PWCS gets three-year extension to coal capacity system

Port Waratah Coal Services (PWCS) has won interim approval to extend its capacity distribution system for a period of three years to the end of 2007. The Australian Competition and Consumer Commission (ACCC) has granted interim approval for a revised system that will prevent the sort congestion that saw a peak vessel queue of more than 56 coal bulkers off the port of Newcastle on March 14, 2003. The present operating level has a queue of around 10 vessels. In addition to the capacity distribution system, the ACCC has also granted interim approval for PWCS to begin tonnage tracking and to decline to load vessels that exceed the first quarter’s allocation from January 1. ACCC chairman Graeme Samuel said the new medium-term system would help address the imbalance between demand for Hunter Valley coal and the capacity of the coal chain. "The system essentially reduces the amount of coal each producer can export through the port on a pro rata basis so that the overall amount handled by the port better matches the amount that can be delivered by the coal chain," Mr Samuel said. "This is designed to substantially reduce demurrage costs that arise from an excessive queue." Estimated demurrage savings from the present distribution scheme will run to about US$173.5m by the end of 2004. Similar savings are estimated for 2005. ACCC said it was satisfied that the system would not reduce the total volume of coal exports nor would it deter further investment in coal chain capacity expansion. PWCS chairwoman Eileen Doyle said the company was delighted with the ACCC decision because it has given all stakeholders a level of certainty going forward. "In principle everyone is happy &#8211 there is nowhere near the opposition we had the first time," Ms Doyle said. The system will only be triggered where the demand exceeds the coal chain supply capacity, Ms Doyle said. For 2005, PWCS estimates its capacity will be 84.3m tonnes and demand is estimated at 95m tonnes. This compares with an estimated throughput of 80m tonnes for 2004 against a demand level of 88m tonnes. With the improvements elsewhere in the coal chain &#8211 rail bottlenecks for example &#8211 dictating the pace of capacity expansion, PWCS estimates that the Hunter Coal chain could reach a capacity of 102m tonnes a year by the end of 2007, when the system is due to expire. "We have a long-term solution in place," Ms Doyle said. "We are doing major work now to try and get 120m tonnes [a year&#93 out of that." But this relied on a whole of coal chain approach, she said. "Unless we are all expanding there’s no point," Ms Doyle said. "If everyone spends the money then the whole chain can grow significantly." The port is also advocating a move towards stricter contracts in the Hunter Valley, "take or pay" contracts that give committed tonnages for coal.

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