CBS backflip possible as miners shovel out of hole

Hunter Valley coal companies could decide as early as today (Tuesday, January 30) whether to backflip on September’s vote to scrap a capacity balancing system through the port of Newcastle. Faced with mounting demurrage and aware that the axing of the rationing system has not had the desired effect on the near-record vessel queue, some major coal companies are now said to be open to the idea of re-instating the system. Coal company executives were to meet today to discuss the future of the present take-or-pay system that has been in place since January 1 and examine a possible return to the rationing system. The system was introduced in 2004, giving coal companies quarterly quotas to guarantee them specific allocations of the coal chain’s capacity. But coal companies, led by the Rio Tinto-owned Coal &#38 Allied, voted to scrap the system in September, a decision that has not had a noticeable effect on output since taking effect on January 1. The queue doubled from 27 to 54 between the September vote and scheduled port and rail work in November. Newcastle Port Corporation figures showed that the queue sat at about 48 ships yesterday, with the vessels waiting more than three weeks on average to enter the port. Coal &#38 Allied has long bemoaned the downside of a rationing system that it believes has limited its shipments. Most of C&#38A’s production and profit announcements over the last six months have referred to the limitations the capacity balancing system has placed on its export potential. In C&#38A’s 2006 annual results released yesterday, managing director Doug Ritchie said the rationing system had &#8220ultimately failed because it did not address all aspects of the coal chain&#8221. The company reported no change in production in 2006 but saw a fall in shipments from 29m tonnes to 27.6m tonnes. Profits for 2006 dropped from $146.5m in the first half to $60.3m in the second. Mr Ritchie said the CBS had managed the vessel queues well until the last quarter when vessel queues blew out. &#8220Despite infrastructure expansions, there is a risk that the system capacity may remain constrained during 2007,&#8221 Mr Ritchie said. Some suggest that older, more established mines benefit more from the rationing system than the newer mines because the latter are less reliable in meeting quotas at specific times. Despite C&#38A’s criticism of the system yesterday, the company could support a return to a revised system of rationing the coal chain capacity. Mr Ritchie said C&#38A would consider a system that managed the network for &#8220at least a two or three-year time frame&#8221 until rail and port improvements provided more capacity. Xstrata Coal spokesman James Rickards said the company had supported the retention of the system in September because it was the best method of maximising coal output. &#8220CBS is the most attractive and effective tool that will significantly assist with the current issues,&#8221 Mr Rickards said. &#8220We think it will help address the queues.&#8221 &#8220Demurrage costs are very significant and something needs to be done.&#8221

No Results