While 2009 has presented an array of new opportunities and threats for the Hunter Valley coal supply chain, the priorities for the chain’s key stake holders remain the same.
With stage one of Newcastle Coal Infrastructure Group (NCIG), representing about 30 million tones per annum, financed and packaged, and Port Waratah’s expansion moving from about 97 to 112 million tonnes over the next 14 months or so, the supply chain is rolling forward nicely, Australian Rail Track Corporation (ARTC) CEO David Marchant told Aus tralian Mining.
All eyes are now on the Hunter Valley Coal Chain Logistics Team (HVCCLT), as it moves into an independent entity, to see if the challenge of building capacity during times of recession can be met.
“One of the good things about the Hunter Valley has been the HVCCLT, which all stakeholders have agreed to put into an independent company, so that all participants can equally share their information understanding that it’s inde pendent,” Marchant said.
While the current economic outlook has seen coal tonnages drop off nationwide, particularly in the metallurgical coal market, the forecast for coal exports is one of strong growth from 2010—11, QRNational Coal NSW Manager David Down told Australian Mining.
“It is essential that the coal chain works together now to plan infrastructure for the future so that we can continue to be a key contributor to the NSW and Australian economies.”
Confidence in capacity
Industry confidence comes from certainty of capacity, and equi table access to that capacity, NSW Minerals Council Director of Infrastructure & Gov ernment Relations Jai McDer mott told Australian Mining.
According to McDermott, The Federal Government’s equity injection announced in December last year will allow the ARTC to borrow in order to deliver expansion of rail capacity.
According to Marchant, the ARTC’s biggest issue last year was the organisation’s borrow ing program, which, like every one else’s, had been placed under pressure.
“Last year we were looking for a billion dollars. Now that has changed dramatically because the Federal Government has de cided to contribute $560 million of equity in for the Hunter Valley projects,” Marchant said.
“That has obviously made a material difference to our capability to move forward on more than $1.2 billion worth of capital projects over the next four or five years.”
At this point the ARTC is concentrating on rolling out the present program, which has not been affected by the downturn, according to Marchant.
“We are rolling through on the same timelines for the projects themselves. They have not yet been adjusted for any poten tial movement from coal pro ducers downwards,” Marchant said.
“At this point in time coal producer’s nominations have not materially moved downwards, there is some short term reduction, but their longer term nominations are still quite high.”
While the industry has committed significant investment to expand port capacity, rolling stock is a significant threat to the equation.
“The biggest gap that may pose a challenge for the Hunter Valley is going to be above rail rolling stock,” Marchant said.
“There will be a need over the next two years for 28 more full fleets of coal trains.
“It is an issue that is going to need to be addressed if the tonnages envisaged are going to take place. The criticality of that is starting to get quite tight.”
Marchant is also looking for the HVCCLT to resolve some of the present constraints that as yet there have not been commitments to, such as speed loading at some of the mines.
“Some of the coal mines have to look closely at their loading facilities, because some facilities at some mines add quite a constraint to the capac ity of the network,” he said.
Parties need to be more willing to share information and align capacity so that stakeholders can maximise coal exports and plan effectively for the future, according to Down.
“Access to capital and the willingness to invest are obvi ously major challenges for com panies during a recession. But the projected growth for the industry post-recession is strong and companies must have confidence in this and the resolve to ensure that they are ready when the time comes for increased production,” Down said.
All agree that it is extremely important that capacity stays ahead of the coal chain moving forward.
“Most of the benefits which the industry experienced out of the boom were driven by price rather than volume,” McDer mott said.
“During that time our market share went backwards, while countries such as Indonesia achieved strong growth in volumes of thermal coal.
“There is a huge opportunity cost in having a coal chain which lags demand growth.”
According to Marchant, the faster the HVCCLT is moved into an independent entity, and the faster all the players commit to helping that entity to do the planning transparently, the more the presenting issues can be addressed by all players.
“There are three functional things that need to be done quickly,” he said.
“Firstly, the application by the ports to the ACCC for authorisation of their future com mercial structure; secondly, the ARTC’s undertaking to the ACCC; and thirdly, the most critical thing, is moving the HVCCLT into an independent entity and looking for methods of helping to finance and struc ture the above rail rolling stock that will need to be available in the next two years.”