The Australian Competition and Consumer Commission has proposed granting authorisation* to a medium term system designed to prevent a large queue of coal vessels from re-forming at the port of Newcastle.
"The system proposed by Port Waratah Coal Services (PWCS) is designed to address the imbalance between the amount of coal that exporters want to export and the capacity of the infrastructure which moves coal from mines in the Hunter Valley onto vessels", ACCC Chairman, Mr Graeme Samuel, said today.
"Under a short term distribution scheme, which the ACCC authorised in July this year, the vessel queue has reduced from a peak of over 50 ships to a desirable operating level of 10 ships. The medium term system is to replace the short term system when it expires at the end of the year".
The ACCC has also decided to grant interim authorisation to allow PWCS to begin the tonnage tracking and management elements and to decline to load vessels that exceed the first quarter's allocation from 1 January 2005.
"With high international coal prices, Hunter Valley coal producers want to export more coal than the coal chain can deliver at present", Mr Samuel said.
"The system essentially reduces the amount of coal each producer can export through the port on a pro rata basis so that the overall amount handled by the port better matches the amount that can be delivered by the coal chain. This is designed to substantially reduce demurrage costs that arise from an excessive queue".
PWCS estimates demurrage savings resulting from the (short term) system of US$173.5 million by the end of 2004. PWCS forecasts similar demurrage savings under the new scheme, based on a similar sized queue returning without an allocation system in place.
"The ACCC is satisfied that under the system the total volume of coal exports from the Hunter Valley is unlikely to be reduced. It is also satisfied that the medium term system is unlikely to defer investment necessary to expand the capacity of the coal chain, particularly in the near future".
The ACCC proposes to grant authorisation until the end of 2007.
A built-in trigger mechanism will ensure that the medium term system will not operate unless the expected demand exceeds capacity by at least three million tonnes.
More information regarding the application and a copy of the draft determination are available by following the Authorising anti-competitive conduct and Authorisations links on the ACCC's website