Coal is Australia's largest export, worth around A$22.2bn in calendar year 2005 and demand is estimated to grow by 5 a year over the next five years, driven by China, India, Japan and Brazil. In anticipation of future coal trade volumes, Australia has plans to expand the capacity of its key coal terminals.

In New South Wales, where Port Waratah Coal Services Limited (PWCS) has an annual ship loading capacity of 89m tonnes in the Port of Newcastle,PWCS  has responded to a 58% increase in demand for Hunter coal over the past decade by embarking upon a continuous expansion programme. Expansion underway will mean capacity will increase to 102m tonnes.

In Queensland, projects will boost throughput at Abbot Point, Dalrymple Bay, Hay Point, R G Tanna, Barney Point and Fisherman Islands by about 55m tonnes by 2010, while there is a feasibility study underway for a terminal at Wiggins Island, with a capacity of 22m-25m tonnes rising to 60m-70m tonnes. 

State support for the ports’ plans appears to be sound. The Queensland Government-owned Ports  Corporation of Queensland (PCQ) has two of the three big coal ports – Hay Point and Abbot Point – under its auspices although Hay Point has two separate coal loading terminals, one controlled by the BHP Billiton Mitsubishi Alliance and the other the Dalrymple Bay Coal Terminal (DBCT), leased by Babcock & Brown Infrastructure (BBI).

The policy of allying expansion to demand is exemplified by PCQ chief executive Brad Fish, when talking of infrastructure development at Abbot Point.In 2005-06 the port exported 12m tonnes of coal but expansion work at a cost of A$116m will boost capacity to 21m tonnes.

However a quantum leap to more than double Abbot Point’s capacity to 50m tonnes a year will only go ahead if exporters put pen to paper. “PCQ has a policy of having user commitments in place before providing infrastructure,” says Mr Fish. “PCQ makes its decisions on the basis of analysis of the commodity trade projections by the major industry analysts.As we have contracts in place with users prior to committing to expansions, risks are generally not held by PCQ.”

Expansion of Hay Point’s DBCT from the current 59m tonnes a year to 85m tonnes a year is underway in two phases. However, DBCT’s expansion is also allied to a policy of ensuring it has the commitments from users. Babcock & Brown Infrastructure’s general manager operations Greg Smith says existing and new access seekers have signed expansion contracts for the full 85m tonnes a year on full take-or-pay terms for periods of ten years or more. BBI therefore does not carry volume risk and consequently has no concerns about future trade patterns,protectionism, tariff barriers and so on.

As for the future, Mr Smith comments: “Should the industry require further expansion and they are prepared to sign take-or-pay contracts, then BBI and the other supply chain participants would consider the feasibility of expanding the terminal/chain.” Next door to DBCT, Hay Point Coal Terminal, owned and operated by BMA under the name of Hay Point Services,moves around 35m tonnes of coal each year and features the world’s first automated 3D stockpile quality modelling solution. Sam Bonanno, vice president operations ports and business improvement, says that the terminal is undergoing a major expansion in two phases which will upgrade capacity to around 44m tonnes in mid 2007.

Optimism for future prospects is shared by Queensland Resources Council chief executive Michael Roche, who says the coal market trend seems to be towards reductions in protectionism. Mr Roche says that generally speaking,Government support for export coal terminals has been adequate but adds that: “The privatisation of DBCT, which precluded users from ownership, has produced some unexpected side effects. The regulatory process of price-setting for DBCT was an unprecedented task and the complexity of the process has frustrated some of the industry's expansion aspirations.

“Port expansions are such major large-scale projects that they represent a new source of management risk for a port. Governments need to remain focused on ensuring that sufficient expertise is made available to manage these projects so they are delivered on time, on budget and on schedule.” Nonetheless, Mr Roche sees Australia as wellpositioned to supply the industrialisation of China and India despite strategic new regional competition from Indonesia.

“The challenge to Queensland coal ports is to integrate their planning and scheduling with other logistics suppliers - particularly across the interfaces of different supply chain components.This whole-of-chain approach appears to offer real prospects for delivering maximised coal throughput in an environment of reliable transport, diminishing the surprises which case unplanned costs such as demurrage.”