The Australian Competition and Consumer Commission has issued a draft determination, proposing to grant authorisation* to applications from Newcastle Port Corporation and Donaldson Coal Pty Limited for a capacity balancing system at the Port of Newcastle.
NPC and Donaldson lodged separate applications for authorisation in early December 2007 for a system designed to address the imbalance between the demand for coal loading services at the Port of Newcastle and the capacity of the Hunter Valley coal chain in 2008. The industry is concerned that without a system for the allocation of capacity, the queue of ships waiting to be loaded will increase giving rise to significant costs.
"The ACCC is of the view that the proposed capacity balancing system is likely to result in a net public benefit," ACCC Chairman, Mr Graeme Samuel, said today. "In particular, the proposed system is likely to have the effect of minimising the vessel queue at the Port of Newcastle, which has the potential to save industry a significant amount in deadweight demurrage costs.
"However, the ACCC has always considered that queue management systems are appropriate as short term transitional measures only. In this case, while the CBS has effectively been in operation at the Port of Newcastle since March 2004, industry and governments have failed to adequately address ongoing capacity issues within a reasonable amount of time.
"The longer that the system remains in place, the more likely it is that the system will reduce the incentive to develop a long term solution to the underlying coal chain issues, which may ultimately result in several billion dollars of lost export revenue. For these reasons the ACCC has significant doubts about whether the Proposed System is likely to result in a net public benefit beyond December 2008."
"The ACCC has become increasingly concerned that the underlying coal chain issues are not being addressed and that foreshadowed capacity expansions alone will not solve the problem. These underlying issues include the common user provisions of PWCS's Kooragang Lease, which appear to be restricting its ability to enter into long term, binding contracts to underpin investment, and service providers contracting based on assessments of individual capacity without reference to the coal chain as a whole.
"The current industry discussions facilitated by Mr Greiner provide the opportunity for the development of a coordinated approach to address these underlying issues in the Hunter Valley, rather than just focusing on developing a new method to allocate current scarce capacity in the short term."
More information regarding the applications for authorisation and a copy of the draft determination will be available on the ACCC website by following the links to Public registers and Authorisations and notifications registers and Authorisations register.