Coal chain choker

WHILE coal companies with access to privately owned transport facilities boasted record increases in throughput in 2006-07, coal production as a whole rose only 2% despite booming times as supply chain bottlenecks continued to strangle the industry.
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Angie Tomlinson

"Of note is that companies with access to privately owned transport facilities recorded record increases in throughput (notably Hay Point), whilst those relying on third party infrastructure noted significant infrastructure constraints," the Minerals Council of Australia said this week in its 2007 Industry Survey conducted by PricewaterhouseCoopers.

And the report predicted no relief in the Hunter Valley coal chain, with production and sales throughput at the Port of Newcastle expected to remain the same in 2007-08.

The big picture for Australia's minerals industry was positive though, with investment in 2006-07 rocketing by 93% - a reflection of positive expectations of continued strong global demand and high prices, according to MCA.

The survey report found in 2006-07 net profit increased on average by 21%, total revenue by 18% and exploration by 38%.

MCA said most companies with coal interests either undertook additional brownfield and/or greenfield investment and/or transport efficiency improvements in 2006-07.

There was approximately $A4 billion of "under construction" investment at Australian coal mine and related infrastructure sites during 2006-07.

On the flip side, total expenses increased by 17%. Broken down, that was an increase of 16% in labour costs, 18% in government rail and port charges, 18% in production and operating costs, 15% in depreciation and amortisation and 46% in interest payments.

"Although Australia still lags behind its overseas competitors in exploration spending, the increase indicates the industry's confidence in the underlying demand for minerals and energy will continue into the future," said MCA chief executive Mitchell Hooke.

"The Rudd Government's commitment to promote investment in exploration by allowing the selective use of flow-through share schemes for smaller operators in the minerals sector is a welcome first step in ensuring Australia does not lose further market share to other countries."

The report noted that chronic shortages in skilled labour and key construction and production inputs such as tyres, locomotives, mining draglines and grinding mills continue to cause delays and project cost increases.

Delivery times for these essential inputs have increased dramatically from five to 20 months to 20-50 months.

While employment in the minerals industry grew by 4%, it is well short of the estimated 9% per year needed until 2015 to meet the needs of the industry and reflected continued shortages, especially in skilled labour.

MCA estimates that by 2015 the industry will require an additional 70,000 employees.

In the report's outlook for 2007-08, production of bulk commodities is expected to increase by 6% and prices for bulks will rise by 9%.

The export value of thermal coal is expected to increase by 7.9%, while metallurgical coal returns are expected to fall.

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