Hunter coal chain facing massive challenges: PWCS

THE Hunter coal supply chain is facing massive challenges and the entire coal industry has to work together to find solutions to maximise export efficiency after the ACCC rejected a bid to introduce a new queue management system at Newcastle Port, according to Port Waratah Coal Services.
Hunter coal chain facing massive challenges: PWCS Hunter coal chain facing massive challenges: PWCS Hunter coal chain facing massive challenges: PWCS Hunter coal chain facing massive challenges: PWCS Hunter coal chain facing massive challenges: PWCS

Port Waratah Coal Services.

Tim Slater

PWCS, majority owned by giants Xstrata and Rio Tinto, appealed to the Australian Competition and Consumer Commission for a new system for port allocations to be introduced from next year.

The current vessel queue management system is set to expire on December 31, opening up an opportunity for a review of the way mining companies are allocated access to export infrastructure.

ACCC chairman Graeme Samuel said Pacific National (NSW), Queensland Rail and PWCS had sought authorisation for a proposed vessel queue management system (VQMS) to address the imbalance between the demand for coal haulage and coal loading services at the Port of Newcastle and the capacity of the Hunter Valley coal chain in 2008.

"They submit that the system will reduce the likelihood or extent of significant queues and the resulting costs to industry," Samuel said.

"The applicants intend for the VQMS to replace the medium-term capacity balancing system (CBS) currently operating at the Port of Newcastle.

"The VQMS represents a shift away from how port capacity allocations are determined, from being based on producer demand nominations at the port to one based on the lesser of port nominations and rail contracts."

NSW Ports Minister Joe Tripodi said the submission made to the ACCC from PWCS and Pacific Rail and Queensland Rail would stop smaller producers from being able to export coal and have a negative effect on the economy.

Samuel said significant concerns have been raised with the ACCC that the proposed VQMS could have an immediate and permanent detrimental impact within the industry, including reduced competition in the provision of rail services in the Hunter Valley, and reduced production levels at certain mines.

"The NSW Government has also provided a submission to the ACCC which raises serious concerns as to the consistency of the proposed VQMS with common user provisions within the lease that Port Waratah Coal Services has with the Government," he said.

"The ACCC only grants interim authorisation in appropriate circumstances. This is because interim authorisation allows parties to engage in conduct before the ACCC has been able to fully assess the public benefits and detriments resulting from a proposed arrangement.

"While the ACCC has not formed a concluded view in relation to the proposed VQMS, it is clear that there are significant industry concerns over the proposal. In these circumstances, the ACCC does not consider it appropriate for it to exercise its discretion to grant interim authorisation at this stage."

Port Waratah Coal Services general manager Graham Davidson said he respected the ACCC's decision and concerns raised by various members of the Hunter coal industry.

"However, we appeal for the Hunter coal industry to recognise that there are no easy solutions for overcoming the existing flaws along the Hunter coal chain," Davidson said.

"Throughout 2007, the Hunter coal industry has been unable to unanimously agree on a methodology for deciding 2008 export allocations.

"Accordingly, PWCS, Pacific National and Queensland Rail presented the 2008 VQMS as an alternative way forward."

Davidson said the VQMS option received strong support from many key stakeholders in the Hunter coal chain.

"A very strong onus remains on the entire coal industry and service providers to find solutions for the numerous deficiencies that are entrenched throughout the coal chain," he said.

"PWCS will continue to work with industry stakeholders to try and find solutions that are perceived to be fair and balanced for all industry players."

Davidson said that following the rejection of VQMS interim authorisation, it was highly likely that ship queues off Newcastle would continue to grow again beyond January 1, 2008.

Samuel said the ACCC is conscious of the imminent expiration of the current medium-term CBS and the consequential pressure that might be placed on ship queues in Newcastle.

"That said, the ACCC notes that a large queue would exist in the short term with or without the proposed scheme," he said.

"It is disappointing that, despite attempts throughout the year for the industry to reach an agreed solution to ongoing capacity constraints in 2008 and beyond, the applicants did not seek authorisation of the proposed VQMS until November 16, 2007.

"These timing pressures have been exacerbated by incomplete provision of information.

"The ACCC may consider the issue of interim authorisation at any time. In this regard, the ACCC would be able to reconsider the applicants' request following the provision of further information in early 2008."

The ACCC is also considering two new applications for authorisation from the Newcastle Port Corporation and a coal producer seeking to facilitate the extension of the current medium-term CBS.

"The Newcastle Port Corporation believes that if interim authorisation was granted by the ACCC to allow for the extension of the current system, this would provide for the preservation of the status quo for a period of time to provide the ACCC and interested parties with sufficient time to consider the merits of the proposed VQMS," Samuel said.

"The ACCC has sought urgent advice from the applicants as to whether they are likely to take advantage of these alternative proposals should authorisation be granted as a means of endeavouring to manage the vessel queue."