Port Otago looks set to become the South Island's major port through a proposed merger with long-term rival Lyttelton Port of Christchurch (LPC).
Freight broker DCB International managing director in Dunedin, Mark Willis, said the move, announced yesterday, could drive Port Otago's emergence as the "dominant South Island port".
Its strength lies in its dairy and meat exports through Fonterra and Silver Fern Farms.
It has also spent more than $70 million in recent years on new cranes and infrastructure, has a settled workforce and access to land for expansion.
Shipping lines and port companies agree New Zealand is overserviced with its 14 ports, but rationalisation has been delayed by at least five years.
"This [merger] will be positive because the ports will not be fighting each other for market share,"Mr Willis said.
"The shipping lines can't play off the ports against each other if they are a group."
A merger was also better in the long term than ports going into foreign ownership and dividends heading overseas.
Port Otago chairman John Gilks said if the proposal went ahead there would be one company and one board controlling the operational assets and businesses of both ports.
Each port would retain ownership of its core physical assets, such as wharves and land, which was recognised as being "of significant importance not only to shareholders but to local interests", Mr Gilks said, when contacted.
No timeframe had been set and no details or options of governance or responsibility had been spelled out.
Since Port Otago took a $37 million 15% stake in LPC in March 2006, scuppering a deal to sell LPC to an international port manager, Port Otago and LPC have repeatedly said no formal merger talks were under way.
In a joint statement yesterday, Mr Gilks and LPC chairman Rodger Fisher said the pair had signed a memorandum of understanding "to explore the merger of their respective port operations".
Mr Gilks said options to be considered included whether Port Otago became listed on the NZ stock exchange or LPC delisted.
Ideally, shareholders in both companies would be advised of details by the end of March.
Maritime Union of NZ general secretary Trevor Hanson said the union was a strong backer of ports remaining in local control to preserve employment and business opportunity.
In a statement he said the relationship between any new structure and the Ports of Timaru and Southport in Bluff had to be considered: "We're pleased to see local control, as the union has long been opposed to the loss of key infrastructure to overseas interests."
The merger would first legally split the two ports' infrastructure assets from their operations and their commercial activities.
The benefits would come from avoiding duplication, through co-ordination of road and rail use, from development of new joint services and through savings from other, unspecified "efficiencies".
Mr Gilks said exploring "growth opportunities", and increasing jobs, would be paramount to both ports.
While Port Otago's strength lies in dairy and meat, LPC has sound revenues from exporting coal for Solid Energy and Pike River Coal, as well as from hosting car carriers.
Mr Willis rejected suggestions the ports would prompt a carve-up of the South Island into two export and import-only facilities, saying ships preferred to load both ways.
Fonterra's proposal to purchase the former Fisher and Paykel site at Mosgiel signals a likely expansion of warehousing facilities, not only for the present produce from Edendale in Southland, but possibly from its Clandeboye plant which uses PrimePort Timaru.
