21 March 2007
Key Points:
The big issue remains increasing capacity in the Hunter Valley coal supply chain.
In 2005 the ACCC authorised the use of a capacity management system at the Port of Newcastle to enable a more efficient system for the loading of coal onto ships. The need for the system arose because there are capacity constraints in the supply chain from mine to port and those constraints led to significant queues of ships forming off Newcastle. The queues meant that the coal companies were incurring substantial demurrage charges as the ships stood idly by.
The need for authorisation arose because the capacity management system is or may be in breach of section 45 of the Trade Practices Act because it involves an arrangement between competitors to restrict or limit supply and/or may have the purpose or effect of substantially lessening competition.
In September 2006 the coal producers voted to discontinue the capacity management system at the port and revert to the old system. They did so believing that the capacity at the port would be sufficient to meet demand. However, that quickly turned out not to be the case and there are now over 60 vessels queued off Newcastle with demurrage costs of about $460 million being incurred.
Because they had discontinued the capacity management system, the old authorisation which applied to it (and which was due to continue until 31 December 2007) had lapsed and a new application for authorisation was made. The ACCC granted an interim authorisation on an urgent basis only two weeks after receiving the application. In large part this was possible because of the 2005 authorisation.
While this will no doubt help, undoubtedly the big issue remains increasing capacity in the Hunter Valley coal supply chain.
