By Jennifer Perry
The Minerals Council of Australia (MCA) believes the Federal Governments $584 million funding, announced in December, to improve the Hunter Valley rail network could finally assist in easing coal chain bottlenecks.
As part of the Governments first stimulus package, the funding will be directed at expanding capacity along the rail corridors and connecting the Hunter Valleys coal mines to the port of Newcastle.
The MCA has welcomed the move as an example of how the right intervention can leverage other improvements, and its spokesperson told Rail Express that what the industry is looking for is regulatory as well as funding support for projects.
Building the capacity of the rail line there to 200 million tonnes per year capacity will give certainty for port companies looking to build new terminals and for mining companies making investment and expansion decision[s], said Sid Marris, assistant director of the MCA.
Combined with this funding is the decision by the NSW Government to reform the management of coal supply operations, allowing the introduction of contracted demand to give greater investment certainty for mining companies, transport providers and terminal operators.
In a submission to Infrastructure Australia, a body established by the Government to develop a long-term approach to addressing infrastructure issues, the MCA highlighted the need for Government to look at supply chain management issues that continue to affect the minerals industrys ability to respond to global commodity opportunities.
Despite being one of the worlds most important minerals producers, Australia has failed to fully capitalise on this expansion. While prices have risen, volume growth in key commodity sectors has been stagnant.
Capacity constraints, including congested export infrastructure, undeveloped and unresponsive energy and water markets, and failing social and physical infrastructure in regional and remote Australia, have applied a firm brake on export growth, the MCAs submission stated.
The submission highlighted problems inherit with multiple rail operators in the eastern states of Australia. While the MCA told Rail Express there are already steps to introduce the changes that it believe are necessary, central to this is the ability to link prices and access on the network to performance and contracted demand.
Marris said that all parties must commit to more rigorous estimates of capacity and performance.
In the past there has been a tendency for rail operators, as well as ports and mines, to nominate capacity in isolation of other players, Marris said, Thus the capacity of a railway line is often overstated compared to the system capacity of supplying commodities from mine to port.
According to Marris, negotiated prices and penalties for non-performance can provide stability that allow for investment decisions, particularly for expansion to be made.
This does not mean smaller suppliers or new entrants are disadvantaged, because the system has greater certainty to fund necessary expansions.
While Infrastructure Australias funding for projects is expected to be announced in March, Marris said that the body has already produced a list of more than 100 projects and will reduce this to 28 immediate decisions to be endorsed by the Council of Australian Governments.
The minerals sector is encouraged by the projects that were on the original list [which includes] further upgrades of the Hunter Valley rail network. (an additional $1 billion on top of the $584 million already announced)
Marris said the Northern Missing Link in Queensland, also known as the Goonyella to Abbott Point Extension, which links the coal fields of northern and southern Bowen Basin is the biggest priority.
This is subject to commercial discussions, but delaying the development because of a temporary downturn in demand would be a missed opportunity.
Marris said the global financial crisis is challenging for both companies in the industry as well as the Government.
Hard decisions will need to be made and some projects may not be viable.
However he said that long-term prospects remain encouraging with the urbanisation and industrialisation of Asian nations, particularly China and India, continuing to increase demand for commodities.
The industry is determined not to be caught unprepared as arguably both it and Governments underestimated the surge from 2004 to 2008, Marris said.
The MCA is convinced sound strategic planning and the right regulatory environment – one which encourages risks and rewards performance will help create the strong business case for investment in rail infrastructure once access to funds improves.
 
