A majority of the 13 Hunter Valley coal producers using Port Waratah Coal Services' export facilities at Newcastle in eastern Australia have volunteered to cut their contracted capacity for coal shipments for the rest of this year, PWCS said in a statement Thursday.
Throughput at the two PWCS terminals is currently at an annualized rate of 110 million mt and is significantly below the level of the capacity contracted to coal producers for this year, which is 142 million mt, a company spokesman said.
PWCS expects surplus export capacity at its terminals to be redistributed among its customers so that overall contract capacity stays within 142 million mt.
The cap on PWCS contract capacity puts into doubt the company's plans for a fourth coal terminal at Newcastle port, its T4 project, as in the short term, the 143 million mt/year capacity of the two existing PWCS terminals is adequate.
PWCS Chief Executive Hennie du Plooy described the export cuts as a positive outcome, as it would allow coal producers not utilizing their full export allocation to reduce their exposure to ship or pay contracts to the benefit of those requiring additional shipment capacity.
Du Plooy said coal producers expecting to rely on PWCS' T4 facility would now have access to coal shipment capacity through its existing terminals, thereby increasing certainty on access and timing.
"At a time when the industry is experiencing significant economic challenges, PWCS has also been able to reduce coal handling costs for producers by avoiding unnecessary project expenditure," he said.
PWCS will continue to seek necessary planning and environmental approvals for its T4 project, thereby fulfilling its obligation to build extra demand-led coal export capacity under the 2010 Long Term Commercial Framework agreement between the New South Wales government, the coal industry and infrastructure providers.
"Investment is triggered by [coal] producer nominations, but the framework is flexible enough to ensure plans can be adjusted according to industry conditions," du Plooy.
The T4 terminal will have an initial export capacity for 25 million mt/year of coal before rising to 70 million mt/year and will cost A$2.5 billion ($2.6 billion), but its completion has been delayed to 2018, PWCS said previously.
Coal producers using the PWCS terminals, including BHP Billiton, Rio Tinto and Xstrata, have informed the company that the reasons for the fall in demand for its coal handling services this year were three, du Plooy said.
They were lower growth in production than forecast resulting from lower export prices of thermal coal and higher production costs, a shortfall in rail system capacity relative to coal producers' contracts for terminal capacity, and increased uncertainty surrounding mine project approvals.
The voluntary reduction in export tonnages at PWCS has been under discussion since last November, with the aim of clarifying demand for PWCS' coal-handling and vessel-loading capacity.
Newcastle port's third operational coal terminal is run by the Newcastle Coal Infrastructure Group and is to complete its expansion to 66 million mt/year from 53 million mt/year by the end of this year, said one of the terminal's shareholders, Whitehaven Coal, in a statement Tuesday.
UNIONS YET TO CALL STRIKE VOTE
Separately, PWCS said Wednesday that it had yet to receive any notification from unions of pending industrial action arising from a disagreement over the company's proposed new workplace agreement.
A vote was due to be taken of union-affiliated employees at the PWCS coal shipment facilities by May 7.
"They [the unions] have not come back on the ballot date," said a spokesman for PWCS.
Unions representing operator and trade employees at the PWCS facilities had applied to Australia's Fair Work Commission in early April to hold a protected industrial action vote.
