Port CEO Warns of Uncertainty

Filed under News, Port & Shipping ~ by Press on  28 Nov 2019

Further investment uncertainty for Hunter coal industry.

Image credit ~ Port of Newcastle

Port of Newcastle CEO, Craig Carmody, warned that the Hunter coal industry faces more investment uncertainty with new appeals against the Australian Competition Tribunal’s decision regarding pricing at the Port of Newcastle.

The Tribunal last month determined the appropriate price that should apply to coal ships accessing the Port of Newcastle.

The Tribunal – which comprises a Federal Court judge and experts in industry, commerce, economics, law and public administration appointed by the Governor-General – is the review body called upon to re-consider and rule on such competition matters.

The decision, which ended a four year legal battle initiated by global mining giant Glencore, noted the importance of ensuring that prices be at a level that provides “an incentive to a service provider to efficiently (and in a timely fashion) invest in maintaining and improving infrastructure necessary to provide facilities at the Port”.

The Tribunal also expressed concern that “prices that are too low can lead to non-investment or delayed investment, or the non-provision of some infrastructure services”.

It follows the Australian Government’s announcement in September regarding the revocation of the declaration of service at the Port of Newcastle, which brought to an end a period of unnecessary uncertainty for all parties and enabled the port to deal directly with its users.

However, both the Australian Competition and Consumer Commission and Glencore each yesterday began separate but overlapping appeals in Melbourne and Sydney in the Federal Court against the competition tribunal’s decision.

Port of Newcastle CEO Craig Carmody said it was disappointing to see further uncertainty for everyone.

Port pricing should remain subject to an appropriate and efficient commercial relationship between the port and its customers,” Mr Carmody said.

The endless legal battles erode confidence in investing in infrastructure, be it at the mine or at the port, in one of Australia’s most important export industries.

We will continue to sit down with our customers to discuss our services and pricing, respecting the need for all parties to return to a normal commercial relationship.”

A significant part of the dispute is about whether the costs that Port of Newcastle Operations Pty Ltd (PNO) is allowed to recover should include the costs for dredging the shipping channel that were historically funded by various users of the port.

The ACCC excluded these user funded amounts in its original arbitration and determined an access charge of $0.61 per gross tonne as at 1 January 2018, while the Tribunal included these amounts and determined an access charge $1.01 per gross tonne. The Tribunal’s decision allows PNO to recover the user funded amounts in its access charge.  

While the Tribunal took the same approach as the ACCC on a number of issues, the ACCC is seeking review of the Tribunal’s treatment of user funding at the port,” ACCC Chair Rod Sims said.

The ACCC does not consider it to be economically efficient for a service provider to be allowed to charge any user for costs of assets that have already been funded by users.

Our appeal will focus on what we will argue are errors in the way the Tribunal has approached the principles of user funding, which could have implications for other regulatory matters.”

Background

In 2018 the ACCC arbitrated a dispute relating to Glencore’s terms of access to the Newcastle shipping channel and related services for exporting coal from the port. Both parties then applied to the Tribunal for a re-arbitration of the dispute. The Tribunal handed down its decision on 30 October 2019.

The ACCC has a role in arbitrating access disputes for services which have been ‘declared’ under Part IIIA of the Competition and Consumer Act 2010.

The shipping channel service at the port, defined as ‘the provision of the right to access and use the shipping channels (including berths next to wharves as part of the channels) at the Port, by virtue of which vessels may enter a Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct’, was declared under Part IIIA by the Tribunal on 16 June 2016.

The declaration has since been revoked, however the arbitration determination remains in force until 2031.

Additional information at National access regime under Part IIIA.



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