Port Waratah Coal Services can now better manage the large queue of vessels waiting offshore at Newcastle, saving the coal industry around $1 million a day, ACCC Chairman, Mr Graeme Samuel, said today.
The ACCC has issued a determination granting authorisation* to Port Waratah Coal Services to reinstate an amended Capacity Balancing System at the Port of Newcastle.
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 rapidly reformed, at times reaching 70 ships, and therefore reduce the resultant high demurrage costs, PWCS sought authorisation to reinstate a modified system for the balance of 2007.
The system is designed to provide Hunter Valley coal producers with a proportionate share of the available capacity of the coal chain. This is designed to substantially reduce demurrage** costs that arise from an excessive queue. Despite expansion at the port to a capacity of 102 million tonnes per annum, and ongoing expansion in the Hunter Valley, there is still an imbalance between the amount of coal that producers want to export and the capacity of the infrastructure which moves coal from the mines onto vessels at the port.
The ACCC granted urgent interim approval for PWCS to immediately reinstate the amended system at the port in March 2007. PWCS expects it could take until July 2007 to reduce the queue to a more workable level.
"Reinstating the system is expected to result in significant demurrage savings for the industry for the remainder of 2007," Mr Samuel said. "PWCS estimates the size of these savings could be upwards of A$175 million.
"There has been some criticism in recent times that the capacity balancing system reduces production at mines and removes the pressure for the industry to make the necessary infrastructure investment to expand the capacity of the coal chain. This is not correct", Mr Samuel said.
"Any limits on production levels at individual mines are a factor of the limited capacity of the coal chain, and not the reinstatement of the capacity balancing system itself. If there was no system in place, the coal chain would not be able to export more coal and producers would need to reduce production as vessels wait even longer in the queue to load coal and to avoid excess stockpiling at mines.
"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 has granted authorisation, as requested, until 31 December 2007.
More information regarding the application and a copy of the determination are available by following the Authorising anti-competitive conduct and Authorisations links on the ACCC's website.