Newcastle Coal Exports Constrained by 'Weakest Link' Trains, Goldman Says

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30 Jun 2010

Coal shipments from Australia’s Newcastle, the world’s biggest export harbor for the fuel used in power stations, are limited by the capacity of trains to carry the product to port, Goldman Sachs JBWere Pty said. Trains on the network will be capable of transporting 123 million metric tons a year in 2012, compared with the 133 million-ton export capability of two terminals operated by Port Waratah Coal Services, Goldman Sachs said in a note dated June 28. Capacity on the rail line will be 145 million tons.
“The coal chain is restricted by its weakest link and currently trains are proving to be the constraint,” Goldman Sachs analysts led by Melbourne-based Neil Goodwill said. “Unless expansions to capacity of the rail and trains are able to keep pace, the additional port capacity will not be of use.”
Newcastle Coal Infrastructure Group, partly owned by BHP Billiton Ltd., shipped its first cargo from the Australian port in March after spending more than A$1 billion ($870 million) on a third terminal at the harbor. Its export capacity is expected to rise to 30 million tons in 2011.
Rio Tinto Group, Xstrata Plc and Peabody Energy Corp are among mining companies that ship the fuel from Newcastle. The volume exported in the week ended 7 a.m. local time June 21 climbed to 2.04 million metric tons from 1.66 million tons in the preceding period, Newcastle Port Corp. said on its website.

Source: Bloomberg