ACCC: Port of Newcastle Should Reduce Charge for Glencore

Port of Newcastle Operations (PNO) should reduce its current charge for ships entering the port to carry Glencore Coal Assets Australia’s coal, the Australian Competition & Consumer Commission (ACCC) has determined. 

The charge should be decreased by around 20 percent to AUD 0.61 per gross ton (GT), the ACCC said after it finalized its arbitration of a dispute between Glencore and PNO about terms and conditions for accessing the ‘declared’ shipping channel service at the Port of Newcastle.

The port provides the only commercially viable means of exporting coal from the Hunter Valley region in New South Wales.

In January 2015, PNO increased the charge for coal ships entering the port by around 40 percent to AUD 0.69 per GT.

In November 2016, Glencore notified the ACCC of a dispute with PNO about the price increase and requested the ACCC to arbitrate. Since then, PNO has increased the charge to its current 2018 price of AUD 0.76 per GT.

“In the course of the arbitration, PNO submitted to the ACCC that the 2018 charge for coal ships entering the port should be increased to AUD 1.36 per GT,” the ACCC said. *

In contrast, Glencore submitted the charge should be reduced to AUD 0.41 per GT.

As explained, the main task for the ACCC was establishing the value of assets used to provide the ‘declared’ shipping channel service. Charges for ships entering the port were then derived from this valuation.

A key part of the dispute was whether PNO should be able to charge for dredging of the shipping channel that had been undertaken or funded by users of the port. The ACCC excluded these user funded amounts from the costs that PNO could recover and determined Glencore should pay a lower price, backdated to 2016.

“PNO proposed large increases to the current price, but the ACCC found that a reduction in the price for using the shipping channel was appropriate,” ACCC Commissioner Cristina Cifuentes said.

“The ACCC also determined appropriate mechanisms for future price changes, and decided on certain non-price terms and conditions of access where the parties had been unable to reach an agreement,” Cifuentes added.

The ACCC’s arbitrated terms and conditions of access are operative until the ‘declaration’ of the shipping channel service at the port expires on July 7, 2031.

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 (Cth). 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 Australian Competition Tribunal on June 16, 2016.

Update:

* As a response to the ACCC’s statement, PON has released a comment claiming that it has never sought “to increase prices to AUD 1.36 per ton or anywhere near that amount.” According to PON, all parties involved in the dispute are aware that the AUD 1.36 per ton is a theoretical maximum number that could be charged if calculated using the regulator’s own “building block model” pricing methodology.

Separately, the ACCC said in an update: “The AUD 1.3643 results from PNO’s submitted inputs to the pricing model that the parties agreed to use for the purposes of this arbitration. If the ACCC had accepted PNO’s submissions in full, then the AUD 1.3643 would have been the price determined by the ACCC. In this event, PNO would have been entitled to charge Glencore any amount up to this figure.”

PON has confirmed that the 2018 navigation service charge remains AUD 0.76 per gross ton.

The article has been amended since its initial publishing with updated information on the port prices.