Indonesia beating Oz in coal logistics race

AUSTRALIA’s coal mining industry is being left behind in the global commodities market because its bulk materials-handling and logistics planning lags world’s best practice, according to management consulting firm Siecap.

Indonesia - which is already challenging Australia as the major export of thermal coal to Asia - has stolen the march when it comes to export volumes, performance and time to execute projects, Siecap Advisory chief executive David Irvine told the Queensland Supply Chain and Logistics Conference.

He said the resources sector still held great opportunities for Australia and particularly Queensland, but the nation needed to operate more efficiently especially in logistics and supply chain activities.

"Contrary to some opinions, the mining boom is far from over. States like Queensland are simply missing out because they are inefficient, too expensive and take too long to get projects off the ground," Irvine said.

"There is still strong demand for thermal coal being driven by India and China, but that is now being filled by Indonesia, which has overtaken Australia as the world's largest coal exporter.

"Australia is being left behind in the international market place and if we don't do something about it we will face an economic climate far worse than the global financial crisis."

Siecap provides tailored logistics and supply chain solutions for projects and organisations across the mining, oil and gas, construction and major infrastructure sectors.

Irvine said many major projects across the nation were facing delays and cost blowouts because logistics planning was not given sufficient consideration in the planning of major projects.

"The costs of construction and commissioning delays in Queensland for major projects have been estimated by project directors at between $1-3 million a day for a single project, certainly not something to be taken lightly," he said.

"Project directors are finding that the fundamental issues associated with the planning and construction of new mines, infrastructure projects and processing plants are relatively straightforward in comparison to ensuring the delivery of construction equipment, personnel and transport permits to support the construction process.

"This is particularly important as mines and oil and gas operations are located further from established infrastructure.

"Organisations should be spending more time to develop efficient and effective supply chains to compete, entice investment and sustain long term project viability. We strongly believe that logistics is in a great place to improve performance for projects and business in Queensland."

Mark Gresswell, chief analyst and director at research and consulting firm Salva Report, told the conference that the major competitive threat to Australian exports would come from Indonesia, which had taken market share from all other exporters over the past decade.

But he said states such as Queensland had the potential to capitalise on the continuing strong global demand for thermal coal if they developed more effective supply chains.

"Global seaborne thermal coal demand grew by around 12 per cent in 2012, a record year, and the rate is continuing in 2013 driven by demand from India and China," he said.

"Queensland and other coal producing states are ideally placed to meet a large portion of this demand for coal, at least geographically, and organisations should be focusing on developing efficient and effective supply chains to meet the realities of demand and competition.

"Australian policy makers and infrastructure providers need to be aware of not only the opportunities but also the competitive pressures faced in the international market."

Irvine said there were 71 projects of State Significance in Queensland, each of which would be competing for logistics resources that would require planning and coordination.

He said challenges that must be considered in the development of logistics execution plans and included in engineering designs included lengthy approval processes, the potential need for pilot vehicles, escort vehicles and police escort officers and delays in booking and confirming escort availability.

Other challenges included a failure to undertake appropriate fatigue management programs, resulting in transport schedules being suspended and penalties incurred, as well as road infrastructure, transport approvals and community consultation processes.

"Developing detailed execution plans capturing all the constraints and requirements will assist in managing risk, mitigating cost blowouts and schedule delays," Irvine said.

"The first step must involve engaging and connecting with government, community and industry stakeholders early.

"The next step is to plan by identifying major requirements, constraints, volumes, routes and capacities and build that into the engineering options.

"Logistics execution plans including traffic management and road use management plans should then be developed and finally, all stakeholders must be aligned for ongoing coordination, communication and governance."

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