$1bn rail logjam hits exports

THE bottleneck at one of Australia's biggest coal ports is costing mining companies more than $1 billion a year, threatening hundreds of jobs in the industry and risking the future of exports to key Asian customers.

THE bottleneck at one of Australia's biggest coal ports is costing mining companies more than $1 billion a year, threatening hundreds of jobs in the industry and risking the future of exports to key Asian customers.

As more than 50 ships wait off Queensland's Dalrymple Bay port to load coal, furious coal producers are blaming "sheer incompetence" by the state-owned railway for the backlog.

Confidential correspondence and briefing papers obtained by The Weekend Australian reveal that the failure of Queensland Rail to come close to meeting its pledges on the transport of coal to Dalrymple Bay, south of Mackay, is shrinking benefits from the mining boom.

The Australian revealed last month that more than 150 ships were anchored off the east coast -- most of them at Newcastle, north of Sydney, and Dalrymple Bay -- waiting to load coal.

But documents, including a crisis paper from Australia's leading coalmining companies, reveal that QRNational, rather than helping clear the Queensland bottleneck, is going backwards in the amount of coal being delivered to key ports.

This is leading to soaring costs, missed revenue for mine companies and looming lay-offs.

The paper -- prepared by Xstrata Coal executive Stephen Bridger on behalf of about eight top coal producers and sent to QR's acting chief executive, Stephen Cantwell -- sets out Queensland's falling performance. It warns that the coal chain in central Queensland "is currently in a crisis which has the potential to cost the Queensland coal economy over $1 billion in revenue and additional costs in 2007 alone".

It describes the "poor performance" as being of extreme concern, and blames most of the shortcomings on "QR causes" arising from locomotive faults and cancellation of trains due to a lack of crews. "The multiplier effect of this situation on the overall Queensland economy is difficult to estimate, but it is undoubtedly substantial," it says.

The documents and investigations by The Weekend Australian show the inability of QRNational, QR's freight arm, to consistently provide manpower, locomotives and wagons is largely responsible for the backlog.

The crisis paper calls for service providers and customers to evolve "from no accountability to setting and delivering stretch targets", and from "indecisive committees to real leadership at all levels".

Despite the most lucrative mining boom in Australia's history, the volume of coal being taken to the ports in central Queensland has fallen.

The volume of coal likely to be moved this year is about 15 per cent less than the figure coal producers were given in November, when they began negotiating with overseas buyers.

Coal producers revealed yesterday that Asian buyers of coal were angry that their orders were not being met, and some were threatening to source the commodity elsewhere.

Royalties from coal are also projected to pour $1.5 billion a year into Queensland's coffers, meaning that inefficiencies have a direct impact on funds for public services.

Deputy Premier Anna Bligh said last night she was setting up an urgent process with the Queensland Resources Council and an independent umpire to investigate the capacity problems and find a solution.

"I'm not denying there is a problem and it has to be fixed by the parties sitting around the table and knocking heads together," she said. "The long-term interest of the state and the nation is more important than this squabble over who caused what. There are entrenched difficulties that need to be resolved."

Coal is the biggest export earner in Australia, and Queensland is the world's largest exporter. Its deposits generated overseas sales revenue of about $18billion last financial year.

QR is a government-owned corporation with a coal division boasting more than 470 services a week to more than 32 coalmines in Queensland, and "an uninterrupted coal supply chain that enables the Australian coal industry to compete successfully with international competitors".

But more than 50 ships currently queued off Mackay, on the Queensland central coast, are racking up huge demurrage costs while waiting to be loaded with coal from the Dalrymple Bay Coal Terminal.

The terminal, which is supplied with coal by QRNational, had only 220,000 tonnes of coal available for loading -- enough to load just two of the 50-plus ships. Demurrage charges for each ship run to tens of thousands of dollars a day.

The costs to coal producers and the economy will rise because QRNational is forecast to transport less coal to Dalrymple Bay this year than it moved in 2005, according to coal producers. Several coal producers are warning there will be layoffs of hundreds of jobs in Queensland's Bowen Basin because of the inability of QRNational to move their coal.

Coal producers fear that speaking out will lead to retribution, such as the withholding of mining leases, but one producer said the problems demanded top-level attention.

"We are constantly hearing this garbage about the boom in commodities exports, but in fact there is not a single kilogram more of coal going out -- in fact, it's less than two years ago," he said. "Our business and others are being systematically damaged by the lack of performance of the monopoly service provider. The people who are supposed to take our product and put it on ships are bungling incompetents, and they are going to be responsible for lost jobs."

QR's Mr Cantwell said last night he was well aware that coal producers were frustrated and concerned about the hold-ups, "and we are doing everything we can to ensure that our assets are delivering as much as they can".

"We are the first to acknowledge issues with the ability of the rail system to cope and we are absolutely conscious of the challenges that we face," he said.

Newcastle faces similar issues, with mining giant Rio Tinto announcing earlier this month that it would cut 250 jobs at its Hunter Valley subsidiary Coal & Allied because of rail and port blockages at the port.