The Australian Competition and Consumer Commission has authorised* a system designed to substantially reduce the queue of coal ships at the Port of Newcastle, ACCC Chairman, Mr Graeme Samuel, said today.
The system was developed by Port Waratah Coal Services which operates the coal loading service at the Port of Newcastle. The system has been operating since early April 2004 under an interim authorisation** granted by the ACCC in March and final authorisation has now been granted until the end of 2004.
The vessel queue had been as high as 56 ships before the system began. The queue formed primarily because coal vessels were arriving at a faster rate than coal could be transported from mines in the Hunter Valley to the port.
The system aims to match the rate of ship arrivals with the capacity of the rail and port systems to transport coal from mine to ship. The vessel queue has dropped substantially since the system began operating.
The ACCC concluded that the system is likely to result in a public benefit, particularly by reducing the demurrage costs*** paid by the industry. The size of these cost savings depends on the length the queue would have reached without the system. The ACCC considered that the vessel queue would have been substantial, although there was some uncertainty about the precise size. Given this uncertainty, the ACCC estimates that the cost savings would be at least A$110 million and could be as high as A$195 million in 2004.
However, the ACCC also accepted that the system generates public detriment. In particular, it has slightly reduced Hunter Valley coal exports in the first half of 2004 and further reductions later in the year cannot be ruled out. Even slight reductions in the amount of exports can be significant given current high coal prices.
The ACCC has also allowed producers to sell allocation to one another as this is likely to improve the operation of the system including by helping to ensure that the system does not reduce Hunter Valley coal exports.
Overall, the ACCC was satisfied that the public benefit will outweigh the public detriment.