The other West Gate Bridge bottleneck

Everyone who drives from or to the west of Melbourne has cursed the congestion on the West Gate Bridge. The construction of the new tunnel will improve that problem, but it will do nothing to address another pressing issue: the bridge is too low for many large ships to pass under.

Only ships carrying up to 7500 containers (TEUs or twenty-foot equivalent units) pass easily under the bridge. While there are other concerns with taking larger ships into the inner port, these can be overcome with investment. By contrast, the bridge is a hard constraint. While this problem might not be as frustrating as being stuck in traffic, it is costing the Australian economy over a billion dollars a year – we need to get serious about addressing it.

We all pay
According to maritime research firm Drewry, the potential cost savings to Australia of upgrading from the current average 5,000 TEU vessel to an 11,000 TEU ship is about US$110 per TEU.[i]

Since Swanston Dock (upstream of the bridge) handles about two million containers per year, the direct and immediate cost to Victorians of the bridge being too low is about $350 million per year.

However, the problem is worse than this. The planning for Webb Dock (downstream from the bridge) was also constrained to operate with ships of maximum size of 7500 TEU to accord with Swanston Dock. This means that the cost of the undersized bridge applies to the whole three million TEU shipped annually, which means that the direct cost is almost $500 million per year.

At current forecasts, there will be six million TEUs passing through the port in the early 2040s, which will increase the cost for Victorians to $1 billion per year.

These excess transportation costs are a deadweight burden on the Australian economy.

Even Sydney and Brisbane pay

While the cost to Victoria from this problem is significant, this is not the full extent of the issue. Because container ships that come to Australia do a loop which includes the ports of Brisbane, Sydney and Melbourne, the West Gate Bridge actually limits the size of every container ship that comes to Australia’s major ports. Again, Drewry explains:
Because these three cities handle about eight million TEUs per year, suboptimal ship sizes are already costing the Australian economy about $1.5 billion per year (and growing quickly).

What can be done?
There seem to be two alternatives: either the bridge has to be rebuilt or the port relocated.
Infrastructure Victoria (IV) has opted to shift the port, but recommended but that this can wait until 2055. However, IV’s analysis has two key problems:

1. It advocates restricting ship sizes below optimal and passing the excess costs on to Victorian consumers – “the shipping lines are likely to be able to pass on the costs of deploying smaller than optimal container ships to Swanson Dock to exporters and importers on Asian trades” but does not include this as a cost;[iii]
2. It ignores the potential benefits of re-purposing the land in the Port of Melbourne. As Deloitte noted in its economic advice to IV: “An opportunity cost of the underlying value of land was not available at this stage for this study. The upshot of this is that the case for relocation would be stronger than that presented here if such opportunity costs were taken into consideration.”[iv]

These omissions, understating the cost of retaining the current port and ignoring potential revenue from other uses of the land on which it stands, leads IV to overstate the case for extending the life of the current port to 2055.

In the past two decades, Barcelona, Bremen, Copenhagen, Amsterdam, Oslo, Bilbao, Buenos Aires, Genoa, London and Cape Town have all moved their ports and liberated the land to create beautiful new cities. Auckland is doing the same.

Melbourne faces the same trade-off and will inevitably make the same decision, but 2055 is probably too late.

Note: Interested readers can refer to Infrastructure Victoria (2017) and Deakin University (2017) for reviews of port development locations and options for Melbourne.