Lies, damned lies and newspaper reports: investigating coal shipments through the port of Newcastle

Abstract

Australia's reputation for the quality of its coal has led to this commodity becoming a major input to the country's economy. About 88 million tonnes out of Australia's annual port capacity of 270 million tonnes of coal are shipped through the Port of Newcastle, which claims to be the world's largest coal handling port. However, capacity constraints at various parts of the supply chain threaten export shipments of coal. In the past demand for coal has been regular and constant. However, recent rapid increases in demand, attributed mainly to an increasing Chinese market, have pushed the existing system beyond its capacity. An outcome of the inability of the coal supply chain to meet demand has been the increasing number of vessels waiting to enter the port. In 2002, the number of vessels anchored off the port often exceeded 50 daily. In an attempt to reduce vessel waiting time, and the burgeoning cost of demurrage, a vessel priority system for loading was introduced. The system appeared to be effective, with the daily number of vessels anchored off the port reducing to single figures. However, in 2007 the number of vessels awaiting entry to the port has again risen to more than 50 on most days, leading to cuts in export quotas [1]. Exacerbating the situation are orders for coal totaling 120 million tonnes for shipment in 2008. This ongoing research, initially based on newspaper reports and ACCC documents, is a qualitative exploratory case study that investigates the issues affecting the transportation, loading and shipment of coal through the Port of Newcastle, Australia. The research aims to identify why so many ships are waiting to load coal, and how the length of the queue may be reduced. However, reports widely circulated do not accurately reflect the situation at the Port. Following unstructured, formal interviews involving several key people in the coal supply chain a different story has emerged.