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Unity needed at the coalface

By Mark Christensen - posted Thursday, 3 May 2007


Inefficient regulation, cumbersome public-private sector interfaces and long lead-times for new port infrastructure are just some of the constraints impacting the export coal chain in Queensland.

The biggest problem, however, is the unwillingness of the stakeholders to let go of these niggling concerns and commit seriously to an integrated vision. In this regard, one of the most significant factors preventing a commercial solution to improved performance is the coal companies themselves. They'd rather whine about easy targets than bring about serious structural change.

The 12 coal mining companies in the Bowen Basin are interested in two inter-related things.

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First, they want a seamless service that moves coal from the mine to the hull of a ship. There has to be excellent co-ordination between mine output, rail services, stockpiling at port and ship-loading operations.

Second, they need supporting transport infrastructure planned and delivered as efficiently as possible. Rail lines must cope with required train operations, while the ports need matching capacity. Upgrading rail without port improvements will lead to bottlenecks. Similarly, there is massive value in the ports collectively managing capacity in order to avoid costly new investment as long as possible.

The Queensland system has many historical constraints preventing the integration of the various parts of the coal logistics supply chain and the infrastructure that support it.

For example, the coal ports at Gladstone and Hay Point are responsibility for services and infrastructure. The former is owned by a Queensland government owned corporation(GOC); the latter by the BHP Billiton-Mitsubishi Alliance.

In the 1980s, the Queensland Government built coal terminals at Abbot Point and Dalrymple Bay following concerns that the big miners were unwilling to share capacity (Dalrymple Bay is in the same harbour as Hay Point). These two ports are managed by operating companies jointly owned by the coal miners who use them. The infrastructure at Abbot Point is owned by another GOC, while Dalrymple Bay is now the responsibility of Babcock & Brown Infrastructure through a long-term lease.

Rail services and infrastructure in the Bowen Basin are provided by QR, a Queensland GOC. Other operators like Pacific National can compete above-rail by gaining access through the state-based regime, though this has not yet happened.

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The mass of public-private interfaces could hardly be enhancing efficiency. What is interesting is why a commercial solution has not been forthcoming, given the situation is ripe for reform.

Despite media photos depicting long shipping queues, the coal system in Queensland is now much closer to optimal performance. The real problem is the resources boom is forcing stakeholders to work closer together.

The miners find it excruciatingly difficult to agree on how to share the benefits and costs of changes to existing operations and more importantly, new investment. Infrastructure improvements may deliver different returns for different mines. Smaller companies can often free-ride by being obstructionist, while the multinationals use their political clout. Add to this the fact that one miner has exclusive use of its own port.

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First published in the Australian Financial Review on April 23, 2007.



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About the Author

Mark is a social and political commentator, with a background in economics. He also has an abiding interest in philosophy and theology, and is trying to write a book on the nature of reality. He blogs here.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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