Ken Devencorn, Aurecon: Where are we at? Evaluating current rolling stock, infrastructure and...
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Transcript of Ken Devencorn, Aurecon: Where are we at? Evaluating current rolling stock, infrastructure and...
Constraints to Capacity Growth
Limiting Factors on the Australian Heavy Haul Rail Sector
Heavy Haul Rail 2013, July-2013
Ken Devencorn, Technical Director - Rail, Aurecon
2
Australia’s rail history dates back to 10-Dec-
1831 when the Australian Agricultural
Company opened Australia's first railway
located at the intersection of Brown & Church
Streets, Newcastle
Rail and the Australian Economy HH Rail is an Intrinsic part of the Australian Economy
• Although only operating 1t payload wagons, the
gravity rail hauled export coal (from Hebburn
Colliery) down the hill to the Port of Newcastle
• Australia’s economic fortunes are very closely
reflected in that of its Railways
3
Australia’s economic fortunes and HH Rail -
• Around 1900 Australia had the highest level of labour
productivity in the world
• By 1950 Australia’s GDP had slipped to 81% of the USA,
and ranked 4th among the top 20 economies
• By 1983 this decline had accelerated with Australia slipping
to 14th place (Dean Parham, “Microeconomic reforms and the revival in Australia’s growth in
productivity and living standards”)
Labour productivity is closely linked to the cost of transport
Australia’s HH Railways are most often the “path to market” for
Australia’s export economy
Mining productivity is for nothing if the product can’t be
competitively provided to the end user customer
Rail and the Australian Economy A “rail history” of Australian Economics
4
Australia has enjoyed the benefits of an economic revolution,
again reflected in rail – but it could have been very different -
• By the end of the 1980s there was a strong lobby to divest
government ownership in rail – in favour of road
• The 1991 Council of Australian Governments (COAG)
provided a direction to the Australian Federal Government to
initiate competition policy reform
• The subsequent Hilmer Review proposed wide-ranging
economic and social reform on the basis that -
“Where effective, competition can be relied upon to improve
performance”.
Rail and the Australian Economy Economic Reform
5
In terms of rail, the 1991 Industry Commission Report (The
Hilmer Report), saw each of the Australian Governments
interpret the reforms slightly differently -
o Queensland – retained a single integrated railway but opened to Third
Party Access
o New South Wales – separated State Rail Authority into 4 separate
businesses
o Tasrail - was sold to a private operator Australian Transport Network
o Australian National Railways – was purchased by a private operator
Australian Southern Railroad
o V/Line was sold to Freight Victoria
Rail and the Australian Economy The Competition Revolution
6
What followed was an economic revolution
Privatisation was seen by many Governments to be the most
efficient means by which to achieve Hilmer reforms
Concerns that Government ownership leads to –
• Political interference in timetabling and Industrial Relations,
• Anti-competitive freight rates because Governments are not bound
to a commercial return,
• Interference in management decision-making,
• A short-term focus linked to the election cycle, and
• Irregular and non-specific investment planning
But such was not the case with Queensland Rail – the
exception which highlighted that no one remedy can be applied
to all
Rail and the Australian Economy The Competition Revolution
7
Queensland Rail Coal and Freight firstly became QR National
and then subsequently privatised as Aurizon
• Aurizon Holdings Limited has emerged as a top-50 ASX-
listed company offering rail and road-based freight transport
and infrastructure solutions across Australia
• It now successfully competes head-to-head in-market with
other private companies
Queensland Rail Passenger was a Government Owned
Corporation (GOC), has just recently become a Statutory
Authority
Rail and the Australian Economy Success stories and turnaround
8
Australia’s economic turnaround in Rail has been nothing short
of spectacular
There is now increased competition between rail firms (“in-
market competition”) for HH Rail business -
• “In some cases, such as export coal by rail, this has led to
massive investment in new infrastructure, and rail freight
costs falling up to 42% in the latter half of the 1990s” (Rod
Sims, Chairman of the Australian Competition & Consumer Commission,
Apr-2013)
Dynamic results such as this are driven out of long-term
investment in better and more economical use of existing
assets, and continuing investment to drive costs down
Rail and the Australian Economy Success stories and turnaround
9
Australia’s economic revolution is being
closely studied by developing countries
hoping to stimulate economic growth
through increased competition – and HH
Rail is a key element
The UN’s Africa Review Report on
Transport (Aug-2009) found –
• Transport is a key driver of economic
development and poverty reduction
• The “Cost to Market” of resources is
hampered by reliance on road transport
• International competitiveness is linked to
the availability, reliability, and cost of
transport
Rail Regulatory Reform Around the World The pressure upon developing countries
10
• Politicians tell us that we
are facing the “end of
the mining boom”
• Miners tell us that the
benefits of that boom
have been squandered
It is the case though that
whilst project investment
might decline in the coming
years, many new projects
are coming on-line and the
task of HH Rail is yet to
really begin
Rail and the Australian Economy The “End of the Boom” and HH Rail
HH Rail serves the
mining and resource
industries
11
Rail and the Australian Economy The “End of the Boom” and HH Rail
HH Rail has served the resource industry despite other cost increases
Cost of transport has actually declined (on a relative basis) during the
mining boom – “Estimated Australian average export thermal coal FOB cash
costs (2006-2012)”
12
HH Rail Supply Chains are complex, and constitute inter-related
networks
For these Chains to operate safely and efficiently, there has to
be co-operation, coordination, and integration of purpose
The supply chain is there solely to service the product
Rail and the Australian Economy HH Rail is an Intrinsic part of the Australian Economy
13
• Strong demand still exists for
Australia’s resources, and
many are yet to be developed
• The Galilee Basin is a case in
point – an example of where
HH Rail is intrinsic to the
resource solution
• Potentially the largest coal
producing region in Qld, if not
Australia – 14Billion tonnes of
(mainly) high quality thermal
coal - combined export
“projects” of more than
200Mtpa
Rail and the Australian Economy The “End of the Boom” and HH Rail
14
The problem is not with the
quality of the resource, nor the
ability or capability to develop
and export it
• The Galilee Basin is being
developed on Hilmer “competition is
good” supply chain arguments
• Despite the significant economies
of scale of a dedicated “Multi-User”
HH Rail line
Rail and the Australian Economy The “End of the Boom” and HH Rail
15
HH Rail capacity constraints are changing away from “steel
wheels and steel rail” to the cost of accommodating export
resource development within the community
• Investment in smarter ways of co-existing HH Rail within the
urban environment
Barriers to HH Rail Capacity Growth The Economics of HH Rail is Changing
• HH Rail increasingly
has to evolve and re-
invent itself within the
urban environment
• Unless this can be
achieved, the HH Rail
supply chains will
become more and
more constrained
16
In many notable cases the value of existing infrastructure assets
has been eroded over time as urban growth competes with the
resource economy
The capacity limitation is thus not with rail but rather imposed by
the community it seeks to serve
Barriers to HH Rail Capacity Growth The Economics of HH Rail is Changing
• Alternative HH Rail
supply chains
• Tunnels under suburbs
to protect the
community from the
effects of coal dust,
noise, vibration
• A change in the
economics of HH Rail
17
Road is not the solution – only HH Rail supply chains provide
the capacity throughput necessary to make many resource
developments commercially viable
Road imposes many of the same problems which HH Rail is
now facing – but often to a much greater degree
Rail and the Australian Economy The “End of the Boom” and HH Rail
18
Australian expertise in HH Rail has been a major contributor to
the economic growth of Australian – and Australia’s export
economics are reliant upon HH Rail
• Technology has improved -
longer, heavier, more
powerful, and more cost-
effective trains
• HH Rail serves the resource
industry – hence a downturn
in Australia’s resources sector
is keenly felt in rail
• A downturn in HH Rail – a
move from rail to road – will
have a significant impact
upon the Australian economy
Rail and the Australian Economy HH Rail is an Intrinsic part of the Australian Economy
19
China is one of the world’s
largest economies and its growth
is suffering as a result of its
infrastructure -
• China’s rail network spans
93,000km, yet a significant amount
of bulk materials are still transported
by road
• Economic growth has seen start-up
mining firms using existing state
roads to get their product to market
HH Rail expansion cannot keep pace
with resource developments, causing
massive road traffic jams, and
environmental and social issues
Rail and the Australian Economy HH Rail is an Intrinsic part of the Australian Economy
20
Constraints to HH Rail productivity
growth -
• Lack of clear Government policy, planning,
and leadership
• Uncertainty in the resources sector
• Inefficiencies in Intermodal (mine-port-
terminal) interfaces
• Asset utilisation, management, and
productivity
• Labour utilisation, education, and training
• Inadequate and aging business and
operational systems
• Availability of investment capital
• “Technology commitment”
Rail and the Australian Economy Issues Affecting HH Rail Productivity
21
Thank you,
Questions and Discussion