Industrial action to hit Queensland coal rail network

Unions have notified Australian rail firm Aurizon of plans for industrial action in Queensland this week, in what could be the start of a longer period of unrest as the company tries to renegotiate all its enterprise agreements over the next six months.

Around 100 train controllers who are members of the Rail Tram and Bus Union (RTBU) have told Aurizon that they will not be working on the Goonyella line control boards on 5 July, as well as on all Aurizon's Queensland coal network control boards from 18:00-2200 (08:00-12:00 GMT) Australian Eastern Standard Time on 6 July and for two four-hour periods on 7 July, as part of protected industrial action.

The work ban on 5 July will coincide with a scheduled maintenance closure of the Goonyella line and should not have any impact on the operations, Aurizon said. But the firm is not yet sure what impact the Queensland network-wide work bans will have on deliveries.

Other unspecified unions will be involved in the negotiations with Aurizon, with a joint statement due to be issued tomorrow morning.

Amid the current uncertainty, a major producer has offered a cargo of premium low-volatile hard coking coal for August loading, a Chinese trader said. "Their target price for this cargo is likely to be still above $210/t cfr China, but it is unlikely that buyers will accept these levels for now," she added.

An earlier trade for a premium low-vol hard coking coal with lower CSR (coke strength after reaction) was done at $211/t cfr China, the highest level so far amid a shortage of premium low-vol cargoes in the market. Many market participants were sceptical of the trade, but some now expect the August-loading cargo to possibly trade even above $211/t cfr China.

The Goonyella line connects mines in the Bowen basin to the 55mn t/yr Hay Point and 85mn t/yr Dalrymple Bay export terminals. Even small disruptions to deliveries to Dalrymple Bay often have a marked impact on shipments because of the port's limited stockpiles and can lead to an increase in shipping queues.

Aurizon also runs all other coal rail networks in Queensland in addition to the one connecting into the 10mn t/yr Brisbane coal export terminal.

Unions have warned that further disruption is likely across the network as Aurizon seeks to reduce wage increases in its enterprise agreements from 4pc/yr to 1-2pc/yr. The firm is also looking to split enterprise agreements for its coal haulage operations from the remainder of its business, which has further angered unions.

One of the shiploaders at the Dalrymple Bay Coal Terminal (DBCT) will be shut for maintenance from early July to early August, which could reduce coking coal exports from the port by as much as 1mn t over that period, a Japanese trader said.

The scheduled maintenance at DBCT could add to vessel congestion and cargo delivery delays at the terminal, where the vessel queue increased today to 31 ships.

The disruption comes as Aurizon faces significant headwinds to its capacity from a change in its maintenance regime. It expects the new maintenance regime, which it blames on proposed reductions in its regulated maximum earnings, to remove 20mn t/yr or more of capacity from the Queensland rail network in the 2018-19 financial year that started on 1 July. The network had a nominal capacity of 225mn t/yr before the change to the maintenance regime.

The industrial action could cause further reductions in capacity, unless it can be managed to coincide with scheduled maintenance, as appears to be the case with the Goonyella line on 5 July.

Aurizon expects to come in at the bottom of its forecast range of 210mn-220mn t for the financial year that ended 30 June. It will release volume figures on 13 August.

The industrial action could spill over into the company's New South Wales operations, where it hauls mostly thermal coal on the ARTC rail network to the port of Newcastle, as it also tries to renegotiate enterprise agreements in that state. It is one of three operators on the ARTC network and hauls about 55mn t/yr of the around 170mn t/yr of coal shipped from Newcastle.