,000

$600,000

Dargaville Rail Yard Container Forklift

Flat deck wagons(8)

$100,000

$800,000

CHH Wood Chip Flat deck wagons (40)

Containers (80)

$ 4,000,000

$ 320,000

Golden Bay Limestone Rock

Rail line (2 km)

Wagons (10)

Road crossing

$ 1,000,000

$ 2,000,000

Unknown

Table 6 Estimated cost to transfer identified freight onto rail


6.4.2 Tunnels

The current estimate, by KiwiRail, to allow Hi-Cubed containers through

the Northland tunnels (refer to table 1, page 10) is thought to be about

$100 million (Roberts, 2011). All the tunnels that need lowering are on

the Auckland to Whangarei section of the network.

KiwiRail, General Manager of Freight, Iain Hill told a public meeting in

Whangarei in October 2011, that it is estimated to cost $40 million to

improve clearances in the tunnels (KiwiRail, 2011).

The reason for the difference between the two figures is unknown, but it

is probably related to the $100 million being the “wish list” of KiwiRail and

the $40 million the bare minimum requirements to allow Hi-Cubed

containers through the tunnels.

As it appears Fonterra is the only business that would be able to use Hi-

Cubed containers and only for their chilled product (about 65,000

tonnes). The other products from Fonterra and Imerys clay are restricted

by weight, not the height of the container. This is also the case for the

other potential users, Affco and Silver Fern Farms.

Other countries have used Low Rider wagons to transport the Hi-Cubed

containers until such a time as the tunnels are lowered to cater for the

increases heights. Low Rider wagons allow the Hi-Cubed container to sit

closer to the ground than the traditional flat deck wagons. The

disadvantages of the Low Rider wagons are the higher manufacturing

costs and lower operating efficiencies. The advantages of the Low Rider

wagons are that businesses are able to use the Hi-Cubed containers and

the expense of the tunnel lowering can be delayed until a later date.

NRC is considering purchasing their own Low Rider wagon to aid KiwiRail

cater for the demand of Hi-Cubed containers (NRC, 2011). It has been

indicated that KiwiRail may already have some Low Rider wagons (Dick,

2010). It may be possible to relocate these wagons to Northland and

lower the other tunnels in New Zealand first. Currently the only other

tunnels to lower are in the South Island on the West Coast and the

Midlands lines.


6.4.3 Weights

Currently the Northland rail network is weight restricted and unable to

carry containers to their weight capacity. Only businesses with direct

loading capabilities would be able to take advantage of the potential.

The issue of filling the containers to capacity at the rail siding was raised

with Imerys. They indicated that it would too much of a hassle and

uneconomic. Timber has been freighted to Auckland on truck and then

loaded into containers.

Imerys have indicated that they would not be able to put more in each

container. Both Affco and Silver Fern Farms are close enough to the rail

yard to allow the transport of a partially filled container by road, then

filling to weight capacity at the rail yard, but are unlikely to do this

because of the security of the product. Fonterra is the only business that

would benefit from the heavier weight capacity containers.

As a result, the heavier container freight is likely to be restricted to the

Kauri to Auckland section of the rail network. There are 58 bridges on this

route that would need to be capable of carrying 18 tonnes axle weight (or

heavier).

There are a total of 106 bridges in Northland. By not immediately

requiring the whole Northland rail network to be heavy container

compatible, the upgrading of the other 48 bridges and the rail network

can be left until such a time as either finances become available or the

bridges reach their replacement date. This would have the effect of

reducing the immediate financial requirement for the Northland rail

network upgrading.

No information was provided by KiwiRail relating to weight capacity of

current bridges, or the cost of upgrading or replacing of the bridges. The

length of each bridge is unknown. Cost information was provided by a

private consultant (name is confidential) who estimated that a new bridge

will cost between $30,000 and $40,000 per metre. Short bridges cost

more than longer bridges per metre. For double-tracked bridges the figure

will double.


6.4.4 Northport

If Northport was to develop container facilities and build the rail line

would any freight come from outside the district? It is very unlikely as the

same factors that prevent Northland businesses from using more rail

freight would also apply to the businesses from outside the area. They

would be better served by using either the Ports of Auckland or Tauranga.

If the rail line was fully redeveloped, the businesses from outside

Northland would still be better served by the Ports of Auckland and

Tauranga.

If the Port of Auckland was closed, the Port of Tauranga would be unable

to cope with the increased demand resulting in a requirement for

container facilities at Northport. This freight could be transported by road

until such a time as the rail was fully developed to cater for the

requirements.

The conclusion can be drawn that unless the Ports of Auckland becomes

uncompetitive, then the Northport is only likely to service the import and

export of bulk produce for Northland.

Photo 3 Aerial photo of Northport (foreground) and Marsden Point Oil Refinery.


7 Conclusions and Recommendations

The following table provides a summary of the potential gains in rail

freight per year.

Business Distance (km) Tonnes

(000) tkm (000) Requirements

Imerys 65 12.5 812 Container facilities

Affco 240 15 ? 3,600 Rail siding

Container facilities

Silver Fern

Farms 180 ? 20 ? 3,600 Container facilities

CHH Kinleith 180 Northland

160 Main Trunk

135 ?

135 ?

24,300

21,600 Rolling stock

CHH Whangarei ? ?

Golden Bay

Limestone rock 35 300 10,500

Rail siding

Road crossing

Rolling stock

Golden Bay

Other ? ?

Ravensdown 7 Rolling stock

Price structure

Progressive

Enterprises ? ?

Rolling stock

Door to Door

Kaihu Valley

Sawmill 270? ?

Loading facilities

Rail siding Huntly

Fletcher Steel 185 ?

Table 7 Summary of potential rail freight gains

Note ? indicates unknown information or the accuracy is uncertain.


Conclusion

At the Otiria rail yard, Imerys Tableware and Affco both need a container

forklift, a forklift operator, flat deck wagons and empty containers. Imerys

will use Otiria as soon as these requirements are met. Affco will consider

using rail. For Imerys the potential volume is 12,500 tonnes per year

from Otiria to Whangarei and for Affco the potential volume is estimated

at 15,000 tonnes per year from Otiria to the Ports of Auckland.

Recommendations

1. Provide container forklift at the Otiria rail yard. Estimate cost of

$100,000.

2. Contract Forest Loaders to operate the Otiria container facilities. No

capital costs.

3. Relocate the Imerys flat decked wagons and empty containers from

Whangarei to the Otiria rail yard. No capital costs.

4. Provide flat decked wagons for Affco at a rate of 3 per day (average)

at the Otiria rail yard. Required are 6 new flat deck wagons (assuming

2 day turnaround) at an estimated cost of $600,000.

5. Rail the empty refrigerated containers for Affco to the Otiria rail yard.

No capital costs.

Conclusion

Silver Fern Farms needs a container forklift, a forklift operator, flat deck

wagons and refrigerated containers to consider using rail at the Dargaville

rail yard in the future. The potential increase in Silver Ferns Rail use is

estimated at 20,000 tonnes per year from Dargaville to the Ports of

Auckland.

Recommendations

6. Provide a container forklift at the Dargaville rail yard. Estimated cost of

$100,000.

7. Contract Forest Loaders to operate the Dargaville container facilities.

No capital costs.

8. Provide flat decked wagons for Silver Fern Farms at a rate of 4 per day

(average) at the Dargaville rail yard. Required are 8 new flat decked

wagons (assuming 2 day turnaround) at an estimated cost of

$800,000.

9. Rail the empty refrigerated containers to the Dargaville rail yard. No

capital costs.


Conclusion

CHH Kinleith needs flat decked wagons and open topped containers

available in Whangarei before considering using more rail freight in

future. The potential increase from CCH Kinleith is estimated at about

135,000 tonnes per year from Whangarei to Kinleith.

Recommendations

10. Provide flat decked wagons for CHH Kinleith at a rate of 20 per day at

the Whangarei rail yard. Required are 40 new flat decked wagons

(assuming 2 day turnaround) at an estimated cost of $2,000,000.

11. Provide open topped containers for CHH Kinleith at a rate of 40 per

day at the Whangarei rail yard. Required are 80 open topped

containers (assuming 2 day turnaround) at an estimated cost of

$320,000.

Conclusion

KiwiRail has released different figures for the lowering of the same

problem tunnels ranging between $40 and $100 million.

The Northland rail network redevelopment appears so far to have been

done in an ad hoc manner with no regards to the potential freight gains

that will be realised as a result of possible capital expenditure.

Recommendations

12. Produce and release a plan for the total upgrading of the Northland

rail network including costings and a time line.

13. Upgrade the weight capacity for the Kauri to Auckland sections of the

Northland rail network first.

14. Conduct research as to why some businesses use rail outside

Northland, but not in Northland and consider rectifying the issues

identified.


Conclusion

The NRC has put forward a proposal to purchase some Low Rider wagons.

The land for the Marsden Point rail has been purchased.

Currently there is no master logistics plan or any other supports for the

transfer of freight onto the rail network.

Recommendations

15. Set up a regional logistic master plan.

16. Provide grants for rail sidings.

17. Invest in rail infrastructure.

18. Invest in freight hubs.

19. Fund or partially fund feasibility studies for the following businesses:

a. Fonterra Maungaturoto.

b. Golden Bay‟s Hikurangi to Portland limestone rock transfer.

c. Golden Bay‟s other freighted inputs.

d. Golden Bay‟s freighting of final product.

e. All businesses with potential identified in this report.

f. All businesses with potential identified in the report titled

“Northland Inland Port/Distribution Hub. Pre-Feasibility Study”

written by Stewart McElwain in 2009.

Photo4 Container forklift loading containers onto Flat Decked rail wagons


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9 Appendix

9.1 Appendix 1 The KiwiRail „turn-around plan‟


The rail ‘turn-around plan’

KiwiRail’s 10-year programme to create a sustainable rail business

Investment in KiwiRail announced by the Government today (18 May, 2010) marks the beginning of a long term plan to create a business capable of standing on its own feet financially.

The investment, subject to business cases, follows the Government’s consideration of a 10-year plan prepared by KiwiRail for turning around the rail industry. It calls for investment in the business’s assets rather than an operating subsidy.

The plan reflects the need to create a viable and efficient rail industry capable of meeting its share of freight traffic projected to grow by at least 75 percent by 2031.

The plan aims to increase rail traffic volumes and revenue, increase productivity, modernise assets and separate out the commercial elements of the business from the non-commercial.

It takes into account the following:

1. The views of our customers who say they need an efficient and reliable rail network to serve their businesses and meet future freight growth.

2. The need to develop partnerships and alliances with our customers, stakeholders and suppliers.

3. The need to restore rail’s relevance – eroded over the past 15 years in many areas through lack of maintenance investment that has resulted in poor transit times and unreliable services.

Currently, an express freight train journey between Auckland and Wellington typically takes thirteen and a half hours - similar to transit times in the late 1970s. A truck on the same route takes nine hours.

To be relevant to customers the rail journey for express freight trains needs to be no more than 11 hours and it must be reliable.

We recognise that for the plan to succeed, we will need the support and engagement of our staff as well as their willingness to work with management to improve productivity.

Implementing the plan

There will be five major areas of investment and work to protect and grow our revenue, and create a sustainable rail system for New Zealand:

1. Step change in the Auckland–Christchurch route • Reduce transit time and improve reliability along the route -

easing curves, removing speed restrictions, greater renewals investment in bridges and sleepers and passing loops

• Improve exit and entry from Auckland and Wellington -

Whangarei

AUCKLAND

improvements at terminals and on mainlines to reduce transit times and conflicts with commuter services

• Increase ferry capacity for rail freight - extend length of Aratere and make Kaitaki rail-capable

2. Other key routes • Improve reliability and capacity with increased renewals

Investment in replacement of sleepers, strengthening of bridges,

New Plymouth

Hamilton Tauranga

Napier

Gisborne

refurbishment of track formation

3. Enabling investment • Improved IT systems and processes, equipment and facilities

Whanganui

PALMERSTON NORTH

Masterton

at terminals • New locomotives, wagons • Improved track infrastructure

4. The minor lines • Review business on North

Auckland, Stratford-Okahukura, Napier-Gisborne and North Wairarapa lines

• Consultation with communities, customers and staff

• Close or mothball by 2012 if anchor customers do not emerge

Greymouth

Blenheim

CHRISTCHURCH

Ashburton

Timaru

WELLINGTON

5. Auckland and Wellington metro services • Clarify and assign accountability

for costs associated with operating metro networks

Invercargill

Oamaru

DUNEDIN


Key elements of the ‘turn-around plan’

1. The business needs a connected network Growing the business depends on KiwiRail maintaining a connected national network. However, minor lines that carry little or no traffic will only survive if they have proven future potential and/or an imminent anchor customer. Focussing our scarce capital on productive revenue is a key issue.

2. Growth in volume and revenue quality is essential Freight is critical to the financial success of KiwiRail. It currently generates more than 75 percent of KiwiRail’s revenue from carrying bulk commodities, import-export goods and domestic freight. The predicted near doubling of the freight task over the next 30 years and the opportunity to increase rail’s market share on some routes underpins its importance to the business.

3. Auckland-Christchurch is the backbone of the network The national network does not exist without its backbone (Auckland-Christchurch). Increasing the amount of domestic freight carried on all sectors along the main trunk backbone is critical to the growth and sustainability of the freight business. Other routes are busy and important. But in most cases, rail is already relevant and growth depends on some other factor – like natural growth in the economy.

4. Investment in infrastructure is critical to improving transit times and reliability Targeted investment in key routes – particularly Auckland-Christchurch - will restore relevance and reliability and give the freight business the opportunity to protect the business we have today, reclaim business from the past and grow with the forecast freight growth. Critical elements are easing curves, laying new sleepers and strengthening bridges to decrease transit times as well as improving exit and entry in Auckland and Wellington and building or extending passing loops.

5. Greater ferry capacity is needed for the Auckland- Christchurch route to be competitive Greater rail capacity will be needed in Interislander to support freight business growth. All sailings are likely

to require rail access, whereas today one of our ships does not have rail capability. Greater general capacity will be required also to meet the growing freight task.

6. Wagon and locomotive fleets need to be upgraded

Currently the newest diesel locomotives in the fleet are 30 years old and the average age of wagons between 25 and 30 years. Adding new locomotives and wagons to the fleet is critical to improving transit times and reliability and enhancing our natural advantage from a sustainability perspective through lower fuel use. New locomotives are already on order; further work is required for additions to the wagon fleet.

7. Productivity needs to improve Productivity can always be improved and we are challenging ourselves to review and make necessary changes to achieve the necessary gains. Targeted investment in technology, processes and equipment will enable us to unlock a wide range of productivity improvements.

8. Long-distance passenger business growth will come from creating rail experiences Few tourists or New Zealanders use long-distance trains as a means of travel from place to place. Future growth in long-distance passenger travel depends on improving the quality of the experience. New passenger carriages for the South Island will help but KiwiRail will need better infrastructure and possibly greater expertise in customer service.

9. The metro business depends on true costs being recovered The metro business, funded by a mixture of fare box, council rates, NZTA and Government, is essentially non-commercial relative to our other trading businesses. These areas of business will be accounted for separately so that the total costs are fully understood by the stakeholders and there is wider appreciation of the impact of decisions made. Our job is to partner with the regions and the operators to ensure that the metro rail systems are a vibrant part of the integrated public transport system in each region.

The KiwiRail business

KiwiRail’s trading businesses – KiwiRail Freight, KiwiRail Passenger including Tranz Metro and Tranz Scenic, and Interislander – are set up to listen to and respond to their customer needs and set the market priorities. They are accounted for separately but share overhead costs where practical. KiwiRail Network, KiwiRail Mechanical and Corporate teams support their plans to deliver for customers today and into the future.

KiwiRail key routes

Route Key traffic

Containerised export and bulk products Auckland-Hamilton-Tauranga

Auckland metro network Commuters

Auckland-Christchurch Containerised domestic goods Overseas and local passengers (Overlander and TranzCoastal)

Waikato-BOP forestry lines Wood and wood products

Oringi-Palmerston North-Whareroa Bulk milk

Wellington metro network Commuters

Cook Strait Containerised domestic goods Passengers and cars Westport-Greymouth-Lyttelton Bulk coal International visitors (TranzAlpine)

Edendale-Port Chalmers/Timaru-Lyttelton Containerised dairy products and coal


9.2 Appendix 2 Business Survey


Name

E Mail

Telephone

Postal

Additional comments are welcome.

1 Your contact details

Name

Position

Business Imerys

Phone Number

E-Mail

Postal Address

Contact Details for survey coordinator


2 What volumes of major goods do you freight by all means from your site?

(tonnes/year)

3 Give a brief description of the processes once your final product leaves

your site. eg Loaded into container, transported to Whangarei by truck, rail to export port.

4 Which ones from the following list, applies to your business? (circle any that apply)

A. We have a rail siding

B. Rail runs through or on the boundary of our property, but no siding

C. Rail is close to our property, but no siding

D. Rail is too far away to consider a siding

5 What distance is the Otiria rail siding from your business?

6 Do you currently freight any of your products by the Northland rail network?(circle one)

A. No.

B. Yes.

If yes please give details. Product, volumes, rail end points.


7 Are there any limiting factors, related to rail that prevent your business transporting larger volumes of product by rail in Northland? (circle one)

A. No

B. Yes

C. Never considered rail (go to question 9)

8 Over the last 10 years, has the volume of products being freighted on rail, in Northland by your business changed? (circle one)

A. Never used rail.

B. Remained the same.

C. Yes. Decreased.

D. Yes. Increased.

Minor

1 2 3 4

Major

5

A Closure of Port Whangarei

B Company policy is to use rail if possible

C Rail better able to meet our requirements

D Road better able to meet our requirements

E Cost of rail vs. road

E Production volume changes

F New products/discontinued products

G Removal of loading facilities at Otiria

H Others (please state)

10 How do you perceive the cost of freighting from door to door, using rail

compared to road? (circle one)

A. Rail is more expensive

B. Rail is similar

C. Rail is cheaper

9 Over the last 10 years, what effect have the factors below had on your

Northland rail freighting patterns?


11 Has any person from Kiwirail contacted your business in the last 2 years

attempting to procure more business for the Northland rail network?

(circle one)

A. No.

B. Yes.

12 Are you aware that KiwiRail has appointed Keith Holdsworth as Northland

freight development manager? (circle one)

A. No.

B. Yes.

13 Has Keith Holdsworth, from KiwiRail, contacted your business? (circle one)

A. No.

B. Yes.

14 How seriously was using rail freight considered by your business in the last

two years? (circle one)

Not considered Slight

consideration Considered

Seriously

considered Changed to rail

15 What has made your business review rail freight in the last two years?

(circle as many as required)

A. Not considered

B. Regular review

C. Freight/fuel prices

D. Road congestion/travel time

E. Changing company ethics/values

F. Public opinion

G. Contact by KiwiRail

H. KiwiRail “Turn Around Plan”

I. Other (please state)


16 For your business to initiate or increase the use of the Northland rail network, how important are the following factors?

Minor

1 2 3 4

Major

5

A A different train schedule

B A more reliable service

C The Marsden Point rail line

D Quicker delivery to Whangarei

E Quicker delivery to Auckland

F Quicker delivery through Auckland

G Able to handle Hi-Cubed containers

H Able to carry heavier loads

I Suitable rolling stock

J Storage facilities at Otiria rail siding

K Better loading facilities at Otiria rail siding

L Door to Door services

M Freight hub at Otiria

N Security at Otiria rail siding

O Reduced damaged goods

P Reduced misplaced products

Q Other(please state)


Port of Marsden Point

As part of Kiwirail‟s submission to the Northland Regional Council,

regarding infrastructure, Kiwirail said that they would only consider the

Northland rail network viable if the line to Port of Marsden Point is built.

1 Do you currently import and/or export any product through Northport?

A. No. (go to question 3)

B. Yes. (go to next question)

2 What volumes do you currently freight through Northport?

3 If Northport had rail access (non containerised), how likely is it that your business would use rail to freight through Northport? (circle one)

Very unlikely Unlikely Likely Very likely Extremely likely

4 If Northport had container facilities (assuming all other factors equal to Ports of Auckland and Tauranga), how likely is it that your business would freight containers, by road, through Northport? (circle one)


5 If Northport had rail and container facilities (assuming all other factors equal to Ports of Auckland and Tauranga), how likely is it, that your

business would freight containers, by rail, through Northport? (circle one)


Any comments related to Northport.


10 Researcher

Kelvin Taylor is a student at NorthTec, Whangarei, New Zealand, studying

a Degree of Business Management. The paper being completed is a final

year industry project. Contact with Kelvin Taylor can be made by email at

[email protected]

mailto:[email protected]