AusRAIL, Market Sectors

BHP Billiton’s 35m tonnes up for grabs

<p>The BHP Billiton Mitsubishi Alliance (BMA) has selected a "preferred tenderer" for a contract to haul a massive 35m tonnes of Queensland coal a year, it was revealed last week.</p> <p>As discussions between the parties are continuing, BMA still needs to confirm its choice, although the key decision could possibly be announced by the end of the month. </p> <p>BHP Billiton’s substantial coal haulage business in the Hunter Valley is also up for grabs and a preferred tenderer has apparently also been chosen in New South Wales.</p> <p>Several rail operators, including incumbent QR, are understood to have been in the running for the Queensland contract, which represents a quarter of QR’s entire coal business. </p> <p>Most of the coal, sourced from seven mines, is railed along the Goonyella system and exported via BMA’s Hay Point Services terminal. </p> <p>Smaller tonnages from the Blackwater region mines are exported through Gladstone.</p> <p>In 2002, the alliance reportedly managed to renegotiate its rail haulage contracts with QR as legislation opened up the network to above-rail competition for the first time.</p> <p>Industry insiders believe QR will fight hard to preserve its core coal business at almost any cost, adopting the "what we have, we hold" philosophy. </p> <p>The state-owned operator benefits competitively by owning existing rolling stock, and having maintenance and other systems in place. </p> <p>However, with competitors knocking on Queensland’s narrow gauge door, BMA will have enjoyed enormous leverage on haulage prices.</p> <p>Some analysts believe it would represent a leap of faith for BHP Billiton to run with another operator, but the enormous coal volume involved &#8211 coupled with a reasonably lengthy contract period &#8211 would certainly make a stand-alone operation viable.</p> <p>It is believed the contract length was left open for the tenderers to negotiate with the mining giant. </p> <p>A BMA spokesman said the alliance is seeking "optimum efficiency and cost effectiveness for our rail transport services", with a key determinant being the highly competitive nature of the international coal market.</p> <br />