In 19th century provincial Auckland the population was widely scattered. There were few suitable roads and the sea was the main means of travel and communication. Fleets of small river and coastal ships provided vital links for surrounding settlements with the city.

Dependent on the weather conditions, sail was not always a reliable form of transport. The first steam propelled vessels in New Zealand were developed in the 1850s. The early steam vessels had inefficient engines and consumed huge amounts of coal, which meant they could only cover short distances and carry small volumes of freight. However, despite the difficulties with steamships they were seen as a means by which cargo could be delivered regularly.

During the 1860s an increasing number of small steamships were being employed to meet the trade and transport needs of Auckland Province. Several Auckland ship-owners attempted to meet the transportation needs of the city. Leading the way was Captain Alexander McGregor, supported by a syndicate of Auckland businessmen. His first steam ship was ROWENA, built in Auckland in 1872. Over the next few years the syndicate added more steamers to their fleet: the ARGYLE, IONA, GLENELG, STAFFA, FINGAL and KATIKATI, all of which were to later become part of the first fleet of the Northern Steam Ship Company.

Early in 1881 Alexander McGregor had negotiated with James Mills of the Union Steam Ship Company and secured the northern trade routes, thereby laying the foundations for the Northern Steam Ship Company. A meeting was held on 11th May 1881, attended by nineteen prominent businessmen from various industries with vested interests in shipping. It was decided to form one company, combining the business interests and property of Alexander McGregor and other Auckland businessmen and ship-owners. By the end of the meeting the Northern Steam Ship Company had been formed. Thomas Morrin, David Cruickshank, Alexander McGregor, Thomas Ball, James Macfarlane and James McCosh Clark were appointed as the directors. The Company took over six steamers: GLENELG, ARGYLE, IONA, MACGREGOR, ROWENA and STAFFA, the ships in which the directors had the most shares. The Northern Steam Ship Company was established to serve all ports of the East Coast of the Auckland Province, from East Cape to Parengarenga, and to the Hokianga in the north. On the West Coast they served the ports of Onehunga, Waitara, New Plymouth and Wanganui.