There are too many ports in New Zealand for the shipping volume, but until this week none of the 14 port companies or shipping lines has moved to start a much-anticipated rationalisation programme.
Rationalisation will be the making of major ports, but the death knell for others and will likely prompt the loss of many jobs.
The proposed merger between Port Otago and Lyttelton Port of Christchurch (LPC) will be ground breaking, scrutinised closely by business and unions alike and will likely set legal precedents, if it goes ahead.
Ports around New Zealand, especially the smaller, less attractive and less profitable, have spent the past five years waiting for "someone" to get rationalisation started, because the country is overserviced for its export and import volume by too many ports and a dwindling number of ship visits.
Not since the 1989 abolition of the Waterfront Industry Commission, which hired its members out to port companies, will the sector have seen such upheaval.
Port Otago, and the entire waterfront sector at the time, went through a bitter seven-year period, described by many as a "union busting" era, and Port Chalmers staffing was slashed 55% to 125 employees by 1996.
Key to ports' medium to long-term survival is capital expenditure on infrastructure development and maintenance.
It is a strength of Port Otago and a weakness of LPC, and is an issue which comes at a crippling cost for smaller to medium-sized ports wanting to remain competitive.
The present credit crunch will bring a slew of new problems for major ports during the next two years because of the lack of lenders, higher interest rates and even in a recession, the magnitude of the cost of major projects.
Since the rationalisation question arose, the focus has been mainly on the Ports of Auckland and Tauranga, with sabre-rattling talks of takeovers or buy-ins, while at the same time shipping lines such as the giant Maersk held sway, deciding which port it would favour with its patronage.
The same game was played out in the South Island, with Port Otago and LPC vying first for P&O Nedlloyd then Maersk's patronage.
No doubt they felt they were being held to ransom, but never openly criticised shipping lines' decisions.
That may all be about to change.
The story starts off in true southern parochial fashion, with Port Otago gatecrashing a ploy by LPC's owners, the Christchurch City Council, to buy out the listed Canterbury port company, delist it from the stock exchange then sell the company to foreign management.
Port Otago eventually gained 15.47% for $37 million, sidestepping claims it had purposely bought a blocking stake (minimum 10% required) to stymie the sale.
But a blocking stake is a blocking stake.
Whether Port Otago would ever be sitting around the bargaining table with LPC if it did not have the stake may never be answered as the world has changed vastly in the past two years with the US subprime mortgage fiasco prompting the global credit crisis - which is yet to be played out.
One thing is for sure, if LPC had gone into aggressive foreign-owned management, that company would be unlikely to be offering any olive branch to its competing southern neighbour.
The Maritime Union of New Zealand was quick to react to Thursday's announcement, shortly after the proposal's release, offering its "qualified" support.
However, the union was looking further afield than just Port Chalmers and Lyttelton, but encouraging discussion to encompass South Port in Bluff and PrimePort Timaru, knowing several hundred members' jobs are at stake in the medium to long-term.
Lyttelton has had a tougher ride with the union in recent years, specifically over operation of a third shift and retention of pay and conditions, with more proposed strike action than Port Chalmers.
The union's stance was held partly to blame for a decision by former P&O Nedlloyd to choose Port Chalmers over Lyttelton as the preferred South Island call for its round-the-world service in October 2002.
Port Chalmers' only major clash was over the use of casual staff in 2001, when the union, backed by local support, picketed the port boundary when an out-of-town stevedoring company was used to load ships.
As the stevedoring company was subcontracted by the ship lessee, Port Otago managed to keep the issue at arm's length and remain relatively unbiased.
Its older staff probably understand better the bad old days, not only of the abolition, but the hard times of plummeting demand for exports in the 1980s and early 1990s.
In 1996, Port Otago hit the skids.
It had a bare-bones staff of 126.
Two shipping lines dumped the port within eight weeks and container numbers plummeted from 55,000 a year to 35,000.
However, from 1998 a saviour appeared in the form of dairying and the port began rebuilding, starting with a new Maersk deal then a huge push in warehousing development, upgraded wharves and most recently new cranes - hand in hand with more than doubling staff to 300.
The Maritime Union notes ports are not only businesses but the essential supply chain between New Zealand and the global economy, and rationalisation at a time of recession could become a major disruption for local economies.
Other ports, such as those at Timaru and Bluff, should be included in the merger proposal and the proposal could spark debate on a national ports plan and some form of national ownership.
Following in the footsteps of Kiwibank, KiwiSaver and KiwiRail, the union went as far as floating the suggestion of a KiwiPort.
Of more immediate concern is the answering the "big question" for Cantabrians and Otagoites - Which province will dominate on the board of the new holding company that will oversee commercial operations of both ports?
Insiders in the sector believe a boardroom tussle will be avoided, emphasising the boards had secretly worked out the memorandum of understanding and they could hardly instil confidence in gaining shareholder approval if boardroom bickering surfaces at this stage.
The final make-up of the new holding company will likely be split evenly, from its shareholding, directors' votes and even through to profits - essentially 50-50 all the way.
There is so much devil in the detail of the supply and demand factors of the goods handled that any weighting other than 50-50 could quickly become untenable for the province getting less than the other.
A 1-in-100 year drought in Otago, or a collapse in world demand for coal, or a major rail disruption in delivery of West Coast coal has to be factored into future risk and recompense.
Both provinces would have to understand their respective ports may have to underpin vast losses from its neighbour at some point in the future, and equally share profits in the good years.
LPC is larger, with 10 times the tonnage across its wharves, 25% more staff, more than the double the ship calls and 33% more revenue, but its dividend to shareholders was $5.2 million against Port Otago's $9.5 million, which includes a special $2.5 million component.
However, LPC is essentially becoming a coal port, requires more infrastructure spending and does not have access to hinterland produce of Otago and Southland.
A cash pay-off for LPC may be in Port Otago buying further into its LPC holding, when the ledger book of complex assets and business revenue are balanced up, while Port Otago could easily pick up more ex-Canterbury export.
Port Otago is expected to become the main export point for Fonterra's dairy produce, from both Southland and South Canterbury, which will boost tonnage, albeit at a time of world recession and likely decline in demand.
The subject of delisting the company will be appealing, as the new entity would relieve itself of the need for continuous disclosure releases, public shareholder interference and analysts' reviews, which can often be unflattering with no recourse to reply.
Compared with the Port of Tauranga, both Port Otago and LPC are underachieving in their return on assets, but together their respective diversity and market standing would be close to the size and sway the Port of Tauranga commands.
Maersk shipping line, this week rejecting criticism it had a stranglehold on the country when deciding on which New Zealand ports to patronise, noted all shipping lines followed cargo.
Freight industry sources believe a major but unknown factor in the supply chain will be the opportunities afforded both exporters and ports from government-owned KiwiRail, which is yet to grab any headlines in service opportunities.
With its potential to cut truck traffic, reduce carbon footprints and boost some return to the ailing coastal shipping sector, KiwiRail should provide plenty of cost-effective opportunities soon.
There is no shortage of coal at LPC (Pike River Coal is forecasting an extra 1 million tonnes a year), nor shortage of dairy and meat produce at Port Chalmers' wharves.
Port Otago may well be content at present in owning 100% of a successful company, albeit on a smaller scale to LPC.
But if the investigation into the merger proposal finds there are profit opportunities, it will likely forgo outright ownership to instead secure a half-share in a more powerful entity which can drive its own destiny, without parochialism being an issue.
