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Competition tribunal flips ACCC ruling on Newcastle port shipping charges

Thursday, 31 October 2019 | 01:00

A review tribunal has ruled Port of Newcastle can charge coal giant Glencore 65 per cent more than the price set by the Australian Competition and Consumer Commission last year.

The Australian Competition Tribunal announced on Wednesday that the private port operator can charge Glencore $1.0058 per gross tonne in navigation service fees, up from $0.7809.

The decision sets a price point for coal ships which is more than double what the port was charging before it was privatised in 2014.
It follows the tribunal’s review of an ACCC ruling in 2018 that the port should cut the fees it charges Glencore by 20 per cent to $0.6075.

Glencore is the biggest exporter of coal from Newcastle, and the navigation service charges are the port’s main source of revenue.
The tribunal ruling, which does not apply to other coal companies using the shipping channel, covers the port and Glencore until 2031.

“It is important (as one aspect to consider) that the price and terms of access should provide an incentive to a service provider to efficiently (and in a timely fashion) invest in maintaining and improving infrastructure necessary to provide facilities at the Port,” the tribunal said in its decision.

“Prices that are too low can lead to non-investment or delayed investment, or the non-provision of some infrastructure services.”
Port of Newcastle welcomed the tribunal decision, which represents its second big win in a month after Treasurer Josh Frydenberg sanctioned the port’s deregulation in September.
“We have long said that port pricing should remain subject to an appropriate and efficient commercial relationship between the port and its customers,” chief executive officer Craig Carmody said.

“Following on from the Australian government’s announcement in September regarding the revocation of the declaration of service at the Port of Newcastle, a period of unnecessary uncertainty for all parties has hopefully now been concluded.
“We look forward to sitting down with all our customers to discuss our services and pricing as part of a return to a normal commercial relationship.”

The ACCC said it was “currently considering its options”, raising the prospect of a legal challenge.

“The ACCC is very disappointed with this result. In particular, the ACCC believes that, if users have funded an asset, they should not be forced to pay for it again,” a spokesperson said.

“Port of Newcastle has a monopoly over the shipping of coal from the Hunter Valley, and this decision enables the Port to charge more than the ACCC considers efficient.”

In a separate but related case, Glencore mounted a campaign, approved by the Australian Competition Tribunal and endorsed by the Federal Court in 2016, to reinstate regulation at the port.

The campaign followed Port of Newcastle raising access charges by between 40 and 60 per cent soon after taking over the port in 2014.
The ACCC resumed arbitrating pricing disputes between the port operator and its users, including a 2016 application by Glencore that the port’s fees were “unreasonable” and should return to pre-privatisation levels.

Glencore’s move to seek a decision on pricing during a window of opportunity when the port was regulated has now resulted in substantially higher charges.

Port of Newcastle appealed successfully to the National Competition Council to overturn the port’s regulation. Mr Frydenberg endorsed this outcome by not intervening within the statutory 60-day time limit.

ACCC boss Rod Sims last month attacked the Treasurer and the NCC for deregulating the port, arguing it was “bad for the economy when bottleneck infrastructure, at the end of a crucial value chain, is in the hands of a company with unfettered market power”.
A port charge of just over $1 per tonne amounts to about 1 per cent of the current price of thermal coal.

The NCC said when determining the port should be deregulated that “charges at the Port are likely to remain a small proportion of international spot prices for coal”.

It also found the port operator would self-regulate price increases to avoid “chilling” future investment in the mining industry.
Glencore declined to comment about the latest price ruling.

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Source: Newcastle Herald

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