The Australian Competition and Consumer Commission has issued a draft determination proposing to grant authorisation* to Port Waratah Coal Services to reinstate an amended Capacity Balancing System at the Port of Newcastle, ACCC Chairman, Mr Graeme Samuel, said today.
The ACCC originally granted conditional authorisation to the Capacity Balancing System in 2005, with that approval not due to expire until 31 December 2007. In September last year, however, Hunter Valley coal producers voted to switch off the system for 2007. In order to reduce and manage the large queue that has subsequently reformed, at times reaching 70 ships, and therefore reduce the resultant high demurrage costs, PWCS now seeks authorisation to reinstate a modified system for the balance of 2007.
"This draft decision comes three weeks after the ACCC granted urgent interim approval for PWCS to immediately reinstate the amended system at the port. Submissions received from interested parties, including Hunter Valley coal producers, all support the reintroduction of the scheme.
"When the ACCC received PWCS' application, the industry was reportedly paying A$1 million a day in demurrage** costs. Reinstating the system is expected to result in significant demurrage savings for the industry for the remainder of 2007. PWCS estimates the size of these savings could be upwards of A$215 million," Mr Samuel said.
The key changes to the system involve increasing flexibility measures for all coal producers and introducing monthly coal loading allocation for large producers. Under the previous system, all producers received quarterly coal loading allocations.
"The ACCC is satisfied that under the amended system the total volume of coal exports from the Hunter Valley is unlikely to be reduced. In fact, overall the ACCC considers the amendments should improve the operation of the system by helping to smooth cyclical fluctuations in the vessel queue and providing increased flexibility to producers to maximise their use of coal loading allocations.
"The ACCC is also satisfied that reinstating the amended system will not constrain export growth. The ACCC notes significant commercial incentives exist for all industry participants to maximise coal exports. Coupled with recently completed and ongoing expansion projects in the Hunter Valley, particularly at the port, reinstating the modified Capacity Balancing System for the remainder of 2007 is unlikely to defer necessary investment."
The ACCC proposes to grant authorisation, as requested, until 31 December 2007. The ACCC will now seek further submissions and provide interested parties with an opportunity to seek a conference prior to it making a final decision.
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.