Competition between the rail rivals is visibly increasing as more and more PN-branded trains enter service on the state’s rail network, QR chief executive Lance Hockridge told Lloyd’s List DCN.
When asked if Asciano subsidiary PN’s increasing presence in Queensland changed anything in practice for QR, Hockridge answered in two parts.
“On one level yes and on another level, no,” Hockridge said.
“We welcome the competition. From an above rail point of view this is a very positive development, one that we welcome.”
The entrance of Asciano’s rail business had put an internal focus in QR “on the customer and on commerciality,” Hockridge said.
Up until Asciano’s entrance into the Queensland market place, QR was without a rail competitor of a similar stature in the state.
“There is nothing like competition to cause us to sharpen our focus,” Hockridge said.
“I’ve got no doubt that for many of our people in the coal business to see the reality of those PN trains now running around on that coal track, speaks many, many, many times more volume than frankly people like me or Marcus McAuliffe (executive general manager coal) saying to them, ‘Hey, we’ve got to get our competitive act together’.”
Otherwise, QR was “well prepared” for competition with PN, Hockridge said.
“We have done – not just in respect to coal but across the corporation – a huge amount of strategy work over the last 15 months,” he said.
“We have been in the mode of getting ourselves fit for this sort of competition. We are, I believe, in good shape to meet (it) and to provide value for our customers, which is what it’s all about.
“None of what we’ve seen play out so far around the contracts gives us any cause for concern.”
The comments followed the announcement at the end of June that PN’s parent company, Asciano, had struck a deal with Anglo Coal, a subsidiary of Anglo American, to transport up to 5.75 mtpa of coal in Queensland.
At the time, Asciano said it was in talks with a number of customers in the New South Wales Hunter Valley region about renewing other coal contracts.
Tit for tat
Since then, the battle for coal has continued to escalate between the two heavyweight transporters.
On July 5th, QR coal business QR National Coal announced an 11-year contract with Peabody Energy to deliver up to 12 mtpa from Peabody’s Wambo and Wilpinjong mines to the port of Newcastle for export to the Asian market from 2010.
Then on July 22nd, PN announced it had signed a 10-year haulage contract with Xstrata Coal covering the Hunter Valley and Port Kembla regions. The deal was expected to net in excess of $800 million over the life of the contract.
Less than a week later, on July 27th, QR National Coal announced it had signed a coal haulage contract with Felix Resources to deliver up to 12 mtpa from Felix Resource’s new Moolarben mine for over 11 years, extending its presence in the Hunter Valley.
Asciano – which also bid for the contract – then wrote to the Queensland Competition Authority claiming QR lowered its central Queensland track charges to Felix Resources to win the contract.
A QR spokesman rejected the claims, saying all dealings were made within the law.
Rail investment
Both companies are set to invest heavily to meet their respective contract obligations.
Asciano said it planned to buy 12 new locomotives and 400, 120-tonne coal wagons for its operations in the Hunter Valley at a cost of $160 million to meet customer demand.
QR said it would support the Peabody contract with an investment of more than $110 million in rolling stock.
On winning the Felix Resources contract, it committed to investing a further $190 million in locomotives and wagons.
Hockridge said the contracts were important milestones for the company, considering its relatively short tenancy in the Hunter Valley.
“We’ve gone from a zero market share to about 18 per cent of the existing market down there,” Hockridge said.
“That is the extent of what we can do with the existing fleet in that part of the world.
"The Peabody contract is therefore important as it underpins the fact that we are continuing to increase our market share even in a growing market in the Hunter Valley.”
The investment “demonstrates that our owners continue to support us in new ventures that make commercial sense,” Hockridge said.
Source: Lloyd’s List Daily Commercial News – www.lloydslistdcn.com.au
 
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