Rail Express Issue 2 - 2017 Freight Rail Supplement by Prime Creative Media

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Victoria launches rail shuttle program Trains return to Main North Line after Kaikoura

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Aurizon to exit intermodal CBH happy with new locos

ARA COLUMN

AUSTRALASIAN RAILWAY ASSOCIATION

People, Productivity and Product Key Themes of ARA Rail Freight Conference A who's who of the Australian rail freight industry converged in Sydney in August, for the Australian Railway Association's inaugural, two-day Rail Freight Conference, ARA boss Danny Broad writes. HE CONFERENCE, which brought together elements of ARA’s previous ‘AusIntermodal’ and ‘Heavy Haul’ conferences was timely, given the amount of activity underway in our industry. The Inland Rail project, port connectivity, infrastructure funding and financing and the National Freight and Supply Chain Strategy are all hot topics in the Australian rail industry, and so there was no shortage of issues on the table for discussion. Our excellent presenters on the start of day one including Phil Davies from Infrastructure Australia, Marion Terril from the Grattan Institute and Adrian Hart from BIS Oxford Economics provided a ‘big picture’ overview of the rail freight industry. One of the key themes emerging from these opening presentations was that there are significant funds committed to rail freight (or planned to be committed) but there are challenges industry and government must address to maximise the benefits of these investments, from a regulatory, planning and governance perspective. A prime example of these investments is the Inland Rail project, which was the subject of a presentation from ARTC’s Peter Winder as well as a panel session on day two. This project is now full steam ahead following the 2017-18 Federal Budget in which the Australian Government committed $8.4 billion, through the form of an equity investment, to the Australian Rail Track Corporation. A range of presenters over the conference, including rail operators, customers and regional councils, highlighted how Inland Rail has the potential to transform the Australian rail freight industry by providing a reliable, efficient and safe transport option between Melbourne and Brisbane, with efficient links to Sydney and to the west.

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This message was reinforced by our two political representatives – The Hon. Paul Fletcher MP, Minister for Urban Infrastructure (stepping in for the Hon. Darren Chester MP, Minister for Infrastructure and Transport whose plane was delayed due to strong winds) and the Hon. Anthony Albanese MP, Shadow Minister for Infrastructure, Transport, Cities and Regional Development. ARA welcomes the strong level of bipartisan support for this nationally significant infrastructure project. Port connectivity was also a major topic of discussion, underlined by presentations from Maurice James, Managing Director of Qube and Marika Calfas, Chief Executive of NSW Ports. Both Marika and Maurice also sit on the expert panel for the Government’s inquiry into National Freight and Supply Chain Priorities. I look forward to rail freight connectivity featuring prominently in the Commonwealth Government’s Strategy, on which the ARA has provided a comprehensive summary. Heavy Haul was the focus of day two of the conference, with presenters from BHP Billiton and Adani, among others, highlighting the significant amount of activity and opportunities on the horizon in movement of both coal and iron ore.

Image: www.RailGallery.com.au

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DANNY BROAD

I was fortunate to witness some of this activity myself recently, when I visited the Western Australian operations of ARA members Pilbara Iron Ore (previously Rio Tinto) and Roy Hill. The visits emphasised how many of our big mining operators are preparing for growth over the next two to three years, reinforcing the need for even more efficient rail operations to haul their commodities to port. In the eyes of many, the most important message was left until last when we were joined by Robert Agnew from Woolworths who delivered a clear and telling reminder to conference delegates that rail freight’s future prospects are intrinsically linked to our ability to put the customer at the forefront of our thinking. An extremely important message for everyone in our industry. My thanks to Aurecon’s Michelle Doolan, winner of the ARA’s AusRAIL 2016 Young Rail Professionals Innovation Pitching Competition, and Damien White, CEO of TasRail and Chair of the ARA Rail Freight and Ports Committee, for their assistance in chairing the event. I look forward to seeing you at next year’s  ARA Rail Freight Conference!

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HEAVY HAUL

FMG soars to $2bn profit

Fortescue Metals Group exported 170.4 million tonnes of iron ore through its Pilbara port and rail network in FY17, on its way to a doubling in annual profits to $2.1 billion. HE AUSTRALIAN-GROWN iron ore operator announced its FY17 results in August, saying net profit had gone up 112% from a year ago. The miner credited cost cutting and a stronger iron ore price for the solid result, and handed out a $0.25 per share fully-franked dividend. “Fortescue has continued to generate excellent cashflows allowing further repayment of debt, strengthening of our balance sheet and increasing returns to our shareholders,”

chief executive officer Nev Power said. “Consistent production was sustained in FY17 with delivery of 170.4 million tonnes from our mining operations at the Chichester and Solomon Hubs through our world class port and rail infrastructure.” Fortescue exports its iron ore from Port Hedland. “Responsiveness to our customers’ needs has driven refinements to our product strategy, meeting the core requirements of quality, timely delivery and flexibility,” Power continued.

Fortescue cut its C1 operating cost to US$12.16 per wet metric tonne in the June quarter, and Power says the miner can continue to cut that cost below US$12. “Cost performance has been a core element of Fortescue’s success in FY17,” he said. “With our sustained productivity and efficiency focus, costs have reduced a further 17% compared to FY16. From November 2016, Fortescue’s position as the lowest cost provider of seaborne iron ore to China has been recognised and maintained by Metalycs Resource Sector Economic analysis. “Guidance for our C1 cost of US$11-12 will ensure that our cost reduction momentum journey is sustained, as we optimise technology and innovation across  all areas of the business.”

Image: www.RailGallery.com.au

GRAIN

Viterra, G&WA extend grain rail deal Glencore grain business Viterra will continue to move grain by rail in South Australia after extending its rail agreement with Genesee & Wyoming Australia on the Eyre Peninsula up to March 2019. ITERRA’S LOGISTICS and commercial relations manager Jonathan Wilson said the current three year agreement was due to expire in 2018 but the two companies had worked together on a 12-month extension. “This allows more time for government and industry stakeholders to examine the long term future of the rail network,” Wilson said. Currently, two rail lines service 15 storage and handling sites to transfer grain to Port Lincoln for shipping.

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“Our focus is on offering Eyre Peninsula growers the most efficient and cost effective supply chain in moving grain from upcountry to port,” Wilson said. “We are the only customer using this rail network. We work very closely with G&WA and will continue to support discussions between stakeholders to determine the best logistics solution for the future.” More than 725,000 tonnes of grain has been moved on the Eyre Peninsula rail lines  since 1 October, 2016, Viterra said.

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INTERMODAL

Pacific National will look to expand its intermodal operations, partnering with Linfox to buy some of Aurizon’s key assets. Photo: RailGallery.com.au

Aurizon to sell Queensland Intermodal to PN/Linfox, will close interstate terminals Aurizon will sell its Queensland Intermodal business to a consortium of Pacific National and Linfox for a combined value of $220 million, and close its intermodal sites outside of Queensland, following a twelve-month review.

URIZON MANAGING DIRECTOR

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and chief executive Andrew Harding announced the outcomes of the company’s Freight Review, as the business released its annual report for FY17 on August 14, which detailed a $188 million loss. “My aim is to take decisive action, no matter how unpopular or difficult those decisions those decisions may be,” Harding said. “In making the decision to exit, we considered the significant financial losses that have been sustained year on year by Aurizon Intermodal. The business has not been able to establish significant scale and a customer base to support a profitable business in such a highly competitive market.” The Queensland Intermodal business – including 350 employee positions, assets, and commercial and operational agreements – and the Acacia Ridge Intermodal Terminal south of Brisbane, will be sold off to the consortium in two separate transactions. |

The Acacia Ridge terminal is a 66-hectare site which includes narrow-gauge and standard gauge freight terminals, marshalling yards and warehousing. At this stage the sale is a binding agreement between the sides. It will be subject to approval by the Australian Competition & Consumer Commission, and the Foreign Investment & Review Board. Harding said the additional closure of Aurizon’s intermodal terminals outside of Queensland would affect roughly 250 jobs. Aurizon’s Interstate Intermodal business includes freight terminals at Forrestfield, Perth (freehold), Enfield, and Sydney (lease), along with locomotives, wagons and road vehicles. It also includes the import-export service between Enfield and Port Botany. “The transaction and the shutdown actions are necessary given the history of significant losses to the business, the long-term

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industry sector attractiveness, and my view that in this industry sector we lack some fundamental characteristics for success,” Harding said. The former Rio Tinto iron ore boss said his recent arrival provided him with a “fresh set of eyes” with which to consider Aurizon’s Intermodal business. “The Intermodal business has made a loss in all but three of the last ten years,” he said. “The last two years, were the first- and third-largest loss years. “The market conditions are also not favourable. Market volume growth is forecast to be sub-GDP, and the long-term dynamics are shifting to shorter hauls, favouring road transport, as Australian manufacturing volumes are replaced by imported volumes.” In addition to a poor market outlook, Harding was not optimistic about Aurizon’s chances of success in the competitive interstate market. ISSUE 2 2017

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Aurizon’s freight review found little reason to continue in the intermodal sector. Photo: RailGallery.com.au

“Outside of Queensland, Aurizon lacks scale and is third in the east-west corridor, which is the largest profit pool,” he said. “Aurizon has considerable skills in bulk haulage and below rail operations, however it has huge capability gaps in trucking and logistics systems.” Ultimately, the former mining boss said the decision was not a “complex” one. “I do not consider it practical to turn the business around,” he said. “I need to pursue the next-best alternative.” Pacific National is in a good position to buy the Aurizon Intermodal business,

thanks to reported support from its major international backers, who have owned the business since the breakup of Asciano in 2016. PN’s chairman Russell Smith is among the partners of Global Infrastructure Partners, which holds a 27% share in PN. According to an AFR report, Aurizon’s market testing also attracted interest from Qube Holdings and SCT Logistics. Pacific National chief executive Dean Dalla Valle said the planned acquisition will nicely complement PN’s existing capabilities. “The Acacia Ridge Terminal supports Pacific National’s goal of providing consistent

and reliable freight rail services to our customers,” he said. Dalla Valle, formerly a senior executive at BHP, said the Acacia Ridge Terminal would supplement PN’s national network of terminals, and would provide security for the operator’s interstate operations. “[The acquisition of] Queensland Intermodal supports PN’s strategic objective to grow in important markets and allows for PN to offer new northbound services and southbound services within Queensland on day one,” he added. 

HEAVY HAUL

100 projects targeted during Hunter network shutdown More than 100 projects were delivered during a 62 hour shutdown on the Hunter Valley rail network in August.

HE ARTC shut down the network from

August 15 to August 17, with work taking place within the rail corridor from Kooragang Island, north to Narrabri and also along the Ulan line from Muswellbrook. The scheduled activity included track reconstructions, new rail, level crossing improvements, ballast cleaning, rail corridor tidy-up works and signalling maintenance. “These works are an essential part of keeping one of the busiest rail networks in the country running safely and reliably,” ARTC Hunter Valley executive general manager Jonathan Vandervoort said ahead of the work. “We would like to thank the community for their patience with us while this important work is taking place – we appreciate it can be an inconvenience for our neighbours and there are often a number of ‘big yellow machines’ in operation during this work.”

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Regularly-scheduled maintenance shutdowns help keep the Hunter Valley rail network operational. Photo: RailGallery.com.au

Vandervoort noted the work also coincided with Rail Safety Week. “So you will see a few rail safety week badges on our vehicles – we are asking the community to please use this as a reminder to be cautious around the rail corridor, take care near worksites and be aware there

may be a number of additional trucks running in the area than usual,” he said ahead of the work period. Some passenger rail services were impacted between Scone and Maitland, and some trains between Telarah and Maitland and long  distance trains to the North West.

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ARA

ARA targets 10 points

in freight submission Bipartisan support to protect infrastructure corridors and fund freight rail is the focus of the Australasian Railway Association’s submission to the inquiry into National Freight and Supply Chain Priorities. RA CHIEF EXECUTIVE Danny Broad outlined the association’s 10-point plan for freight rail, which made up its submission to the inquiry, at the association’s Freight Rail conference in Sydney in August. “The ARA supports the development of a national freight and supply chain strategy to guide long term decision making and investments by both government and industry,” Broad said. With an 80% growth forecast for Australia’s freight task between 2011 and 2031, Broad said action on freight rail in the near future was “critical”. “The ARA, on behalf of the rail industry has identified 10 areas that require attention to enable greater efficiency and productivity for rail freight,” he said. “They include linking future infrastructure funding to the delivery of reform, commitment to a competitively neutral policy approach to ensure domestic rail freight markets can

operate as far as possible on a level footing with other modal choices, a national framework for corridor protection, equitable access pricing for road and rail, as well as Commonwealth, State and Territory Government investment into rail.” Other areas for improvement identified in the ARA’s submission include maximising

“

efficiency on the existing network, addressing ‘externalities’ that impact upon the Australian community negatively, supporting technology developments, addressing jurisdictional inconsistencies and continuing to identify ways to address challenges associated with different track owners. 

A national freight and supply chain strategy [can] guide long term decision making and investments by both governments and industry.

DANNY BROAD, CHIEF EXECUTIVE OFFICER, AUSTRALASIAN RAILWAY ASSOCIATION

”

GRAIN

Jimmy Wilson takes over at CBH Former BHP iron ore boss Jimmy Wilson is the new chief executive of grain handler CBH Group, succeeding Andrew Crane who steps down after more than eight years in the role. BH GROUP chairman Wally Newman said Wilson’s experience was what the Board was looking for in a new chief executive for the co-operative, a leader with core strengths in developing, operating and innovating international supply chains. “The Board was seeking a candidate that would drive and shape the next phase of development for our growers’ supply chain, ensuring the organisation is fit to match the fiercely competitive environment of international grain trading and foster the culture required to support this,” Newman said. “With the co-operative’s current major focus on delivering our $750 million Network Strategy, Jimmy’s proven strengths in extracting efficiencies from integrated operations, driving excellence in capital management, and using innovation and technology to escalate

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changes in productivity, make him a natural fit for the organisation.” Newman said the grain operator’s board had had the opportunity to meet Wilson a number of times before making the appointment and felt his professional track record, down to earth nature and straight-forward, hands-on approach would resonate strongly with our grower members. “Driving value for growers is at the centre of everything CBH does, and over the past decade grower loyalty and satisfaction levels have reached record highs, while the business has achieved solid balance sheet and revenue growth,” Newman said. “It was important to the Board that the new CEO had the skills and experience to build on these achievements and also had a strong desire to work with the members

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in achieving what they need from their grain supply chain.” Wilson said the opportunity with CBH presented an exciting challenge for him. “I have worked across many different countries, commodities and markets over my career and the shift into grain, while outside the traditional mining and resources sector, has many operational and trading synergies with the industries I have enjoyed working in,” he said. “Jobs of this calibre and complexity are rare, even more so in Perth, and I feel very privileged to undertake this appointment, and begin an exciting future path with CBH and the growers of Western Australia.” Wilson joined CBH on August 14, as chief executive officer-elect, scheduled to formally take over the CEO role at the start of CBH’s financial year on October 1, 2017. Wilson began his tenure travelling to grain growing regions across Western Australia to attend grower meetings where he will have the opportunity to meet and hear from  CBH members, the company said. ISSUE 2 2017

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The $58 million project aims to reduce road congestion in Melbourne by putting more freight on rail. Photo: RailGallery.com.au

Victoria launches port

rail shuttle program Expressions of interest are being sought for companies to connect the Port of Melbourne to major freight hubs and businesses via the city’s existing rail network. $58 MILLION PROJECT aims to hand down a contract later this year, to help reduce road congestion in Melbourne by placing more port freight on trains, with funding available to upgrade rail connections and improve terminal access. “The Australian Government’s free trade agreements are seeing a boom in exports, which has led to trucks taking more produce and freight to the ports,” federal infrastructure and transport minister Darren Chester said. “This project will provide the ability to shift larger volumes of freight via rail compared to trucks, and reduce congestion on our roads.” The Australian Government is committing $38 million to the project, and the Victorian Government has committed $20 million. “The freight and logistics industry had identified rail’s potential to reduce transport costs by about 10%, with the proposal potentially improving Australia’s competitiveness, which is why the Australian Government is investing $8.4 billion in the Inland Rail project connecting Brisbane and Melbourne.”

Victorian roads and ports minister Luke Donnellan said the project would especially benefit Melbourne’s inner west. “The Port of Melbourne will remain our primary freight hub for a generation,” he said. “With container numbers expected to double over the next two decades we need to act now to share the load between road and rail.” The Australian Logistics Council (ALC) welcomed the announcement. Michael Kilgariff, ALC managing director, said that the Council had been a consistent supporter of the Port Rail Shuttle project, as it would significantly enhance efficiency for freight in Victoria and across national supply chains. “Moving more freight to rail, where it makes sense commercially, has the potential to significantly improve freight efficiency, while at the same time improving urban amenity, reducing road congestion and decreasing queuing times at ports,” Kilgariff said. “Increasing the use of short-haul rail was a significant focus of Freight Doesn’t Vote, ALC’s

recent submission to the federal government’s Inquiry into National Freight and Supply Chain Priorities.” Freight Doesn’t Vote is the ALC’s final submission to the inquiry, and makes 41 recommendations covering all modes of transport in the freight logistics sector. It builds on the Logistics Council’s two previous working papers and was heavily informed by both industry engagement and dialogue with the Department of Infrastructure and Regional Development. Echoing concerns raised by Infrastructure Australia, the ALC’s submission called on the federal government to have “greater role” in protected freight transport corridors from urban encroachment, and recommends a review of regulatory practices which, it says, inhibit efficient movement freight. It also outlines opportunities where the government could “incentivise good planning practices” and encourage implementation of up-to-date technologies for increased efficiency outcomes. Furthermore, the ALC’s submission asks the Inquiry that it considers the findings report recently published by BITRE, which found that establishing “value adding hinterland terminals” could secure the necessary traffic volumes for competitive line haul costs with short-haul rail. “The Inquiry”, the ALC submission states, “should recommend greater government focus and investment in the use of port shuttle/short- haul rail infrastructure as a means to improve supply chain efficiency and reduce congestion.” Kilgariff said that the Port Rail Shuttle project was a “welcome step” in achieving greater usage of short-haul rail services for freight in Victoria, and would help bring the state up to speed with NSW, where the state government has committed to doubling the amount of freight leaving Port Botany by rail. “Constructing the Port Rail Shuttle to provide a rail connection between the Port of Melbourne and inland ports in Victoria is a crucially important aspect of improving the state’s freight network and driving greater supply chain efficiency and safety.” 

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Adani says the coal Carmichael will provide is crucial for the electrification of some of India’s poorest regions. (left) Photo: RailGallery.com.au (right) Photo: iStock

HEAVY HAUL

Sovereign risk an issue

in Adani funding decision HE GOVERNMENT’S DECISION over a $900 million loan request by prospective mine and rail developer Adani is being watched keenly by other major Indian businesses, and could threaten future investment decisions if not approved, Adani’s projects director has said. Peter Thomas spoke at the Australasian Railway Association’s Rail Freight Conference in Sydney in August. He said Adani hopes to make financial close on its massive Carmichael coal mine project in the Galilee Basin by March 2018, and has a two year timeframe between that date, and first production. But the project is unlikely to go ahead without a highly controversial $900 million loan from the Northern Australia Infrastructure Facility, the $5 billion fund set up by the Turnbull Government.

And Thomas said the decision could have a massive impact on future spending by Indian companies even bigger than Adani. “The project is extremely important to Adani,” he told the conference. “I think this is lost a lot on the Australian media. “This project is being watched by the Indian Government, and very large Indian companies. If it goes ahead and succeeds, it would do wonders for Australia’s relationship with India. “If it doesn’t, it’ll probably put Australia on – I wouldn’t say a ‘blacklist’ – but on the ‘too difficult’ column of sovereign risk for Indian companies. That’s just a massive opportunity that Australia [may] miss out on. “Adani is a large company, but it is by no means the largest company. There are some massive conglomerates in India who are all looking into Australia for agriculture, for resources, and so forth, and we’re on the

“This project is being watched by the Indian Government, and very large Indian companies. If it goes ahead and succeeds, it would do wonders for Australia’s relationship with India.” ADANI PROJECTS DIRECTOR PETER THOMAS

cusp of grasping that opportunity. So it’s really up to us to do that.” Thomas indicated Adani could afford to deliver the project without the loan, but said the loan was more about getting some off the Government’s “skin in the game”. “The reason why that’s so important is there’s a lot of distrust of doing projects in Australia, and there’s great concern about the sovereign risk of Australia,” he continued. “Adani wants the Australian Government to be invested in this project … Adani has taken the approach that they’re not going to invest their good money, unless the  Government is invested.”

INTERMODAL

TasRail welcomes Toll development ASRAIL CEO Damien White on August 22 welcomed the Launceston City Council’s approval of the project, saying Toll would be increasing its usage of Tasmania’s rail network.

Image: www.RailGallery.com.au

Toll Group will build a $20 million intermodal hub in Launceston, after the city’s council approved the development.

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He said the development showed the company’s growing confidence in freight rail in Tasmania. “Since TasRail recommenced rail services to Toll’s Launceston facility in March 2012, more than 60,000 containers have moved through that facility on rail,” White said. “This generates significant environmental, safety and business benefits to the Toll Group, its customers and the community. “TasRail congratulates the Toll Group on their vision and commitment to the new transport hub and we look forward to working with Toll Group and the wider northern Tasmanian community on this much-needed economic boost for our region.” 

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BHP is positive about the future of the iron ore and coal sectors. Photo: RailGallery.com.au

HEAVY HAUL

BHP upbeat on bulk volumes

BHP released its annual result in September, delivering a US$6.73 billion underlying profit in FY17, up almost five times on the US$1.2 billion reported in FY16. The profit came off the back of a 64% rise in underlying EBITDA, to US$20.3bn in FY17.

“W

E HAD A VERY STRONG

financial year,” BHP chief executive Andrew Mackenzie said. “Free cash flow was US$12.6 billion, or second highest on record. We used this cash to reduce net debt by nearly US$10 billion and return US$4.4 billion to shareholders.” BHP reduced its debt from US$26.1 billion to US$16.3 billion during the period, and handed down a US43c per share dividend. A solid program of continued cost cutting and limited capital expenditure, coupled with positive outlooks for iron ore and coal, will allow BHP to continue rewarding shareholders and driving down debt, the company said. In a volatile iron ore market, BHP’s highquality ores will allow it to remain versatile. “Based on our view that the steel market in China will remain tight, thus supporting mill margins, we expect ores at the higher end of the grade spectrum to perform well for at least the remainder of the calendar year,” the miner said. “Spreads to ore at the lower end of the grade spectrum are likely to stay relatively wide. These circumstances would suit the grades of fines and lump product of [BHP’s WA iron ore business], which remains a world-class, high margin operation. “That is amplified by our ability to consistently secure value for our Newman, MAC, Jimblebar and Yandi products.” As for metallurgical coal, BHP said rising utilisation rates in Chinese blast furnaces in response to supply side reforms to the steel industry, have underpinned demand for coals at the higher end of the quality spectrum.

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“Additionally, with the potential for voluntary supply restraint by major Chinese met coal producers, ongoing supply issues for PMV, Chinese port inventories remaining low, high land borne logistics costs in China, and the potential for an accelerated rate of capacity closures in calendar year 2018, it is possible that met coal prices can sustain above long run marginal cost for some time,” the miner added. The story was also positive for energy coal. “Energy coal prices have benefited from robust demand from China, steady demand from other North Asian markets and supply disruptions in key export jurisdictions,” BHP reflected. “Coal power generation in China increased 8.5% year-on-year in the second half of FY17, with strong cooling and industrial demand co-occurring with a slowdown in hydro generation. “Chinese imports have expanded by 20 per cent year-on-year to meet this demand, with domestic mines constrained.” Aside from a solid financial and bulk commodity outlook, the big news of BHP’s annual report was the promised sale of its US shale business. “Some of our assets and projects have not delivered the return we, or our shareholders, expect,” Mackenzie said during his investor presentation. “As I have said previously, the shale acquisitions were poorly timed, we paid too much, and the rapid pace of early development was not optimal,” he said. “When we entered the industry our objective was to leverage our systems and scale,

become an industry leader, and then replicate the opportunity around the world. However, following a global endowment study, it became apparent that opportunities to replicate US shale oil elsewhere did not exist.” The announcement is a clear response to a strong and continued push from Elliott Associates over the past six months. Mackenzie and BHP chairman Jac Nasser said the focus of the business was now on cutting down debt and working to reward shareholders with maximised profits. “Over the last five years, we have laid the foundations to significantly improve our return on capital and grow long-term shareholder value,” Nasser said, in his final results announcement as chairman before he retired at the end of September. “We have reduced unit costs by over 40% and achieved over US$12 billion in productivity gains. Our capital allocation framework provides flexibility at the bottom of the cycle and discipline on top. We have shifted our focus to low-cost, high-return latent capacity projects which has allowed us to reduce capital expenditure by over 70%.” “Productivity gains across our simpler portfolio of tier one assets increased our return on capital to 10%,” Mackenzie added. “This strong momentum will be carried into the 2018 financial year, with volume growth of 7% and further productivity gains expected. Our relentless focus on cash flow, capital discipline and value creation should allow us to significantly increase our return on capital  by the 2022 financial year.”

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Target to take space at Moorebank as Qube announces 6% profit drop Logistics operator Qube has announced Target Australia will be the first major client at its Moorebank intermodal terminal, after it posted a net profit of $77.3 million in FY17, down 6%. HE COMPANY SAID its statutory profit was down due to significant transaction and other non-recurring costs associated with its acquisition of Patrick and AAT during the FY17 period, as well as two impairments “which [were] largely offset by fair value gains on Qube’s investment properties”. The company reported good revenue and earnings growth from both its Logistics and Ports & Bulk divisions. Qube’s statutory revenue was up 13.5% to $1.51 billion, and underlying revenue was up 14.7% to around the same figure. Statutory EBITDA was up 1.7% to $253.3 million, while underlying EBITDA was up 6.2% to $261.5 million. “The 2017 financial year was a year of completion and implementation at Qube,” managing director Maurice James said. “The transformational Moorebank project remains on track and will be further enhanced by today’s announcement that Target Australia

Moorebank is expected to take 3,000 containers off Sydney roads each day. Graphic: Qube

will be a major tenant in Australia’s largest intermodal precinct.” In a separate announcement detailing the Target deal, James said the Moorebank precinct would transform Sydney’s freight and logistics supply chain. “The Moorebank development is certainly a once in a lifetime opportunity,” he said. “Linking one of the nation’s busiest ports by rail to an inland facility with the sheer scale and location benefits of the Moorebank site is a game changer that will deliver huge long term benefits to consumers and businesses.” Target has agreed to a new five-year logistics services contract with Qube Logistics

to move freight between Port Botany and Moorebank. Qube will develop 37,860 square metres of warehouse and office facilities for an initial lease term of 10 years at Moorebank, due for completion in early 2019. “Securing Target Australia is testament to the quality product that is Moorebank Logistics Park, combining a superior property location and efficient logistics,” Qube’s strategic assets division director William Hara said. “Qube is looking forward to working with the Target Australia team in delivering an optimal warehouse and logistics solution for their operations.” 

NETWORK

Murray Basin upgrades begin Work is underway on the second phase of the Murray Basin Rail Project, after the $440 million contract was awarded in June. EDERAL INFRASTRUCTURE and transport minister Darren Chester joined his Victorian counterpart Jacinta Allan in Maryborough to kick off the project, inspecting equipment and meeting rail workers just a month after a joint venture of McConnell Dowell and Martinus Rail was announced as the successful tenderer to deliver the major upgrade. The contract represents stages two, three and four of the Murray Basin Rail Project, with work to take place up to August 2018. The three stages of work included in the contract cover the gauge conversion and upgrades on rail freight lines from Maryborough to Yelta, Ouyen

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to Murrayville, Dunolly to Manangatang, Korong Vale to Sea Lake, and Gheringhap to Warrenheip. Preliminary works kicked things off at Maryborough, including vegetation removal and site investigations. Works were also set to begin in Dunolly, delivering major upgrades to the Mildura freight rail line. The project will increase train axle loadings from 19 tonnes to 21 tonnes between Dunolly and Yelta, and Maryborough to Ararat to allow freight trains to carry heavier loads. “Improving the performance of the regional Victorian rail freight network will bolster the state’s agricultural sector, drive economic growth, help create jobs and boost regional communities,” Chester said. “The Murray Basin Rail Project will standardise rail gauges and increase maximum freight volumes, allowing higher volumes of goods to be carried more efficiently.” Federal Member for Wannon Dan Tehan, who also visited Maryborough, said the

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upgrade project itself would also benefit employment in the region. “More than 400 people will be employed on the project at its peak with up to 60 local jobs generated in the Central Goldfields Shire,” Tehan said. “The Murray Basin Rail Project will ultimately enable trains to carry up to 500,000 more tonnes of grain each year and capture about 20,000 journeys currently undertaken by trucks, improving road safety and the road network for all those who use our local roads.” The Sea Lake and Manangatang lines will remain open for now, so freight operators can consider using these lines as another option to keep moving freight by rail with works being scheduled outside of grain harvest seasons, the ministers said. Work on the Mildura line started on August 7, requiring the closure of the line north of Dunolly for the following five months  to ensure the safety of work crews.

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Queensland Premier Annastacia Palaszczuk (right) with deputy premier Jackie Trad. Photo: Annastacia Palaszczuk MP / Facebook

Photo: Four Corners / ABC

Queensland to investigate

‘trash trains’ report Queensland Premier Annastacia Palaszczuk has announced a three-month investigation after an ABC investigation highlighted the transporting of waste by rail and road from NSW to Queensland.

HE FOUR CORNERS STORY, which

aired in August, detailed the sending of waste – on trucks and trains – north of the border, to avoid a $138 per tonne NSW landfill levy. Industry is estimating the trade to have reached roughly a million tonnes a year, with interstate operators reportedly dumping waste in disused mine sites. Palaszczuk announced a three-month independent investigation would look into the drama. “I want to send a clear message to interstate waste generators and companies that Queensland is not a free for all,” she said. “We need to better understand the actions of those who haul waste several hundred kilometres to Queensland, what responses we can make, and whether national action is required.” The premier noted that 6000 people are employed in Queensland in the waste transfer and recycling sectors, but seemed to indicate the trend of interstate waste haulage was not wanted. “Not only is interstate waste haulage unnecessary, it can be unsafe,” she said. “We also need to question the potential cost to Queensland taxpayers and the environment.”

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The investigation will consider how the state can limit the incentives currently in place for the interstate waste trade to take place. It will also consider any illegal practices taking place, the need for regulatory reform, and the role of other states and the Commonwealth in fixing the issue.

“

I want to send a clear message to interstate waste generators and companies that Queensland is not a free for all.

”

PREMIER ANNASTACIA PALASZCZUK

State environment minister Steven Miles said the Government already enforced illegal dumping in Queensland, but said the investigation would seek out any operators who slipped through the cracks.

“The good operators want us to see bad elements in their industry stamped out as much as we do and that’s why they’ve been working with us,” Miles said. “An independent investigation is the best way to bring those in the industry who think it is alright to treat Queensland as a cheap dump into line with community expectations. “I encourage all transport, waste and recycling facility operators in New South Wales and South East Queensland to provide written submissions to this investigation,” Miles said. “The investigation will look at the incentives for movement of waste from other states, and how to prevent this from happening,” the minister continued. “It will also consider whether there’s a need for regulatory reform - and examine the role of other states and the Commonwealth. While this is not a regulatory or criminal investigation, it is expected that any unlawful activity it uncovers will be referred to the appropriate Queensland or interstate authorities.” An interim report will be provided to the Government by 18 October 2017, with a  final report due by 17 November 2017.

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The first train to use the line after the earthquake arrives in Christchurch on September 15, 2017. Photo: KiwiRail

NEW ZEALAND

First freight trains on Main North Line since earthquake Freight trains have started servicing New Zealand’s Main North Line for the first time since last year’s devastating earthquake, with the first train making its way from Picton to Christchurch in September. HE MILESTONE marked the start of low-frequency freight services that will run five nights a week. This will allow repair and rebuilding work to continue during the day while also helping to take 2000 trucks a month off the inland road freight route. “We’ve had a remarkable 10 months to get to this point, and what it has highlighted is the importance of rail to our economy,

and how critical it is that road and rail work together,” KiwiRail chief executive Peter Reidy said. “Before the earthquake, KiwiRail was carrying one million tonnes of freight on the line for our customers per year. After the quake, freight has had to be moved south by road, which has put pressure on the inland route.

The final weld is made to connect the Main North Line in August 2017. Photo: KiwiRail

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“It’s meant additional costs for freight forwarding companies and it hasn’t been easy for truck drivers.” New Zealand’s transport minister lauded the efforts over the past ten months in getting the line running again, which included intensive and extensive repair work at over 750 sites. “Over 1500 workers from KiwiRail, the NZ Transport Agency and their partners in the North Canterbury Transport Infrastructure Recovery alliance (NCTIR) have done a fantastic job in what have been challenging conditions,” Bridges said. The first service to travel on the repaired track on Friday carried general domestic freight from KiwiRail customers Bascik, Toll, Mainfreight Group and Maersk, and was driven by KiwiRail Locomotive Engineer Wayne Sullivan, who was also driving a train on the line when the earthquake struck. KiwiRail held special celebratory event on Friday morning at Kaikoura as the train passed through, organised to acknowledge community support for the operator and North Canterbury Transport Infrastructure Recovery alliance and their efforts to rebuild the line. “The earthquake had a major impact on Kaikoura, and the past 10 months has not been easy for them. KiwiRail appreciates the co-operation the community has given us over that time,” Reidy said. “That support has helped us get freight trains running ahead of schedule, and that in turn will help take pressure off the alternate route.” ISSUE 2 2017

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NEW ZEALAND

Work underway to repair the Main North Line in March 2017. Photo: KiwiRail

During the event, a sculpture by local artist Ben Foster was unveiled to mark the occasion and to acknowledge the rebuild effort. “As an artist living in Kaikoura, I felt a great sense of pride in being involved with the creation of a sculpture recognising the November 2016 earthquake event and its effects on the wider community,” Forster said. The sculpture features pieces of twisted track salvaged from IronGate, north of Kaikoura, and incorporates key place names of the Main North Line along the Kaikoura coastline, which Forster said was a way of honouring the history of the construction and reconstruction of the line over the decades. “More importantly,” Forster remarked, “this sculpture reminds us that change is very much a constant, the twisted rail communicating the raw power of Mother Nature, and may stand as a constant reminder of how resilient we all are as it reaches upward.”

According to KiwiRail’s chairman, Trevor Janes, had the earthquake not occurred the operating surplus would have been $92 million, surpassing the 2016 financial year’s underlying surplus result of $86 million. “KiwiRail’s performance in the first four months of the financial year showed our growth strategies of simplifying our business,

Quake makes $40 million dent in revenue

KiwiRail revealed the Kaikoura earthquake led to loss in forecast revenue of $40 million for the financial year ending in June 2017, with a further $88 million hit in repair costs for the damaged Main North Line. The $40 million loss is mainly due to the impact of the closure of the Main North Line on domestic freight revenue, along with a drop in passenger volumes on the Interislander due to tourists avoiding road travel to Christchurch and the cancellation of the Coastal Pacific tourism service. In the 2017 financial year, the operator achieved a surplus of $52 million.

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(above) Buildings and infrastructure across the city were affected. (below) Cleaning up liquefaction in a suburban street.

standardising our assets and investing in our people were really starting to pay off,” Janes said. Janes said that prior to the November Earthquake, KiwiRail had anticipated a record season for both passenger services and freight. “Operating margins were increasing due to significant productivity savings which in FY17 totalled $18 million, building on the $27 million achieved in 2016,” he said. Chief executive Peter Reidy said that there had been revenue gains in industries less affected by the earthquake, such as forestry, and that KiwiRail’s partnership with Port of Tauranga saw freight volumes rise there by 12%. Reidy also said that KiwiRail expects tourism to return to a growth pattern seen prior to the earthquake. “Tourism looks set to rebound quickly with the 8% rise we were seeing in our rail passenger journeys prior to November giving confidence that this is sustainable growth that will continue once our Coastal Pacific returns next year,” he said. Reidy indicated that investment over the next 12 months would be focussed on import/export and domestic freight forwarders and in renewing ageing rolling stock, while more work is to continue in getting the freight network back in shape. “Assisting with the rebuild of State Highway One and then working with our NZTA partner in the NCTIR alliance to get the MNL back to full freight capacity is a major focus for the next 12 months, benefitting South Island consumers due to reduced supply chain costs,”  Reidy said.

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A CBH loco and rail cars, products of a $175m investment in locomotives and wagons five years ago, in action.

GRAIN

Prescient decision on rail fleet

paying dividends for CBH

The decision by WA grains co-operative CBH Group five years ago to pour $175m into new locos and wagons is paying dividends as the organisation bursts supply chain records. BH BROKE the state shipping record for the month of April with 1.6 million tonnes shipped. It followed the largest ever amount of grain being shipped over a one month period when January’s shipping volumes broke through 1.8 million tonnes. In addition, there were record rail movements across the state in March to help achieve the largest amount of grain ever transported via rail during a one month period (964,832 tonnes during the month). CBH group general manager operations, David Capper, said the successive records demonstrated the ability of CBH’s supply chain to respond to a record harvest. “Without the appropriate infrastructure and dedication of our regional and port teams we wouldn’t be able to consistently break records,” Capper said. “It’s important that we’re able to export growers’ grain to international customers at the time they’re wanting it and demand is normally higher in the early part of the year. So far, we’ve exported around 62 per cent of the record 16.6 million tonne crop brought in during last harvest, not accounting for domestic outturns. “We’re pleased to be able to reach these milestones while combating challenges such as flooding in February which impacted our road and rail capacity during February and March. We appreciate the ability to collaborate with our stakeholders and customers to work through these challenges.” Capper said CBH had utilised a number of strategies to increase shipping volumes.

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“We’ve continued to increase the total tonnages available through our shipping stem, aided by initiatives including better berth utilisation and increased capacity to bring grain from our upcountry network to port,” he said. “We’re looking forward to continuing to respond to the needs of our customers and growers as we roll out the Network Strategy, focused on delivering an optimal supply chain from paddock to port.” Aiding CBH’s current performance is a decision made five years ago to invest $175m in a new fleet of locomotives and wagons. In 2012 CBH launched the rail fleet consisting of 22 locomotives and 574 purpose-built

wagons. It was the first dedicated new grain rail fleet to arrive in Western Australia in more than 30 years. On 15 June 2012, the first train ran from Kwinana to Hyden and in 2014 another three locomotives were added to the fleet. The rail fleet has since moved more than 35 million tonnes with an expectation to hit 40 million tonnes shortly. CBH Group chief executive officer Andrew Crane said the investment was a strategic decision for CBH Group which had brought significant material benefits for Western Australian growers. “Our investment was driven by a singular focus to continue lowering supply chain

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Rail freight rates now sit around 20 per cent lower than 2011 rates, in real terms.

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CBH GROUP CHIEF EXECUTIVE OFFICER ANDREW CRANE

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The US$30 million Mabuhay Interflour Mill in Subic Bay, the Philippines.

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“

We’re ... focused on delivering an optimal supply chain from paddock to port.

Interflour investment marks new phase of growth

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CBH GROUP GENERAL MANAGER OPERATIONS, DAVID CAPPER

costs for Western Australian growers,” Dr Crane said. “It is always pleasing when a business case delivers to and exceeds the benefits envisaged. In the first year of operation CBH reduced rail costs by seven per cent. These reductions have continued with rail freight rates now sitting around 20 per cent lower than 2011 rates, in real terms. “This is a great result and we are continually looking at ways we can continue to keep the Western Australian supply chain competitive against alternative international origins,” Dr Crane said. “We’re pleased to be able to demonstrate how our key investment has returned value to growers and I’d like to personally thank our rail operator Watco for its help in achieving this positive result,” Dr Crane said.  This story was originally published in Rail Express partner publication, Australian Bulk Handling Review.

Next print edition:

GRAIN

Interflour Group, 50 per cent owned by CBH Group, commenced final commissioning of its US$30 million Mabuhay Interflour Mill in Subic Bay, the Philippines, in July. NTERFLOUR BROKE GROUND on the project in December 2015 and the milling facility will be capable of producing 500 tonnes a day of flour for the Philippine market once fully operational. The first tonnes of wheat for the new facility were exported from CBH’s Kwinana Port in June as part of the largest shipment of Western Australian grain ever consigned by Interflour. At 71,000 tonnes, the shipment carried wheat and malt barley to a number of Interflour’s mills including the Mabuhay Interflour Mill as well as the new Intermalt facility in Vietnam. At the time, Interflour managing director and chief executive officer Greg Harvey said: “This will be the first batch of Western Australian wheat to be processed at the Mabuhay Interflour Mill in the Philippines, which is set for final commissioning at the end of July.

“We will also be supplying malt barley to the new Intermalt facility in Vietnam. “It is quite an achievement for Interflour, we’re now seeing the benefits of the integration of our network of mills, creating more efficiencies in the supply chain by growing our scale. “This shipment, like all of our shipments from Western Australia, are solely sourced through the CBH storage and handling system.” CBH group chief executive officer Dr Andy Crane welcomed the shipping milestone. “It’s great to see so much Western Australian grain being exported to our international investment Interflour,” Dr Crane said. “The shipment marks a new phase of growth in our investment in grain processing with operations starting at the Mabuhay Interflour Mill and at Intermalt which will greatly benefit our growers now and into the future.” 

AusRAIL PLUS 2017

Rail Express will return to print for the official magazine of AusRAIL PLUS.

RAIL EXPRESS

AusR ILPLUS 2017 | Brisbane

Conference & Exhibition

21-23 November

To be part of the biggest Rail Express issue of the year, please contact: Oliver Probert | email: oliver.probert@mohimedia.com

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