Port of Newcastle has cited Tomago Aluminium's decision to export via Port Botany as evidence that it could build a viable container terminal at Mayfield if not for financial penalties under scrutiny in the Federal Court.
PoN's barrister, Garry Rich, SC, told the court on Wednesday that Tomago once exported its products from Newcastle as bulk cargo but now sent about 24,000 containers of aluminium every year to Botany.
The Australian Competition and Consumer Commission has taken legal action against NSW Ports, the private operator of Botany and Port Kembla, and the state government over once-secret container fees included in the $5 billion privatisation of the ports in 2013.
The 99-year leases for Botany and Kembla contained so-called port commitment deeds which included compensation payments to NSW Ports if Newcastle developed a rival freight terminal. The payments were revealed by the Newcastle Herald in 2016.
The 99-year lease for Newcastle locked the PoN consortium into reimbursing the government for these compensation payments if it handled more than 30,000 containers a year.
The ACCC says NSW Ports and the government acted with the intent and likely effect of substantially lessening competition, in breach of the Competition and Consumer Act, by giving NSW Ports "comfort" from the prospect of a rival Newcastle terminal.
Stephen Free, SC, acting for the state, characterised the compensation payments as an attempt to execute government ports policy in the public interest rather than to protect Botany bidders from the prospect of competition from Newcastle.
The NSW Ports legal team portrayed a Newcastle container terminal as commercially unviable and a story of "accumulating failures" rather than a realistic potential competitor to Botany and Kembla.
Mr Rich countered on Wednesday that the 50-year span of the port deeds made it highly likely a Newcastle container terminal could be developed within the life of the agreements.
"The time period within which the commercial likelihood of entry by the Port of Newcastle has to be assessed still has another 43 years to run," he told justice Jayne Jagot.
"Forty-three years ago, not one of the three container terminals currently operating at Port Botany were in operation.
"Much ... else has changed in the shipping industry and in the economy more generally in that period. Nor are things likely to stand still, your honour, in the next 43 years."
Mr Rich said a global trend towards larger, more cost-efficient and environmentally friendlier container vessels presented challenges for Botany and opportunities for new players in the market.
"Your honour will see that Port Botany is already suffering from capacity constraints and congestion problems which present an opportunity for a competitive new entrant," he said.
"Much is made of the incumbent's location, but your honour will hear that its very proximity to the urban centre of Sydney and to other facilities such as the airport is also one of Port Botany's biggest difficulties. And that difficulty is likely to get worse, not better, over the next 43 years.
Tomago Aluminium, a nearby and sizeable potential PoN customer, had followed an industry trend towards shipping bulk cargo in containers but could not do so from Newcastle.
"Your honour will readily appreciate the commercial prudence of considering whether that's the sort of business you might be able to get," Mr Rich said.
He said the defence's position that in 2013 there was no likelihood of competition from Newcastle "sits most uncomfortably with the fact that, at the very time it was preparing for and negotiating the sale of Port Botany and Kembla, the state was aware that a commercial consortium [Newcastle Stevedores Consortium] had signed contracts to actually build a container terminal at the Port of Newcastle".
The government scuppered the Newcastle project after learning it would significantly reduce the amount bidders were willing to pay for the Botany lease.
The NSW government's legal team told the court that it would cost the state an estimated $12 billion to build infrastructure to support a Newcastle freight terminal.
Stephen Free, SC, revealed the cost estimate in seeking to explain the rationale for the government shifting its ports policy to promote Kembla above Newcastle as the first alternative once Botany reached capacity.
He said the government had estimated that Kembla would require $4 billion in public infrastructure.
A Newcastle container terminal operating at full capacity would likely require significant upgrades to the rail link to Sydney, but the government has not previously disclosed its cost estimate for such work.
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