Hunter Valley Coal Chain - Capacity Distribution Systems

Capacity Distribution Systems

While productivity in supply chains is an issue for industries of all sizes, few industries have to deal with a network as broad and a demand as pressing as the coal industry.

As at December 2012 Coal accounted for 18% of Australia's exports. But while Australia has an abundance of coal and a ravenous world market, particularly in Asia (especially China, with its expanding need for coal in the steel industry), willing to devour it is disadvantaged by the distance that must be overcome to get the product to the market and the huge number of players involved.

It is for this reason that the supply chain must run as smoothly as possible, moving the raw product from the mines, to the port and onto the ships no easy task. In 2011 Australia exported 281 million tonnes of coal and moved 97% of this by rail.

But over the last five years, getting the coal to these ports, onto the ships and to the market proved to be a difficult operation as the Chinese and other Asian markets demand soared. Freight bottlenecks rapidly developed, primarily at the Dalrymple Bay Coal Terminal and at Newcastle's Port Waratah.

To cope with these bottlenecks, the terminal operators developed capacity management systems to cope with the volumes.

The two hubs developed independent yet similar systems to cope with the problem of how to reduce queues, with Port Waratah using a Capacity Balancing System and Dalrymple Bay a Queue Management System.

The Port Waratah model allocates production from the mines to available shipping in a way that maximises the capacity of the terminal.

Since August 2003, there has been evidence that the Hunter Valley coal export infrastructure has been stretched and that some coal export growth might have been lost as a result of constraints in the system. In response to this situation, Port Waratah Coal Services (manager of the Kooragang coal terminal (located on Kooragang Island and Carrington coal terminals at the Newcastle Port) applied to the Australian Competition and Consumer Commission to implement a short term capacity distribution system to allocate the current capacity of the coal supply chain to existing coal exporters. This scheme was implemented in June 2004 and interim authorisation to continue a modified version of the scheme until December 2007 – called the medium term capacity distribution system – has been granted by the ACCC.