Aurizon entry to Gunnedah no threat to PN Coal

Pacific National (PN) Coal has downplayed media reports suggesting Aurizonâs recent contract win with Whitehaven Coal that will see the company expand its operations into the Hunter Valleyâs Gunnedah Basin is a serious threat to PN Coalâs dominance in the market. By Jennifer PerryLate last year, Aurizon (formerly QR National) snared a 12-year agreement starting July 1, 2014, to haul up to 16 million tonnes per annum (mtpa) of coal from Whitehaven’s Maules Creek, Narrabri, Gunnedah and Werris Creek mines to Newcastle Port. Whitehaven is a major customer of PN Coal, Asciano’s Coal division, with a 10-year coal haulage contract servicing Whitehaven’s Narrabri, Werris Creek and Gunnedah mines signed in 2009 and generating some $600m of revenue for Asciano over the term of the agreement. Speaking with Rail Express, PN Director Coal David Irwin downplayed media reports suggesting that Aurizon’s entry to the Gunnedah Basin poses a serious challenge to PN Coal’s dominance in the market. It currently holds around 65% market share in NSW and currently hauls 100% of all Gunnedah basin railed coal“We don’t see Aurizon’s contract with Whitehaven as a case of our company losing market share, it’s not about dominance for us. We are at this point, the largest operator in the NSW coal market and market share is an outcome, not an objective of our business,” Irwin said.According to Aurizon CEO Lance Hockridge, the company’s entry into the Gunnedah Basin is a win for customers, adding competition and increased performance pressure to a market which previously had only one operator.“In both New South Wales and Queensland we’ve proven we can expand capacity to match our customer’s growing expectations. We intend to leverage our experience and performance in the Hunter Valley supply chain to maximise coal throughput or Whitehaven,” Hockridge said.Aurizon’s contracted coal haulage across the Hunter Valley in 2013 is about 40 million tonnes per annum (mpta) and its customers across the NSW coal region include BHP, Rio Tinto, Peabody and Yancoal.Irwin said PN Coal’s position as the major coal operator in the region means that it “fully understands” the risks and opportunities associated with specific future haulage requirements. PN Coal also has a greater understanding than its competitors of the risks involved in hauling significant growth volumes in the region, of which there are many, he added.“This growth haulage opportunity in the Gunnedah Basin was not an opportunity where we would look to win at any cost,” he said.Irwin explained that PN Coal’s Hunter Valley strategy for winning new business in the region is focused on ensuring the operator can earn a reasonable return on capital based upon strong operational performance, and where the operating risks and terms are well defined and mutually agreeable for PN Coal and its customers.’If this is the case, then we will do business,” he said.According to Irwin, as the Gunnedah Basin is the longest rail haulage taking coal into Newcastle Port and two-thirds of the journey is single line track as well as having lower axle loads, an operator is subject to any variation that may occur throughout the rest of the Hunter Valley coal chain.“[This] means the efficiency of your operations can be greatly affected and you need proportionally more trains and resources to move your customers’ tonnage requirements,” he said. Aurizon’s contract with Whitehaven will see the company invest around $280m in addition to its planned $110m train maintenance and provisioning facility at Hexham to support its new fleet.Depending on government planning approvals and consultation with stakeholders, Aurizon plans to have its Hexham facility to be operational by mid-2014.PN Coal’s own $110m maintenance facility was officially opened at Greta in the Hunter Valley in December 2012.Rail Express asked Irwin if there was potential for sharing its maintenance facility with Aurizon if the Hexham facility is not operational by the time its Whitehaven contract comes into play in July next year.“PN Coal is of the view that anything that happens with regard to maintenance sharing would be reasonably short term and on a commercial basis,” he said.“We are strong advocates of Aurizon getting on and building Hexham as it is good for them, but more importantly good for the Hunter Valley coal chain as a whole.”Irwin has a positive outlook for the Hunter Valley coal market for 2013, particularly as the coal chain moved 130 mtpa last year, 20 million than the previous year.“The Hunter will not be constrained by the market, if anything it will be constrained by the infrastructure capacity, however we are expecting incremental increases in infrastructure capability as rail infrastructure comes online as well as expansions at the PWCS and NCIG ports,&quot he said. &nbsp