EXPORTS FROM KEY AUSTRALIA PORT WILL BE CUT 15 PERCENT

EXPORTS FROM KEY AUSTRALIA PORT WILL BE CUT 15 PERCENT

Srong Asian demand for Australian thermal coal has left the world's largest coal export facility straining to keep up, leading producers to temporarily limit exports from the Port of Newcastle.

For three months starting Feb. 1, coal producers have agreed to limit shipments through the port to 85 percent of forecast exports. The plan should cut coal exports through the port by 1 million to 2 million metric tons, supply that may eventually be sourced through South Africa, Indonesia, China or the U.S. West Coast, industry executives say.

'PUSHED TO THE LIMIT'

Newcastle handles roughly half of Australia's overall coal exports, and about 75 percent of its thermal coal exports. In early September, loading backups led to a queue of 44 ships off the New South Wales port, about 70 miles north of Sydney. The queue has since fallen to about 20, a number that should stabilize under the temporary shipping restrictions, said Rob Yeates, an Australian coal industry consultant and former managing director of Oakbridge Pty. Ltd., a major coal producer in the nearby Hunter Valley.

''Newcastle is just being pushed to the limit,'' he said. Pressure on the port will ease when a third coal loading berth begins operations in September, while upgrades and expansions also are planned to rail networks bringing coal from the Hunter Valley.

Taken together, the improvements should help raise coal shipments through the port to around 66 million metric tons in 1998, from 61.6 million metric tons in 1997, Mr. Yeates said.

THERMAL COAL IN DEMAND

Demand for Hunter Valley coal has been particularly strong recently, in line with increasing worldwide export demand, particularly for thermal coal. Australia's thermal coal is popular as a fuel source for power stations in Asia, he said.

In December, Mr. Yeates chaired a special committee of Hunter Valley producers to deal with the export bottleneck at Newcastle. Under a ''capacity allocation plan'' drawn up by the committee, Hunter Valley's 19 coking and thermal coal producers each agreed to limit shipments to 85 percent of forecast production during the three-month period beginning Feb. 1, with the plan to be reviewed monthly for as long as needed.

REDUCE DEMURRAGE FEES

One benefit will be to reduce demurrage fees levied on coal producers for ships not loaded within three days of arrival at the port, Mr. Yeates said. Such fees, a standard feature of contracts between Hunter Valley coal producers and shippers, have amounted to US$3 per metric ton and higher in recent months, further reducing producers' already low margins, Mr. Yeates said.

INCREASE DOUBLES FORECAST

The fees resulted from strong demand that surprised just about everyone, Mr. Yeates and others agree. In 1997, the 14 percent increase in coal exports through Newcastle was roughly double the 7 percent-8 percent increase that had been forecast, according to Neill Bencke, manager of customer services for Port Waratah Coal Services, which operates Newcastle's coal loading facility. All told, 1997 demand for coal through Newcastle probably amounted to about 64 million metric tons which, compared with the 61.6 million metric tons shipped, resulted in roughly 2.4 million metric tons of ''queueing'' during the year, he said.

While the port has a nominal capacity of 66 million metric tons, it clearly struggled with throughput below that, Mr. Bencke said. By September, when the new coal berth comes on line, Port Waratah's coal-loading capacity should rise about 9 million metric tons to 75 million tons, he said.

PREPARED TO IMPROVE

For its part, Rail Access Corp., which operates the Hunter Valley's rail network for coal transport, says it's prepared to spend up to US$13 million to upgrade various sequencing and signaling devices and to make other improvements, allowing it to carry up to 90 million metric tons per year from the Hunter Valley to the port.

However, those improvements have yet to be approved by Rail Access Corp.'s board, which wants assurances the extra capacity will be used, company officials said. The board is expected to decide which improvements to fund at its March board meeting, with the improvements expected to be operational by year-end.

For producers in the Hunter Valley, Newcastle's problems are, at their heart, good news. ''There is tremendous demand for our coal,'' said Bob Humphris, managing director of Peabody Resources Ltd., an Australian subsidiary of the British-listed company Energy Group PLC. 'It's just that this sudden, tremendous increase in uplift has caught us a bit short.''