Hunter Valley Coal Chain
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The Hunter Valley Coal Chain (HVCC) is the chain of coal delivery in New South Wales, Australia from (mainly open-cut) coal mines in the Hunter Valley to the Port of Newcastle and to domestic coal-fired power stations in the Hunter Valley. The HVCC essentially follows the path of the Hunter River travelling south-east from the mining areas of the Hunter Valley to Newcastle.
The HVCC mainly deals in the sea-borne export coal trade, especially to Asia (Japan and Korea in particular). It is one of six major coal chains in Australia:
- four in Queensland: Abbot Point, Dalrymple Bay/Hay Point, Gladstone and Brisbane; and
- two in NSW: the Ports of Newcastle (also known as Port Waratah) and Port Kembla (near Wollongong).
The port of Newcastle is the world’s largest coal export port. Rising demand for coal, particularly in the Asian region has resulted in a strong increase in the volume of coal exported through the port. In 2004, port throughput was around 78 million tonnes, or 10 per cent of the world’s total trade in coal, compared with 68 million tonnes in 2000.
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[edit] The chain
Coal generally goes through the following stages between mine and port:
- The producer makes arrangements to sell coal to a buyer on certain terms.
- The coal is mined (most of the coal mines in the Hunter Valley are open cut mines, also known as open pit mines) and stored either at a railway siding located at the mine or at a coal loading facility (used by several mines).
- The coal is then transported to the Port of Newcastle, almost exclusively done by rail. Some coal is transported to the port by truck, but this generally requires permission from the local government (due to the effect on roadways and other infrastructure) and is also usually more costly per tonne than rail transport.
- The coal is offloaded at the port onto stockpiles in the Port Waratah Coal Services facilities.
- Once the vessel arrives at the port, the coal is loaded onto the vessel.
- The vessel then transports the coal to its destination determined by the buyer.
[edit] HVCC Logistics Team
In 2003, the Hunter Valley Coal Chain Logistics Team (HVCCLT) was established to improve the movement of coal from Hunter Valley mines to the ports coal loaders and then to markets across the globe. HVCCLT pools the resources of port operators Newcastle Port Corporation and Port Waratah Coal Services, railway operators Pacific National and QRNational, and railway infrastructure managers Australian Rail Track Corporation and Railcorp into one logistics team.
[edit] Producers
The major coal producers in the Hunter Valley, which utilise approximately 70 per cent of the HVCC capacity, are:
- Coal & Allied Industries Limited, a subsidiary of Rio Tinto (part of Rio Tinto Coal Australia). Coal & Allied owns three main mining operations in the Hunter Valley, being Hunter Valley Operations, Mount Thorley Operations/Warkworth Mine and Bengalla Mine.
- Xstrata Coal NSW Pty Ltd, a subsidiary of Xstrata plc. Xstrata owns (either through joint ventures or companies) and manages and operates 10 mining operations in the Hunter Valley.
- Anglo Coal Australia Pty Ltd, a subsidiary of Anglo American plc. Anglo has a majority interest in Dartbrook and Drayton mines.
- Hunter Valley Energy Coal Limited (a wholly owned subsidiary of BHP Billiton).
The remaining 30 per cent of coal exported is produced by the small coal producers including:
- AMCI Holdings Australia Pty Limited;
- Bloomfield Collieries Pty Limited;
- Camberwell Coal Pty Limited;
- Centennial Coal Company Limited;
- Donaldson Coal Pty Limited;
- Excel Mining Ltd;
- Gloucester Coal Ltd;
- Lake Coal (Road Coal Only);
- Muswellbrook Coal Co Ltd;
- Southland Coal Pty Ltd; and
- White Mining Limited.
[edit] Consumers
Most coal produced in the Hunter Valley is sold directly by coal mines (producers) to overseas buyers. About 20 per cent of coal is sold by traders who do not mine coal but act as agents or intermediaries in coal sales. The coal traders operating in the Hunter Valley include:
- Noble Asia Pacific Ltd;
- Peabody Coaltrade Pty Ltd;
- AEP Energy Services Limited; and
- Glencore International AG.
The majority of Australian coal was traditionally sold to Japanese steel mills or power utilities in accordance with long term contracts. Those contracts were the subject of annual price and volume negotiations. The Japanese steel mills, operating in a coordinated manner and collectively known as the “JSM”, negotiated prices for coking coal. One of the steel mills would be appointed as the lead negotiator for the initial contracts with producers. Prices in subsequent contracts would be based on these ‘benchmark prices’, adjusted for coal quality. This led to “JSM terms” being the benchmark for the industry. While coal is still sold under JSM terms, a greater variety of other contract terms now exist.
[edit] Rail infrastructure
The railway corridor used is part of the Main North railway line. The Australian Government manages the Hunter rail infrastructure through the Australian Rail Track Corporation (ARTC),[1] formerly owned by the NSW Government through the Rail Infrastructure Corporation (RIC) (now RailCorp). The track is open access and may be used by any accredited rail operator. The other infrastructure associated with coal transport, such as load points, is privately owned, usually by a mine or a coal loader.
There are currently two major above-track (rolling stock) operators using the Hunter Valley rail track. Pacific National is a private operator which transports freight, coal, industrial and agricultural products, including most coal transported by rail. Some coal is now transported by QRNational (Queensland Rail). In addition, CityRail (part of RailCorp) operates passenger services on parts of the track as the Hunter line.
[edit] Port Waratah Coal Services
Port Waratah Coal Services Limited (PWCS) operates the coal export facilities in Newcastle. The coal export facilities consist of two coal loading terminals, located on either side of the South Channel of the Hunter River. These are known as the Kooragang Coal Terminal, on Kooragang Island and the Carrington Coal Terminal in the suburb of Carrington. Each of those terminals comprises equipment for the delivery and storage of coal to the terminal and for the loading of coal onto vessels. PWCS leases the land on which the port is situated from the NSW Government under an agreement which states that the port is maintained as a 'common user facility'.
The coal export facilities operated by PWCS have a total capacity of 89 million tonnes per annum (Mtpa):
- Carrington coal terminal has a shiploading capacity of 25 Mtpa. It has berth space for two vessels and shiploading facilities that operate at 2,500 tonnes per hour (tph). Carrington Coal Terminal is able to accept coal deliveries by either road or rail.
- Kooragang coal terminal has a shiploading capacity of 64 Mtpa. It has berth space for three vessels and shiploading facilities which can operate at 10,500 tph. Kooragang Coal Terminal is able to accept coal deliveries by rail only.
The distribution of loading between Carrington and Kooragang Coal terminals is dependent on a number of factors:
- 'Capesize' class vessels usually berth at Kooragang Coal Terminal due to their larger size. However, they are also able to load at the Carrington Coal Terminal. 'Handysize' class vessels are loaded at Carrington Coal Terminal also due to their size. 'Panamax' class vessels may be loaded at either Kooragang Coal Terminal or Carrington Coal Terminal.
- Coal which is to be delivered by road may only be delivered to Carrington Coal Terminal, and therefore any vessels which are to be loaded with road coal must be loaded at Carrington Coal Terminal.
- If the vessel to be loaded is 'geared', that is, it has equipment on deck, then the vessel will usually be scheduled to berth at Carrington Coal Terminal, as the shiploaders at Carrington Coal Terminal are smaller and are therefore more easily able to move in and about equipment on the deck of a vessel.
- Remaining vessels are then scheduled to ensure an even queue of vessels is maintained between the Kooragang Coal Terminal and Carrington Coal Terminal. If the queue for one of the terminals is substantially longer than for the other terminal, the schedule may be amended to ensure that the queues are kept reasonably even.
[edit] Capacity distribution systems
While productivity in supply chains is an issue for industries of all sizes, few industries have to deal with a network as broad and a demand as pressing as the coal industry.
As Australia's biggest export commodity accounting for 10 percent of export volume, coal is of vital importance to the economy. But while Australia has an abundance of coal and a ravenous world market, particularly in Asia (especially China, with its expanding need for coal in the steel industry), willing to devour it is disadvantaged by the distance that must be overcome to get the product to the market and the huge number of players involved.
It is for this reason that the supply chain must run as smoothly as possible, moving the raw product from the mines, to the port and onto the ships no easy task. In 2005, Australia exported nearly 234 million tonnes of coal and moved 97 percent of this by rail.
But over the last five years, getting the coal to these ports, onto the ships and to the market proved to be a difficult operation as the Chinese and other Asian markets demand soared. Freight bottlenecks rapidly developed, primarily at the Dalrymple Bay Coal Terminal (DBCT) and at Newcastle's Port Waratah.
To cope with these bottlenecks, the terminal operators developed capacity management systems to cope with the volumes.
The two hubs developed independent yet similar systems to cope with the problem of how to reduce queues, with Port Waratah using a "Capacity Balancing System" and DBCT a "Queue Management System".
The Port Waratah model allocates production from the mines to available shipping in a way that maximises the capacity of the terminal.
Since August 2003, there has been evidence that the Hunter Valley coal export infrastructure has been strained and that some coal export growth might have been lost as a result of constraints in the system. In response to this situation, Port Waratah Coal Services (manager of the Kooragang coal terminal (located on Kooragang Island and Carrington coal terminals at the Newcastle Port) applied to the Australian Competition and Consumer Commission (ACCC) to implement a short term capacity distribution system (STCDS) to allocate the current capacity of the coal supply chain to existing coal exporters. This scheme was implemented in June 2004 and interim authorisation to continue a modified version of the scheme until December 2007 – called the medium term capacity distribution system (MTCDS) – has been granted by the ACCC.[2]
