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THE current schism between monopoly coal freight operator Aurizon and mining companies is not an entirely unique scenario.
Nor is the concern being expressed by Japanese steel producers over the imbroglio.
A decade ago pictures of dozens of ships anchored off central Queensland ports were frequently published in this newspaper, demonstrating the capacity constraints that were crippling the coal supply chain and damaging the state’s reputation as a reliable resource trader.
That impasse culminated in then premier Anna Bligh wining and dining five of Japan’s biggest steel producers, who represented 10 per cent of Queensland merchandise exports, at famed chef Hiroyuki Sakai’s restaurant La Rochelle in downtown Tokyo in an effort to ensure them the situation would be resolved.
That episode in 2008 is instructive for those who immediately leap to the conclusion that private ownership is now the issue and that continued public possession of the rail infrastructure would have prevented this problem occurring.
It would not have.
However, while the particulars differ, the effect is much the same with consumers of Queensland’s high quality coal demanding action so they can have much greater faith in supply.
Premier Annastacia Palaszczuk will this week act as the state’s top envoy to reassure Japan that the issue will be resolved.
She will meet with Japan Foreign Affairs Minister Taro Kono on a whistlestop tour before venturing once again to the US.
Ms Palaszczuk and Treasurer Jackie Trad have also warned Aurizon and regulator, the Queensland Competition Authority, of the need to resolve this issue quickly.
With legal proceeding afoot, this is probably the most the Palaszczuk Government can do currently apart from some verbal arm twisting.
But it would be prudent of the administration to start working on a “Plan B” if negotiations drag on.
The genesis of this deadlock is a draft QCA decision in December that would allow Aurizon to earn $3.9 billion from its Queensland coal network business between July 2017 and June 2021.
A dispute over coal freight could hurt Queensland’s business reputation.This is nearly $1 billion less than Aurizon is convinced it should make.
The company has accused the regulator of not operating in the “real world” with its decision.
In a high stakes act of brinkmanship, Aurizon has imposed immediate changes to its maintenance schedule on the central Queensland coal network, choking the system and delaying mines getting their product to port.
The Queensland Resources Council has calculated out the impact on royalties, claiming Treasury’s coffers stand to be $2 billion worse off over the life of the QCA decision if Aurizon’s restricted use of its network continues unabated.
While it is hard to fathom that this deadlock will continue for four years, it does underscore the cost that will be incurred by every Queenslander if it is not resolved.
Queensland has been a reliable resources trading partner for decades so the Japanese should grant this state and its miners a degree of latitude while this issue gets resolved.
However, the fact Japan remains Queensland’s second biggest trading partner also means the Palaszczuk Government is encumbered with the responsibility to ensure this dispute doesn’t drag on.
Queensland’s merchandise exports to Japan surpassed $10 billion in 2016-17, which represented almost 16 per cent of our international trade.
Nearly half this was coal products.
Queensland’s reputation as a trader can certainly sustain a brief dispute between a regulator and coal freight company.
However, the costs in both monetary and reputation terms will become substantial if this fight is allowed to drag on.
This article first appeared on www.couriermail.com.au
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