When, in August this year, the "Port Performance and Ownership" report prepared by the New Zealand Institute of Economic Research for the Local Government Forum was published, it drew some controversy for suggesting local authority ownership of ports should be abandoned in favour of commercial shareholdings as a way to encourage efficiencies and more beneficial port-to-port relationships.
In the context of the suspended merger talks between Port Otago and Lyttelton, the report was viewed in some quarters as provocative, particularly in Otago where, it was claimed, the container terminal at Port Chalmers already functioned competitively and delivered consistent dividends to the Otago Regional Council.
However, a contrary view holds that local authority ownership - largely because of parochialism - limits further rationalisation of and improvements to services, and the degree of professional management on an international basis when the global shipping industry is itself falling into fewer hands.
The prospect of the Hong Kong-based Hutchison Port Holdings Ltd, the world's largest port management operator, taking an influential shareholding in Lyttelton prompted Port Otago to bid for its own share, winning 15.5% of Lyttelton shares and effectively preventing that port company from delisting and selling to Hutchison.
It was feared that such a sale would have given Lyttelton a bargaining position with international shipping lines to the considerable detriment of Otago.
But the problem of rationalisation in the face of changing shipping trends has not gone away.
Indeed, the pressure on ports is increasing.
The three shipping lines which hold 34% of the container-trade marketshare here can substantially determine the ports they use and the cost of the services provided to them.
The shipping companies hold most of the cards in terms of pricing and services.
Now the NZEIR has produced a second report, for the Ministry of Transport, on the prospects for long-term sea freight, and it, too, is bound to be controversial because it examines the prospect of just two container terminals handling the very large ships now beginning to service the trade.
Since shipping companies these days do not generally have long-term contracts with ports yet require ports to invest in capital equipment to service these much larger ships - and in Otago's case, also to dredge the harbour - there is a question over the true return on capital for port companies.
The great fear of ports is that the lines will simply take their trade elsewhere as a way of forcing service costs down.
The example of Maersk is quoted.
It is the largest line using our ports with an estimated 40% of the trade: "[It] has on two recent occasions conducted what it terms "port reviews" ... These are effectively tenders ... The most highly publicised aspects . . . have involved Auckland and Tauranga and the three east coast South Island ports Lyttelton, Timaru and Otago.
"In the South Island in 2002-03, Maersk concentrated significant services away from Lyttelton to Otago.
"It also added Timaru as a port of call for another of its services and shifted exports from Fonterra's factory at Clandeboye in South Canterbury to PrimePort Timaru from Lyttelton."
The report also notes that the lines are effectively exempt from the relevant section of the Commerce Act "and are able to collude with one another and act as a cartel when setting rates and charges and can use their market power to reduce competition."
The port companies are not entirely helpless.
The efficiencies of services can have a major influence, as can land transport costs, and Otago's development of an inland "port" to consolidate exports provides a singular advantage.
But the creation of a two-port monopoly would manifestly reduce efficiency while at the same time improving price profitability to the considerable detriment of every other port.
And the NZEIR has estimated at least $1 billion would need to be spent on the two ports to improve infrastructure, which "may take resources away from other spending in the economy".
While it is true proposals for a two-port "hub" here - or worse, an Australasian "hub" in Australia - are gaining credibility, it is also true that export trade is increasing and therefore creating more opportunities for all shipping companies.
Even if a two-port strategy is developed, smaller ports will survive, although greater efficiencies will be required.
It is good that the Minister of Transport will not interfere in the rationalisation of the sector, let alone pick the two ports for international status.
Although shippers rate Lyttelton as the logical South Island choice, Port Otago is in a sound position to argue its precedence - and must continue to do so.
