A week of failure and opportunity for the NSW Minerals Council [opinion]

With the Newcastle port charges in the news, the NSW Minerals Council (NSWMC) has had better weeks. The Federal Budget also has threats for NSW coal miners – but could provide an opportunity for the NSWMC to make up for its failure on port charges and make some new allies.

Port of Newcastle

In early 2014 the NSW Government leased the Port of Newcastle to private operators for 98 years. This effectively privatised the world’s largest coal port, the one which handles 90 per cent of NSW coal exports, and one that all NSWMC members rely on.

The buyers, China Merchants and Westpac-owned Hastings Funds Management, paid $1.75 billion for the port, 27 times earnings and well above expectations.

While Premier Mike Baird celebrated the result for the state, NSWMC members like Glencore, Rio Tinto and BHP Billiton must have been wary. From that moment on, the entire Hunter Coal Chain had little choice but to work with a private port monopoly keen for a return on its large investment.

According to this week’s press, the privatisation of the Newcastle Port has led to increases in port fees for coal ships of 28 to 60 per cent. Early reports suggest that Glencore is out there fighting this all on its own with a complaint to the ACCC.

It seems obvious now that a monopoly port owner would squeeze the industry that has no choice but to use its services. But it appears that this didn’t occur to the NSW Minerals Council in the lead up to the sale.

In their March 2013 submission to the NSW Freight and Ports Strategy there is no mention of the privatisation of Newcastle. They noted that the port is “a key element to the success of the NSW economy”, but said nothing about maintaining public ownership.

The submission did discuss the privatisation of the much smaller Port Kembla, near Wollongong, and the container port at Port Botany. The NSWMC expressed concern that “private ownership might impact on plans to increase capacity.” Their concern was for capacity, not price or competition.

In October 2013, the penny dropped for the NSWMC. Their submission on NSW economic development includes two paragraphs on the need to “manage the risks involved in the lease of the Port of Newcastle,” including “the risk that the lease will lead to a reduction of competition and the regulation of port charges.”

Two paragraphs is the extent of commentary from the NSW Minerals Council on the privatisation of the state’s most important coal port. Too little, too late. No other document on their website goes into further detail. Compare this with the pages of analysis that they put into discussion of Hunter salinity trading or on understanding conditions for women in mining. Worthy topics, but hardly as important for NSW mining as the Newcastle port.

The NSWMC’s support for the port sale is easy to understand. The sale was a triumph for Premier Baird. The CEO of the NSWMC is Baird’s former chief advisor, Stephen Galilee. Blocking the sale would have required Galilee to cross his powerful former boss and to campaign against Liberal party orthodoxy on privatisation.

Galilee’s career is more closely tied to the Liberal Party than the mining industry – he has also worked for John Howard and Tony Abbott. Any resistance to asset privatisation would hamper any future political ambition.

While actually blocking the privatisation might have been impossible for Galilee, it is hard to understand why he wasn’t able to ensure better conditions for miners in the final agreements. With Baird working as Treasurer and then Premier in the lead up to the sale, the NSWMC had unmatched access to the decision makers making the deal.

From publically available documents it is difficult to say whether Galilee and the NSWMC just didn’t realise what was at stake or if they traded port charges for political expedience. Either way, they have made a lot of work for Glencore and the ACCC.

Federal Budget 2015

This week’s Federal Budget contains another serious test for the NSMC. It includes $5 billion dollars for developing infrastructure in Northern Australia, specifically for projects that are not economically viable with private financing. This taxpayer subsidy will go to whoever makes the most noise – farmers wanting dams, indigenous groups wanting roads and, of course, Queensland coal miners wanting a hand-out too.

The Queensland Resource Council is already celebrating the policy.

So far, the NSW Minerals Council is silent. To assist their members and protect NSW coal jobs, they should do three things.

Firstly, they should urgently call for subsidised loans not to be extended to Galilee Basin projects. Development of the Galilee Basin could expand seaborne thermal capacity by 30 per cent, smashing prices and every coal mine south of the border.

Secondly, they should work with the Queensland Resource Council to ensure that any funds for the Queensland mining industry go towards non-coal commodities.

Thirdly, if any federal subsidies do go to the Queensland coal industry, the NSW Minerals Council should push for them to go towards mine rehabilitation, dust suppression or other projects that do not increase coal supply.

Pursuing these strategies not only protects the interests of NSWMC members, but creates an opportunity for the NSWMC to unite with some unusual allies. Labour, community and environment groups would be likely to support these strategies. Here is a chance to build relationships and trust that could be useful in wider industry-community engagement.

 

Rod Campbell is a research director at The Australia Institute.

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