ACCC releases statement of issues on competing proposals for Glencore’s coal haulage network

The Australian Competition and Consumer Commission (ACCC) announced that it will be seeking public submission on the proposals from Aurizon and Pacific National to acquire Glencore’s GRail coal haulage network in the Hunter Valley.

Image credit: accc.gov.au
Image credit: accc.gov.au 

The two proposals came after Glencore announced that it is putting up its coal haulage business for sale as part of its debt reduction plan.

The ACCC has released a combined statement of issues on the alternative proposals in an effort to assess the proposals against the alternative scenario of a new player entering the market by acquiring GRail.

“The Hunter Valley coal haulage market appears to have high barriers to entry, so we would expect the addition of a third competitor to have a significant effect upon the market. This has been supported by market feedback. In contrast, an acquisition by Aurizon or Pacific National would essentially be a continuation of the status quo where there are two active players in the Hunter Valley coal haulage market,” ACCC Chairman Rod Sims said.

“Aurizon and Pacific National were both sponsored into each other’s coal haulage markets in Queensland and New South Wales and there has been little or no new entry before or since. There are some examples of coal producers acquiring their own rolling stock, but Glencore Coal is the only Hunter Valley coal producer to have done so for a majority of its coal haulage requirements.”

The consumer watchdog invited responses to the statement by 21 October 2016, setting a provisional date for a final decision on 15 December 2016.

“Glencore is now selling that rolling stock along with a long-term haulage contract. Coupled with the fact that Glencore Coal is the largest coal producer in the Hunter Valley, this is a platform for entry that is unlikely to be replicated in the foreseeable future,” Mr Sims added.

“However, the ACCC also recognises that coal producers are generally well-resourced, sophisticated parties that may be able to protect their own interests, even if Aurizon or Pacific National acquires GRail. We are going to be exploring their ability to leverage competition between Aurizon and Pacific National or to bypass both haulage providers by acquiring their own rolling stock or by sponsoring new entry.”

Share this post