PWCS said yesterday all producers had received a “reduced allocation for 2007 compared to what they originally requested”. The quota came into play with the reintroduction of the capacity balancing system in March this year.

The CBS was brought back after the Hunter Valley coal industry and PWCS agreed current unprecedented demand exceeded coal chain capacity. Today 72 vessels were waiting off the port.

Already Coal and Allied have announced production and job cutbacks at three of its mines. Managing director Douglas Ritchie said yesterday the cutbacks were unavoidable given the reduction in allocation levels for the remainder of 2007, estimating production would need to be reduced by 20%.

On the chopping block will be 250 contractor positions at Bengalla, Mount Thorley Warkworth and Hunter Valley operations.

Coal and Allied will not be the only ones affected, with majors Xstrata and Rio Tinto anticipated to also cut back production by about 20%.

Reduced production across New South Wales could also put the squeeze on an already tight coal market, putting further upward pressure on thermal coal prices.

In October last year, the Hunter Valley Coal Chain Logistics team said coal chain capacity would be about 90 million tonnes for 2007, a figure PWCS said had not significantly changed.

It said it had spent $A170 million on infrastructure upgrades in the past 12 months, adding with little comfort to producers that "significant capacity increases arising from major infrastructure investment takes years to complete".

Brokerage Macquarie predicted the infrastructure problems would begin to alleviate in 2009.

"At Newcastle, PWCS has the potential to expand capacity towards 119Mtpa. Therefore, it is disappointing that despite the particularly strong market dynamics, the uncertainty surrounding timing, operation and structure of the Newcastle Coal Infrastructure Group's second port continues to delay Port Waratah and any upstream expansions," it said today.