THE Australian Competition and Consumer Commission will be able to intervene in pricing disputes between the Port of Newcastle and mining interests after the Federal Court on Wednesday ruled against the port in a dispute launched by Glencore in 2015.
The decision is a major blow to the port – owned by Hastings Funds Management and China Merchants Group - which increased the price charged to coal ships entering and leaving the port by up to 60 per cent after acquiring a 98-year lease from the state in 2014 for $1.75 billion.
But it is in line with the view of ACCC chairman Rod Sims, who has previously argued opening the port’s services to ACCC arbitration would allow it to balance the interests of the port and mining interests. He also described the sale of Newcastle and other NSW ports as examples of badly structured public asset sales.
Glencore unsuccessfully appealed to the National Competition Council in 2015 to “declare” access to Port of Newcastle shipping channels, arguing prices had been substantially increased without any improvement in the quality of service provided, or significant consultation with port users.
Acting Federal Treasurer Mathias Cormann accepted the council’s recommendation not to “declare” the service, and Glencore appealed to the Australian Competition Tribunal in early 2016.
In June, 2016 the tribunal ruled in Glencore’s favour, after evidence from groups including the NSW Minerals Council, which argued the coal industry was facing “fragile market conditions” following more than a 30 per cent drop in coal prices over the previous two years, causing coal producers to re-evaluate their operations.
The tribunal heard the terms of the lease gave the Port of Newcastle the express entitlement to exclude access to the port’s shipping channels if shipping charges were not paid, with no structure in place to “manage” the prices set by the monopoly owner.
While the NSW Independent Pricing and Regulatory Tribunal had some jurisdiction to investigate the port’s pricing, the Australian Competition Tribunal noted “It is common ground that the IPART regime is not a certified or effective access regime.”
The Port of Newcastle appealed after the tribunal found it was a natural monopoly which exerted monopoly power, and there was no practical and realistic commercial alternative for users in the coal export market.
Glencore was joined by the ACCC in the Federal Court hearing.
The port on Wednesday expressed its disappointment after the Federal Court ruled against it and found its role was not to review the decision but determine if it accorded with the law.
Port of Newcastle chief executive officer Geoff Crowe said the decision could have “wide-ranging implications for the profitability and value of nationally significant assets” and warned there could be “unintended consequences” for other infrastructure providers.
The port would “continue to engage proactively with its customers and the ACCC on this matter” because it had a “commercial imperative to maximise trade volumes through the port and ensure continued access for customers”.
It argued that while the consumer price index rose 70 per cent over the 20 years prior to the privatisation, port usage charges for coal ships increased by only 1.2 per cent.
The Newcastle Coal Infrastructure Group told the tribunal it had paid “very significant sums to the State of NSW for dredging the channels”.