Port of Newcastle chairman’s comments on coal are basically a call for help | Michael McGowan | Australia news

It has been called a “seismic shift” in the move away from coal investment. The beginning, in fact, of a “post-coal regional economy”.

But the statement by the incoming chairman of the Port of Newcastle that the world’s largest coal export terminal must “urgently” diversify is closer to a call for help than a declaration of intent.

Roy Green, the new chairman of the Newcastle Ports board, made headlines on Monday when he said that the “long-term outlook for coal is a threat to the port” and signalled a desire to shift to other exports.

It is a big statement because coal makes up about 90% of the Port of Newcastle’s traffic and is still a massive employer in the wider Hunter region of New South Wales that it serves.

Unsurprisingly, it has been interpreted as evidence of the gathering shift away from coal investment.

Indeed, NAB’s former chief economist Rob Henderson said Green’s comments were “indicative of the seismic shift under way in the world of power generation and investment” and Glen Klatovsky from the environment group 350.org said it marked the beginning of a “post-coal regional economy”.

But the real point of Green’s comments is not that he wants the Port of Newcastle to diversify, it is that diversification is out of Newcastle’s hands.

“Among our challenges,” Green said in his first statement as chairman, “will be ensuring a level playing field for the development of a viable and competitive container terminal.”

The significance of that sentence, buried somewhere halfway through his statement, has mostly been overlooked. But that’s the real point to Green’s message and his target audience is not environment groups but the premier of NSW.

The history of Newcastle’s attempts to move away from its reliance on coal by building a container terminal is long and complex but the crux is this: in 2013, when the NSW state government sold the Port Botany and Port Kembla, it included a clause in the deal to protect the new owner from competition by forcing Newcastle to pay compensation if it exceeded a certain number of container movements.

The government repeatedly denied that such a deal existed, saying there was no “legislated cap” on container movements until the Newcastle Herald got hold of a document proving otherwise in 2016.

Then, rather sheepishly, it admitted that once a “cross-payment” threshold of 30,000 containers – plus 6% yearly growth – was reached at Newcastle, the operator would have to pay the owners of Port Botany about $100 per container, about $1m for a typical container ship of 5,000 capacity.

The deal makes it difficult, if not impossible, for Newcastle to compete with Botany. It is what Green means when he talks about a “level playing field”.

The NSW premier, Gladys Berejiklian, argued while she was treasurer that the deal made sense because the majority of container deposits in Botany were delivered to within 40km and that “major freight operators do not want multiple ports of stops when they are bringing their goods to New South Wales”.

In an estimates hearing last year she said that the government saw “the particular role of the port at Newcastle to be primarily for coal and other bulk commodities”.

But others were less enthusiastic. The chairman of the Australian Competition and Consumer Commission, Rod Simms, has been critical of the Newcastle port sale more generally because of the lack of pricing regulation in the deal.

“We were given access to a fair bit of confidential information but it is fair to say that it’s examples like this that have influenced some of our recent statements on privatisation,” Sims reportedly said last year.

And the NSW opposition leader, Luke Foley, argues that the government’s real goal with the cap was to “inflate the privatisation price by creating a monopoly at Port Botany”.

“And to do this they had to artificially hold Newcastle back from ever having its own container terminal,” he told the Guardian.

In any case, the point is that when the Port of Newcastle talks about diversification, it isn’t talking about a choice.