CBH sets new grain freight benchmark

With Brookfield Rail's co-operation, CBH and train operator Watco Australia moved record tonnes of grain to ports last month.

A new December record of 831,000 tonnes of grain by rail to port was set.

It is part of an ongoing strategy aimed at increasing shipping capacity from CBH's grain terminal ports at Geraldton, Kwinana, Albany and Esperance.

The early work to increase shipping capacity complements CBH's $750 million, five-year network strategy aimed at optimising grain storage and handling.

The Mirambeena receival site at Albany and expansion to one million tonnes receival capacity of the Chadwick site, Esperance, are visible examples.

Expansion of accumulation capacity close to port to minimise loading delays and cut vessel turnaround times at berth is part of a suite of initiatives CBH is looking at to remove constrictions from its paddock-to-port grain path.

Less obvious initiatives include long-term agreements (LTAs) with 10 major other grain exporters who use its storage and handling facilities, and this season's Direct-to-Vessel delivery initiative.

The five-year LTAs, introduced in 2015, provide CBH and its customers with some certainty year to year on volumes through port and timing.

CBH allocated capacity at each port to commercial LTA customers, including its own marketing and trading division.

The difference between capacity allocated and each port's notional maximum capacity is then released by CBH as "spare" capacity available on a first-come, first-served basis.

According to CBH logistics manager Ben Raisbeck, in 2015-16 CBH allocated 10.186 million tonnes under LTAs and released 16.4mt of capacity - effectively 6mt of spare capacity network wide.

For 2016-17 it released 18.7mt, an increase of 2.3mt across the four ports, Mr Raisbeck said.

Direct-to-Vessel also aimed to reduce accumulation delays, he said, with growers delivering to port within 14 days of a ship arriving and nominating grain to a participating exporter to obtain the rebate.

Mr Raisbeck said Direct-to-Vessel had been "taken up quite well in its first year" at Geraldton, Albany and Esperance and more than 300 growers this harvest had delivered 192,000 tonnes direct to vessel.

Gaining extra capacity by fine tuning at Esperance is particularly important.

It is one of only three grain ports nationwide where potential demand for a berth and ship loader during the January-June peak shipping period in 2015-16 notionally exceeded available capacity.

Australian grain ports generally have adequate "spare" capacity, even in peak periods, apart from CBH's berth 1 at Esperance, and Viterra-operated Port Lincoln and Bulk and Automotive Port Services-operated Adelaide Outer Harbour in South Australia. The Australian Competition and Consumer Commission (ACCC) is watching ports operation.

It administers the Port Terminal Access (Bulk Wheat) Code of Conduct, which came into effect in September 2014, and exemptions from parts of the code granted to port terminal service providers (PTSPs) in 2015.

The code and exemptions govern how vertically integrated PTSPs like CBH service customers, who might be competing grain accumulators and exporters vying to supply the same markets, in relation to making port capacity available.

Last month the ACCC released its first Bulk Wheat Ports Monitoring Report on wheat port operations in 2015-16 and indicated it would continue releasing annual monitoring reports.

It approved of the way CBH and other PTSPs operated grain ports, but noted 2015-16 "was not a particularly high production or export year" - it was CBH's fourth largest harvest.

The ACCC said it was "reserving judgement" until after a bumper year.

It stated operation of ports with limited peak-period spare capacity would be particularly scrutinised.

"Where demand for port terminal services exceeds supply (i.e. capacity is constrained), PTSPs not subject to sufficient competitive constraint may have the incentive and ability to charge monopoly prices, and vertically integrated PTSPs may also have incentives to favour their own exporting business and exclude others," the ACCC stated.

"In a high production year, increased demand for port terminal capacity will mean that the competitive constraint on the port terminal operators is reduced.

"On the other hand, where demand for port terminal services is below supply, a PTSP will have some level of incentive to provide access on fair commercial terms, to drive utilisation of its infrastructure.

"The ACCC considers that, broadly speaking, the greater the level of spare capacity, the greater the incentive for a Port Terminal Service Provider to provide access on fair terms," it stated.

CBH's planning to improve capacity at Esperance and other ports - berths are leased from ports authorities but CBH owns the ship loaders and storage infrastructure -started many years before the ACCC began monitoring, Mr Raisbeck said.