BHP agrees to Newcastle coal port restructuring

Reuters | Fri, 18 Sep 2009 10:32
[miningmx.com] -- A group of coal miners led by BHP Billiton have agreed on a restructuring plan for Australia Newcastle port, the world's largest coal terminal, paving the way for a significant boost in exports over the next decade.

The deal means new producers, such as China's Shenhua Energy, are now assured of port access to export their coal, and coal exports from the terminal could double to 180 million tonnes by 2015.

BHP and the New South Wales state government said on Friday they have agreed on a long-term port sharing agreement, which will see miners sign 10-year rolling agreements based on forecast export volumes shipped out of the port, replacing the current one-year contracts.

"With these agreements in place the coal industry will have long term certainty over future access to vital port capacity which will support our future expansions and growth of the region," Jimmy Wilson, BHP President of Energy Coal said in a statement.

Under the agreement, the BHP-led producer group, known as the Newcastle Coal Industry Group (NCIG), will build a new coal terminal in the port which will boost Newcastle's annual export capacity by 30 million tonnes by the first quarter of 2010 and a further expansion to 66 million tonnes at a later date.

The state government said the agreement will support A$5 billion ($4.35 billion) worth of investment in new port and rail infrastructure over the next four years, with coal exports expected to double to 180 million tonnes over the next six years.

The port restructuring plan will be signed off by the government and export terminal operators next week.

Australia's Newcastle port, which ships mainly thermal coal used for power generation, has long been dogged by production constraints and congestion, with ship queues swelling to a record high of above 70 in 2007. Vessel queues are now hovering at 34, with an average waiting time of 14 days.

Port operator seems interim quota system

Having reached a long-term solution to share capacity at Newcastle, port operator Port Waratah Coal Services (PWCS) said it will now ask the competition regulator to give it the option of implementing producer export quotas until the end of the year.

Should the application be approved, some traders said there was a possibility that PWCS would cut producers' shipping quotas in the fourth quarter to reduce ship queues further.

"It all depends on where the ship queues are towards the end of the month. If the queues rise back to above 40, then PWCS might step in to cut producers' quotas," said a Sydney-based trader.

The producer export quota system is a means of controlling ship queues at the port and reducing producers' demurrage costs.

But the quota system, which needed approval from Australia's competition authorities because it required collaboration from rival miners, was scuttled after the BHP-backed producer group missed an Aug. 31 deadline to agree on a long term port-sharing proposal.