Plenty of cars, shame about the roads

There is an obvious explanation why Auckland motorways were hopelessly congested on Sunday, the end of the long Waitangi Day weekend. The reason is the huge increase in vehicles numbers over recent years.

The accompanying figures show the number of new registrations each year and the number of registrations at year end.

There were 220,557 new car and station wagon registrations in 2014 compared with an annual average of 180,400 over the previous twenty years.

The 2014 number comprised 90,632 new cars and 129,925 used cars, mainly Japanese imports. The number of imported used cars and station wagons has risen from a GFC low of 68,757 in 2009 to nearly 130,000 in the latest year.

New Zealand, together with Russia and Myanmar, are the major destinations for Japanese used car exports.

In addition, 44,659 new commercial vehicles were registered last year. This is an all time high and compares with an annual average of 29,784 over the past twenty years.  

The 2014 commercial vehicle figure is made up of vans and trucks, which accounted for 89.9 per cent of the total, tractors 6.8 per cent and buses 3.3 per cent.

Thus, last year was a boom period for new motor vehicle and commercial vehicle registrations with a total of 265,216 compared with 218,359 in the previous year.

The current year has also started on a strong note with new car sales in January up 8.6 per cent compared with January 2014 while commercial vehicle sales appreciated by 18.8 per cent over the same twelve month period.

The buoyant commercial vehicle market confirms that the domestic business sector is extremely confident and optimistic about the future.

The other important figure is the year end total registration number which was 3,760,932 at the end of 2014.

In 2014 there were 265,216 new registrations, 131,581 vehicles taken off the road leaving a net addition of 133,645 registrations in the twelve months ended December 31, 2014.

The total number of registered vehicles has increased by 978,220 since December 2000. This comprises an additional 604,391 cars and 373,829 commercial vehicles.

The percentage increase in registrations since December 2000 has been as follows;

–          Cars 31.6 per cent

–          Trucks 31.7 per cent

–          Other commercial vehicles 51.4 per cent.

The total number of vehicles in Auckland is growing more rapidly than the rest of the country based on 2000 to 2013 statistics.

During this 13 year period Auckland’s road vehicle fleet expanded by 35.5 per cent compared with the country’s overall vehicle growth of 28.7 per cent. As a result Auckland’s roads have become more and more congested as the region’s road fleet continues to grow rapidly.

New Zealand has an extensive road network in terms of size but we are lacking as far as motorways are concerned. Ratepayer councils are responsible for 82,000 km of these local roads and the government’s NZ Transport Agency is responsible for 11,000 km of state highways and motorways.

Forty years ago Auckland was well ahead of Sydney and Melbourne in terms of motorways but they have long since passed us by. Extensive motorway networks move traffic much more efficiently but New Zealand has the OECD’s second lowest motorway length per capita, behind only Turkey.

We spend far more on new cars, imported cars and new commercial vehicles every year than we do on roads. Our politicians are incapable of making decisions, particularly in Auckland, about the appropriate mix of public transport and roads.

The situation is exacerbated in Auckland as the city spreads out further and further because of our reluctance to approve medium and high density housing.

The good news about the booming new car and commercial vehicle market is that it shows that the domestic economy is in good heart.

The bad news is that long weekend trips to the Coromandel and Northland will become increasingly dominated by longer and longer traffic queues unless the region’s road building programme, particularly motorways, is accelerated.

Registrations; more and more vehicles on the roads

Chatham Rock Phosphate

The downside of an ambitious business plan was clearly evident this week when the Environmental Protection Authority (EPA) rejected Chatham Rock Phosphate’s application to mine phosphorite nodules on the Chatham Rise.

The company’s share price immediately plunged 92 per cent, from 20 cents to just 1.6 cents, leaving the company with a sharemarket value of just $3.3 million. Investors quickly concluded that the Chatham Rise project now has no chance of proceeding.

Chatham Rock Phosphate (CRP) first listed in November 2006 on the NZAX market, a cost-effective listing facility for small to medium sized and non-standard companies. It was originally called Widespread Energy and its objective was to invest in the oil and gas sector.

In August 2007 a consortium, with Widespread Energy holding 90 per cent, applied for a prospecting permit on the central Chatham Rise. The phosphate is at water depths up to 400 metres.

The company argued that this phosphate resource could reduce the country’s total dependence on imported rock, virtually all sourced from Morocco at the time.  

Nevertheless Chris Castle, the driving force behind Widespread Energy, continued to focus on energy and he wrote in the 2008 annual report that the company had “made tremendous progress in building up an exciting portfolio of oil and gas exploration opportunities”.

However, in April 2011 the company changed its name to Chatham Rock Phosphate and its main focus turned to the undersea phosphate rock off the East Coast of the South Island.

Activity increased as the company raised more capital and made optimistic comments about the potential to generate annual pre-tax earnings between $62.5 million and $100 million.

CRP filed its full Marine Consent application in May 2014. This was a six month decision process to be considered thorough a full public process by an expert panel appointed by the EPA.

Shortly after this Edison Investment Research published a report saying that CRP’s shares were trading at a significant discount to the company’s unrisked valuation of $1.76 a share.

CRP made its closing submission on the application in November and the EPA announced that it would make its decision by January 30.

On Wednesday the EPA released a 300 page plus report which refused CRP’s consent to mine the Chatham Rise. It concluded that the proposed mining would have a negative impact on the seabed, protected stony corals and habitat. The report stated that these effects could not be avoided, remedied or mitigated by the company.

The report concluded that “the conditions proposed by the applicant (a management regime to mitigate the adverse effects), although they went some way towards addressing some of the risks associated with the proposal, did not allay the basic concern about the adverse effects of the proposal on a distinctive and important marine environment”.

A reading of the report indicates that it is extremely unlikely that the EPA would ever approve mining consent on the Chatham Rise.

The rejection of Trans-Tasman Resources application to mine iron ore off the Taranaki coast shows that all mining projects are subject to vigorous review in New Zealand.

Thus, why has CRP spend nearly $30 million on the project?

There is a simple answer; it is all about Chris Castle, his willingness to take big risks and his ability to convince investors to fund his dreams.

Castle has been involved in a large number of listed companies, particularly in the 1980s.

He has bounced back time and time again and it wouldn’t be a huge surprise if Chatham Rock Phosphate reversed direction and became an oil and gas explorer once again.

Brian Gaynor

Portfolio Manager