The controversy, discourse and value surrounding Darwin Port

In 2015 the Territory Government approved the sale of a 99-year lease on Darwin Port to Chinese company Landbridge in a move that sent ripples around Australia.

Given its strategic location on the doorstep of the wider APAC region the port holds huge defence and logistics value to the country. After nine years of the port operating under the Chinese company though, could Australia potentially buy it back?

The port’s immediate future under Landbridge has become cloudy due to the financial situation of the organisation. The port itself is yet to turn a profit while under the company’s management and registered a loss of over $34 million in 2023-24.

However, the alarm was raised when the company defaulted on a $107 million payment in recent days.

The Territory government has released a statement saying it is aware of Landbridge’s current financial issues, with Treasurer Bill Yan holding a meeting with Federal Infrastructure Minister Catherine King earlier this week.

They have also asked for a more in depth look at Landbridge’s financial status.

Since news broke of the murkiness surrounding Landbridge’s immediate financial future, calls have been made for the Australian federal government to purchase the rights to the port back from the company, an outcome which RMIT Professor of Logistics and Supply Chain Management Dr Vinh Thai says could cancel out the negative feeling towards the initial 2015 transaction.

“This port is a very special access site, it’s not common like any other commercial access port, and that’s because it’s also linked to national security,” Thai tells ATN.

“The geography, the location, is at a strategic point on the route between Australia and the north line, and the South China Sea is right there as well.

“When the purchase was decided in 2015, there was a lot of unrest about it from the Australian public and the federal government.

“The majority of the port was under the Territory government’s control. The federal government didn’t think it was the best idea to lease it out for such a long period of time, but the port is a commercial entity.”

When the rights to the port were sold in 2015, 33 private investors initially expressed interest. That was whittled down to just one when Landbridge’s offer of $506 million was received. An offer, according to former NT Treasurer Dave Tollner, that was “significantly more” than the next largest bid.

The lease covers a variety of facilities at the port, including areas where Australian naval vessels are docked.

The political tensions surrounding Australia, China and the APAC region at the time were key to the unrest created through the initial sale of the port, tensions which have only grown in the near decade since due to events including the recent China-Solomon Islands Security Agreement.

Thai says although there could be mechanisms in place for Australia to reacquire the operational rights to the port, Landbridge is likely to sell other assets before it would sell the port, despite the facility’s overall poor financial performance under its watch.

“Landbridge has responded to the Northern Territory government saying there’s nothing to worry about and they’re not going to sell the port,” Thai continues.

“The Group itself can leverage much higher value assets elsewhere, and they can try to balance that to improve the situation, however that has sparked the question that if they’re not financially well balanced, could this happen again?

“If it is going to happen again, then it could be considered a good opportunity to bring the port back into Australian hands. In my opinion, we need a strategy for that because with the current mechanisms the federal government can express its strategic intent, but if it’s not in a position to do so commercially then it falls under the Territory government’s authority to sell.

“It is going to be quite challenging to solve that domestic problem.”

Despite Landbridge overseeing an overall commercial loss from the port during its tenure in charge, Thai says standard industry fluctuations means there is no concern regarding the financial viability of the port as an asset, whether it be under the control of Landbridge, the federal or Territory government, or another operator.

“A port is a commercial entity, and just like any other commercial entity it will have good years, and it will have bad years,” he says.

“The financial situation is very much cyclical. During Covid, for example, commercial entities like shipping lines were making tons of money. If you look at the history and shipping cycles there will be times where they are suffering and making a loss, but after that there could be three or four years where they make tons of money.

“I wouldn’t say we should be too worried about the port from an economic perspective, but the question is surrounding the strategic access and strategic purchase which is linked to national security and resilience.

“That’s the reason that is provoking discussion around this issue, because at the end of the day it is a commercial entity, but now could be a good opportunity to purchase the port back to potentially enhance national security and resilience.

“If there is a repurchase from the federal government, they need to make sure it goes smoothly and not be disruptive to the port.

“We’ve been going through so much disruption in the past as it is, so if the repurchase is going to be a disruptor that’s not a good thing.

“Whatever happens with any potential repurchasing and whoever could take over the port in the future, it needs to be made sure that the business can remain ongoing as usual on the site.”