While the port's role as a major gateway for passengers has declined since the advent of jet aircraft, the volume of cargo handled continues to grow. Since Melbourne's foundation in the 1830s, the port has handled general rather than bulk cargo, and the volume of imports has consistently exceeded that of exports. The port pioneered the handling of containers and is Australia's largest container port, handling almost 40% of the nation's container traffic.
The growth of the Port of Melbourne has been constrained by physical limitations: the depth of water at Port Phillip Heads; the width and depth of channels in Port Phillip Bay and Hobsons Bay; and the width and depth of the Yarra River between Hobsons Bay and the city. Each has, at different times in the port's history, acted as a constraint on development.
During the pioneering years of Melbourne's settlement (1830s-40s), a sandbar at the mouth of the Yarra River prevented the passage of vessels drawing over 9 ft (2.7 m) of water at high tide. At low tide the depth of water was often less than 5 ft (1.5 m). While small ships could be warped or towed upstream to Melbourne, large vessels were forced to anchor off Sandridge (Port Melbourne) or Williamstown, passengers and luggage being taken ashore in flat-bottomed boats or barges. Passengers landing at Williamstown faced an uncomfortable 9-mile (14 km) journey by horse or bullock dray. While Port Melbourne was only 3 miles (5 km) from the city, travellers arrived on the south bank of the Yarra and had to cross to the city by ferry.
For cargo, the cost of lighterage from vessels anchored in Port Phillip Bay to Williamstown or Port Melbourne - a charge of 30-50 shillings per ton from vessel to shore being the norm - added substantially to the cost of imports. Alternatively, cargo could be offloaded on to barges or other small vessels, which would sail or be towed up the Yarra.
The inconvenience and high cost of serving the city in this way led Melbourne's commercial community to propose various schemes to connect the city and port by river improvement, ship canal, road and railway. The first improvement of the Yarra was the marking of the main channel by wooden stakes. Accepting an 1848 report by Garrard and Manton, which argued that dredging could make Melbourne wharves accessible to larger vessels, the New South Wales Government spent £2000 to improve the Yarra and Corio Channels and a further £800 to construct a steam dredge. By mid-1859 vessels drawing up to 10 ft (3 m) of water were able to berth in Melbourne. The cost of land transport was reduced by the opening in 1854 of the Hobson's Bay Railway Company's line from Port Melbourne to the city.
Improvement of both upstream and bay wharves necessarily accompanied channel improvements. As late as 1839 the sole upstream 'wharf' was the north bank of the river. Wharfage rates were collected from 1839, and by 1841 a small timber wharf, later to be developed into Queen's Wharf, had been constructed in front of the Customs House.
Both public and private ownership played a role in early port development. In February 1842 Captain George Ward Cole was granted a 'private sufferance' to build a wharf. By the late 1840s facilities at Cole's Wharf consisted of the wharf itself, storage sheds, a bonded warehouse and accommodation for a customs officer. A further 'private sufferance' was granted to James Dobson in 1843. The rights were transferred to Joseph Raleigh, whose wharf and sheds were built downstream of Cole's facilities. Cole's and Dobson's wharves were acquired by the newly independent Victorian Government after Separation. With the construction of further extensions, a more or less continuous wharf stretched from Queens Bridge to Spencer Street. In 1853-54 the Australian Wharf, over 2000 ft (600 m) in length, was constructed downstream from Spencer Street.
Facilities in Hobsons Bay remained primitive. A stone jetty at Williamstown was built by convict labour in 1838-39, while Wilbraham Liardet hired a whaleboat for unloading passengers and luggage, and built a small pier at Sandridge in 1841. The gold rush of the early 1850s exposed the inadequacy of existing port facilities, with large clipper ships having to remain anchored in the bay. The cost of unloading passengers and cargo now became of critical importance. The commercial community agitated both for comprehensive planning of the port under a harbour trust and for improvements in the river channel to enable larger vessels to dock closer to the city. However, it took four reports favouring a harbour trust (1859, 1860, 1872 and 1875) before the Melbourne Harbor Trust came into existence in 1877.
Three weeks after its first meeting, the trust engaged Sir John Coode to develop a comprehensive plan for the port. The most important of Coode's recommendations, which were accepted as a blueprint for the improvement of the Yarra River and development of upstream docks, was for the construction of a canal to bypass Fishermans Bend, shortening the distance from Hobsons Bay by over 2 miles (3 km) and making use of the scouring power of the Yarra River to maintain the shipping channel. The Coode Canal, opened in 1886, enabled vessels drawing up to 22 ft (6.7 m) to berth upstream. Lengthening of the Australian and South wharves and the construction of an entirely new 96-acre (38 ha) facility at Victoria Dock (1893) followed the channel improvements.
The 'Rip' at Port Phillip Heads - where a rapid tidal race hits an underwater reef, giving rise to complex surface eddies - represented a threat to both sailing vessels and steamships. The first blasting of the reef took place in 1881-83. Twenty years later the Victorian Government decided to create a 2000-foot-wide (600 m), 37-foot-deep (11 m) channel. Despite these improvements, a White Star liner, drawing 28 ft (8.5 m) of water, touched the bottom in 1913.
Growth in trade volume coupled with an increase in vessel size led to a further development of port facilities over the period 1900-50. By 1906 the employment of larger vessels in Australian overseas trades made it necessary to widen the Coode Canal from 266 to 430 ft (81 to 131 m) and to deepen the channel to 26 ft (8 m). The growing volume of trade led to the further development of both river wharves and open docks. The expansion of open docks included the addition of a central pier (1916) at Victoria Dock and the later development of Appleton Dock (first planned in 1914, but delayed because of a shortage of funds and not opened until 1958). Quays on both the north and south banks of the river were extended, while specialised facilities were developed downstream of the Coode Canal-Maribyrnong River confluence. These took the form of lineal wharves exclusively reserved for adjacent industry (sugar, bulk soda ash, chemicals).
Over time the Port of Melbourne has become increasingly oriented towards Hobsons Bay. Princes Pier at Port Melbourne, catering for passenger and cargo vessels, was built in 1912-14, while Station Pier, with a two-level terminal catering for passengers on its upper level and cargo on its lower level, was built in 1930. The river entrance or Webb Dock was first developed as 'roll-on, roll-off' berths for the Tasmanian trade in 1959.
Containerisation - the shipping of cargo in containers rather than in boxes, packages or drums - has revolutionised the shipment of general cargo. Within a decade, beginning in the late 1960s, containerised cargo grew from almost zero to 70% of general cargo handled by the port. Since containerisation, Melbourne's hinterland has expanded significantly. Overseas container cargoes to and from South Australia and Tasmania are frequently shipped through the Port of Melbourne. The Port of Melbourne's container throughput exceeded 1 million TEU (a TEU being 20 ft (6 m) long by 8 ft (2.4 m) wide by 8 ft (2.4 m) high, or equivalent to the size of a standard shipping container) for the first time in 1997-98.
Development of container facilities in Melbourne began in the mid-1960s, when the Melbourne Harbor Trust constructed eight container berths at Swanston and Webb docks. By mid-1973 plans were complete to double the four-berth Swanston Dock complex. Development of the up-river Swanston Dock led to the further widening of the Yarra River to accommodate the largest container ships visiting Australia. The Webb Dock complex at the mouth of the Yarra - catering for roll-on roll-off, unit load, overseas and coastal container ships - has been used by Australian National Line (ANL) vessels.
The growth in size of vessels employed in overseas container trades (the largest container vessels currently employed in overseas container trades, at about 4100 TEU, are unable to get through Port Phillip Heads when fully laden) threatens the future growth of the port. Employment of vessels of above 4500-teu capacity, already used in Northern Hemisphere trades, would result in a diversion of trade from the Port of Melbourne to Westernport or other Australian ports.
Under the Victorian Government's 1995-96 port reforms, a new statutory authority is to be the landlord of the Port of Melbourne, with responsibility for management of land and berths within the port boundary. Assets that are not central to port activities or commercial operations (such as the World Trade Centre) are being sold. The government will also encourage competition in areas such as stevedoring and ship services.