Rail and Flood Bottlenecks Delay, Reduce $952 Million Coal Shipments from Australia's Newcastle Port

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Researched by Industrial Info Resources (Sugar Land, Texas)--Several global mining majors, including Xstrata plc (LSE:XTA) (Zug, Switzerland), BHP Billiton Limited (NYSE:BHP) (Melbourne, Australia) and Rio Tinto plc (NYSE:RTP) (London, England), have been asked to voluntarily reduce their coal shipments from Newcastle Port in New South Wales. According to reports, problems with railway connectivity and floods have delayed exports worth $952 million from the port. The delay has impacted all major coal mining companies. In comparison to the contracts signed by coal suppliers, coal shipments from the port may fall short by 10 million tons.

The massive congestion has forced ships arriving at the port to dock offshore. Queues have increased to 46 ships a day. On September 13, 2010, there were 37 ships waiting to gain access to the port, in comparison to an all-time high of 83 ships. However, the numbers were smaller than the 53 vessels awaiting access during the week beginning September 6, 2010. To offset lower volumes, coal mining companies are focusing on maximizing exports of coking coal. Presently, exports through the Newcastle port consist of low-priced thermal coal. This fiscal year until June, the port recorded trade of 103 million tons, which was dominated by coal supplies. During the week ending September 6, 2010, total cargo of 1.98 million tons was transported on 27 ships. During the week ending September 13, 2010, the combined cargo dispatch on 25 vessels was nearly 2 million tons.

Newcastle port is the largest coal-exporting terminal in world. The port is struggling to keep pace with growing coal demand from Asian economies, especially India and China. In 2009, about 93 million tons of coal was exported through the port. Presently, the Newcastle port operates two terminals at Korrgang and Carrington. The port is also undertaking capacity augmentation programs, which will increase terminal capacities to 133 million tons by 2011. The proposed third terminal, with 30 million tons per year capacity, is likely to be commissioned in 2011. There are plans to construct a 30 million-ton-per-year fourth terminal in the future.

In a related development, John Holland (Melbourne, Australia) secured a $261 million contract for a new port in Western Australia. The contract for the port, which will be part of Rio Tinto's Cape Lambert B project, will include a ship-loading unit, two wharf berths, a 920-meter jetty and other allied infrastructure. The project, which will be part of the Lambert B iron-ore facility, proposes to increase capacity of the port by 50 million tons per year. Construction is expected to be completed in 2012. Recently, Rio Tinto announced plans to spend an additional $16 billion over a two-year period on several projects in the Pilbara region and augment iron-ore production.

Established in 1949, John Holland is one of Australia's leading engineering services and project management companies. The company, which is a fully-owned subsidiary of Leighton Holdings Limited (ASX:LEI) (St. Leonards, Australia), employs more than 7,000 people.

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