Smooth sailing the aim of exporting

19 Jan, 2018 04:00 AM
CBH Group's logistics customer services manager Michelle Smallman is confident port capacity will not hinder WA's grain exports this season.
CBH Group's logistics customer services manager Michelle Smallman is confident port capacity will not hinder WA's grain exports this season.

CAPACITY constraints will not hinder CBH Group’s ability to deliver the bulk of this season’s WA harvest to export destinations.

Logistics customer service manager Michelle Smallman admitted that while the prospect of handling a record 16.6 million tonnes harvest the previous season had initially caused some reservations, there were no such concerns this season.

“It simply highlights the operational difference between seasons, last year with a bumper crop we were just focussed on getting grain to port and loaded, this year it’s on being agile,” Ms Smallman said.

As an example of agility, she said CBH had recently released additional port capacity in Albany to try and facilitate that market.

While the Albany port zone had one of the State’s biggest harvests, shipping demand out of the port had been less than anticipated, so the release of extra capacity might help encourage its greater usage, she said.

CBH handles 98 per cent of bulk grains exports out of WA and more than three quarters of that is sold on a cost and freight rate – essentially a delivered price.

Its marketers and traders sell grain at prices that include a freight allocation based on an indicative freight cost and vessel availability provided by in-house shipping specialists.

Once a sale is locked in, CBH calls a tender for shipping with the aim of using competition between ship owners and brokers to keep the actual freight cost below the indicative price – the whole process usually takes two days or less to finalise shipping arrangements.

One of Ms Smallman’s main roles is to manage the shipping capacity allocations – essentially a berth booking system – at CBH’s dedicated berths at Kwinana, Geraldton, Albany and Esperance ports.

“My customers include Trevor (Lucas, head of CBH’s marketing and trading division) and his team, but also all of the other marketers that he is competing against to buy grain.

“CBH operations has at any given time a minimum of 10 export marketers using our supply chain in any given year and that can flex up or down, depending on the season.

“We’ve had up to 15 in a 12-month period in recent history and already this season we’ve got 11 on our shipping stem – 11 different marketers we’re interacting with,” she said.

In 2015 CBH signed five-year agreements with 10 of its biggest marketer customers to streamline annual allocations of shipping capacity.

“What that meant for this harvest was that before growers put seed in the ground we already had 10 million tonnes of committed shipping capacity that marketers like Trevor and his team are working to execute against before they even buy a tonne of grain,” Ms Smallman said.

As well as the long-term agreements, each July CBH offers short-term capacity allocations, or “half month slots”, that can be taken up by marketers with agreements to supplement their entitlements or by other marketers wanting to load and export grain using CBH’s network.

It is a “live market” so marketers can seek an allocation at any time through the season and the flexibility of the system generally enables them to transfer capacity between ports if required, or for a “two-port load” depending on the size of the vessel and the commodities to be loaded.

“If you look at what happened pre-harvest this year there was very little capacity allocated in Kwinana and Geraldton zones because the estimate was quite low and poor in regards to crop production in those zones,” Ms Smallman said.

“Fast forward a few months and that has balanced out.

“We take instructions from our marketer clients, they tell us exactly what their intentions are to ship, what their quality specifications are, what destination they are going to and when they are going to bring a vessel and we work with them, using our road and rail transport resources, to ensure we can get grain to port for those vessels,” Ms Smallman said.

“Essentially, harvest shipping is one of the most critical pieces for (CBH) operations.

“We want to make sure that our capacity is not a constraint if possible.

“We try not to match our capacity to the crop size because we don’t know when the marketers will want to ship it.”

The cost of having a ship waiting at anchor for grain to arrive at a port to load currently runs at about US$15,000 a day so it is something CBH wants to avoid.

In recent years it has focussed on lifting its capacity allocation from 12.5mt to 18.5mt theoretical maximum, mostly by improving the grains pipeline feeding the ports and through better planning.

That paid off last year with the system able to handle 16.6mt.

“At the moment we are just shy of 11m tonnes capacity allocated for this year,” Ms Smallman said.

“Given that the crop size is likely to be in excess of the 13m tonne mark and there is a domestic usage, you would expect more capacity to be purchased throughout the year,” she said.



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