With excess demand and a highly visible queue of ships off the Newscastle coast, the capacity of
the world’s largest coal chain operation is under fire. The Hunter Valley Coal Chain Logistics Team (HVCCLT) is on the job.
The first of its kind in Australia, the HVCCLT plans all the region’s coal industry exports. Initially created in 2003 as a trial between Pacific National (PN) and Port Waratah Coal Services (PWCS), the Logistics Team was set up as a response to increasing demand from the industry to improve capacity.
HVCCLT general manager Anthony Pit tells Logistics magazine that from inception, the collaborative HVCCLT model was expected to deliver significant capacity by running coal chain operations as a system rather than a series of component parts, as the practice had previously been.
Pitt, a speaker at the recent IQPC Performance Based Logistics Conference, is proud of the results. “Both our short term goal of increasing throughput and the longer term objective of providing investment planning advice to the industry have been realised,” he says.
About 90 per cent of the Logistics Team’s resources are put towards improving system capacity. “We’ve seen a spectacular 20 per cent increase in productivity from existing infrastructure,” Pitt says. “The vast bulk of that benefit is generated by unlocking latent capacity through greater coordination of things like maintenance
programs on the track and at PWCS.”
In terms of the longer term initiative, our advisory service directly contributes to the efficiency of members’ capital expenditure,” Pitt enthuses. “Members are modifying and even adding new infrastructure initiatives in the knowledge that those changes are in the interests of the coal chain as a whole. We’ve also helped prevent investment in infrastructure that might otherwise be under-utilised.”
On a handshake, PWCS and PN agreed to colocate their planning teams to enable more effective communication and the generation of new ideas about how to increase system capacity. Joined by ARTC, the trial was expanded and formalised in 2005 as a joint venture with stated objectives and governance.
HVCCLT members now include PN and QRNational as the train operators, Australia Rail Track Corporation and Rail Infrastructure Corporation as the track owners, PWCS as the operator of cargo assembly and ship loading services and Newcastle Port Corporation who manage vessel movements.
The functioning of the HVCCLT system completely relies on the participation of members, however, as Anthony Pitt explains, the truly cooperative model doesn’t legally compel any of the group to cooperate in daily planning, or to comply with associated instructions.
I won’t say that it’s been without its challenges,” Pitt admits, “But everyone quickly came to the conclusion that it was the only sensible way to operate the coal chain. The profit generated from this approach to planning was immediate.”
Despite strong pressure on member organisations resulting from bullish growth forecasts from the industry, Anthony Pitt is confident the collaborative HVCCLT model will prevail.
“In the current market place, where the demand for coal out of Newcastle is exceptionally high, the need for more capacity certainly creates an environment with the potential for tensions and competition,” he says. “But I think the success of the model has been the glue that’s kept the team together, and will lead to greater cooperation into the future.”
“There’s a high level of common sense and maturity across participating organisations within the HVCCLT,” Pitt says. “Members acknowledge that they can’t afford to allow this cooperative planning model to be compromised, because the cost of it falling apart would be catastrophic to the industry.”
Anthony Pitt says current infrastructure initiatives have the potential to create capacity approaching the more optimistic forecasts from producers, suggesting in some cases, the need for up to 170 million tonnes of capacity by 2012.
“There are a few steps that need to take place between now and any final investment decisions,” he says. “However, $700-800 million of new infrastructure will be delivered in the course of this year, which will increase system capacity towards 100 million tonnes of throughput for 2008. Beyond that, PWCS has announced
a half a billion dollar upgrade to take port capacity to in excess of 110 million tonnes and the new Newcastle Coal Infrastructure Group (NCIG) terminal is targeting about a 30 million tonne capacity by 2010.”
“The challenges for the HVCCLT moving forward are now in the detail and refinement,” Pitt says. “Our biggest uncertainty is around how to operate the model given any new or potentially competing terminals alongside PWCS, such as the NCIG development although that’s several years away from operation.”
“We have an outstanding invitation to NCIG to participate and we’ve already had constructive dialogue with them,” Pitt adds. “I think it’s very important that we commence the planning process arising from possible changes to the model early, to ensure we ultimately get the best outcome for the coal export industry.”