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Newcastle’s coal port price hike under scrutiny

Mining conglomerate Glencore Coal is unlikely to win its appeal to undo a 60% price hike in the world's biggest coal export port of Newcastle, Australia.

The new port owners, a consortium of Hastings Funds Management and Chinese conglomerate China Merchants, upped shipping charges after the AUD1.75 billion (USD 1.29 billion) privatisation last year.

"As the increase is calculated by gross tonnage, many coal ships that typically carry large loads up to 110,000 tonnes would incur a charge of up to AUD75, 000 per vessel," Glencore said in its submission to the National Competition Council.

As coal prices plummet, Glencore, backed by Shipping Australia (SAL) representing international shipping out of the port, took the matter to the council. Both Glencore and SAL argued that vessels should have right of access to shipping channels to the port. Prices should be regulated by the competition watchdog.

The council however, in a draft decision has ruled against Glencore. While further submissions are invited before 31 August, SAL, for one, will not be taking the matter further.

"Glencore have made a further submission," SAL CEO Rod Nairn told IHS Maritime. "However, as far as we are concerned it's all over. That's one battle lost."

In his submission to the council, Nairn estimated the increase in the navigation service charge would provide a conservative estimated yearly financial windfall of more than AUD22 million to the port of Newcastle.

"This cannot be justified against any increased cost base and seems to be clear evidence of price gouging by the new private operator," he said.

Ports Australia, however, argued the increase was a one-off event, addressing a 20-year decline. It was necessary "to reflect a commercial return on this important asset and its upkeep".

Ports Australia CEO David Anderson argued the charges were needed as the port "requires constant maintenance dredging to keep the channel and berth pockets at safe and specified depths".

Coal exports out of Newcastle had increased from about 100 million tonnes in 2005 to about 160 million tonnes in 2015, he submitted. According to forecasts, exports would probably continue to experience a medium-term growth rate of approximately 3%.

The price of channel services represented 1% of free on-board costs.

"The application by Glencore has all the hallmarks of a price dispute that does not, in our view, warrant a heavy-handed approach constituting an expensive overlay of regulation," he argued.

source: http://www.ihsmaritime360.com