ACCC: produce less coal

A DECISION last week to force coal mines using Port Waratah Coal Services (PWCS) to reduce their volumes by 9% has been described as anti-competitive by coal producers.
ACCC: produce less coal ACCC: produce less coal ACCC: produce less coal ACCC: produce less coal ACCC: produce less coal


Staff Reporter

The Australian Competition and Consumer Commission on Friday issued Port Waratah Coal Services (PWCS) an "interim authorisation" to reduce producers’ volumes through the port by 9%.


The move is aimed at reducing the queue of 40 ships waiting outside coal terminals at Carrington and Kooragang in Newcastle.


The port has the capacity to handle 90 million tonnes of coal a year, but the over-stretched rail network can only deliver 80 million tonnes.


The buildup of ships has grown steadily because the 23 coal producers that use the port have been forward nominating ships on the basis of their own capacity, rather than the coal chain's capacity to deliver said The Australian newspaper. But as one manager at a mine said: “if we didn’t do that we’d never sell any coal.”


The Australian quoted ACCC commissioner Jennifer McNeill as saying the order to reduce the producers' volumes was an interim judgment and had not been subject to a full merits-based assessment.


But she defended the anti-competitive nature of the decision due to the urgency of the problem. Coal producers are paying hefty demurrage fees of up to $200 million to cover the costs of the waiting ships.


The Australian said several coal producers and handlers such as Camberwell Coal, Southland Coal, Donaldson and Noble Australia -- many of whom argued the smaller operators would be hard hit by the reduction in export volumes imposed by the ACCC.


But Doyle claimed the order, originally proposed by PWCS, would actually protect the small operators.


"We're not changing their revenue from a profit and loss point of view because it's still 80 million tonnes that's going to get through the port no matter what. What we're changing is their costs because typically it's the producers that pay the demurrage on their ships,” she said.


What is unclear is the mechanism for reducing the volumes.


“Imposing an even quota in reduction would be impossible,” said one producer. “All our cost profiles are different.”