report final june 2012

FREIGHT AND LOGISTICS COUNCIL OF WESTERN AUSTRALIA

NORTH WEST INBOUND FREIGHT MOVEMENTS: A CONSULTANCY TO IDENTIFY THE POTENTIAL FOR A PARTIAL SHIPPING SOLUTION

FINAL REPORT

June 2012

Pilbara Inbound Logistics and Coastal Shipping Review

Hyder Consulting Pty Ltd-ABN 76 104 485 289 Page i

f:\aa004807\r-report\r001-aa004807-s1a11-08-pilbarainboundstudydraftreport- 19 june 2012 final.doc

Hyder Consulting Pty Ltd

ABN 76 104 485 289

Level 5, 141 Walker Street Locked Bag 6503 North Sydney NSW 2060 Australia

Tel: +61 2 8907 9000

Fax: +61 2 8907 9001

www.hyderconsulting.com

FREIGHT AND LOGISTICS COUNCIL OF WESTERN AUSTRALIA

NORTH WEST INBOUND FREIGHT MOVEMENTS: A CONSULTANCY TO IDENTIFY THE POTENTIAL FOR A PARTIAL SHIPPING SOLUTION

Author Phil Rosser

Checker Natalie Wilson

Approver Neil Matthews

Report No. 08

Date 19 June 2012

This report has been prepared for the Freight and Logistics

Council of Western Australia in accordance with the terms

and conditions of appointment for the Pilbara Inbound

Logistics and Coastal Shipping Review dated 19/06/2012.

Hyder Consulting Pty Ltd (ABN 76 104 485 289) cannot

accept any responsibility for any use of or reliance on the

contents of this report by any third party.

Page ii Hyder Consulting Pty Ltd-ABN 76 104 485 289


CONTENTS

1 EXECUTIVE SUMMARY............................................................................................................... 2

2 INTRODUCTION ........................................................................................................................... 5

2.1 PURPOSE ......................................................................................................................................... 5

2.2 OUTLOOK FOR THIS REPORT ....................................................................................................... 5

2.3 RELATIONSHIP WITH THE WESTERN AUSTRALIAN REGIONAL FREIGHT PLAN ..................... 6

2.4 APPROACH AND METHODOLOGY ................................................................................................. 6

2.5 ACKNOWLEDGEMENTS .................................................................................................................. 8

2.6 STRUCTURE OF THIS REPORT ..................................................................................................... 8

3 PILBARA REGION PRODUCTION DRIVERS ............................................................................. 9

3.1 IRON ORE SECTOR ......................................................................................................................... 9

3.2 LIQUIFIED NATURAL GAS SECTOR ............................................................................................. 10

3.3 A CONSOLIDATED VIEW OF OUTPUT ......................................................................................... 11

4 THE PILBARA LOGISTICS PRECINCT .................................................................................... 12

4.1 A SUPPLY CHAIN MODEL ............................................................................................................. 12

4.2 PRODUCTION HUBS...................................................................................................................... 13

5 THE INBOUND FREIGHT TASK ................................................................................................ 16

5.1 MEASURING THE TASK ................................................................................................................ 16

5.2 PATHWAY ANALYSIS FOR INBOUND FREIGHT .......................................................................... 23

5.3 THE CONTESTABLE FREIGHT MARKET ...................................................................................... 25

6 THE ROAD FREIGHT TASK ...................................................................................................... 31

6.1 KEY ROAD PATHWAYS ................................................................................................................. 31

6.2 FORECASTING ROAD FREIGHT DEMAND .................................................................................. 32

6.3 OPERATIONAL ISSUES ................................................................................................................. 33

7 SHIPPING ................................................................................................................................... 35

7.1 ROLE OF SHIPPING SERVICING THE PILBARA .......................................................................... 35

7.2 KEY SUCCESS FACTORS ............................................................................................................. 37

8 SYNOPSIS OF EXISTING PORTS ............................................................................................. 42

8.1 FREMANTLE ................................................................................................................................... 42

8.2 AUSTRALIAN MARINE COMPLEX - HENDERSON ....................................................................... 44

8.3 PORT HEDLAND ............................................................................................................................ 45

Pilbara Inbound Logistics and Coastal Shipping Review

Hyder Consulting Pty Ltd-ABN 76 104 485 289 Page iii


8.4 DAMPIER ........................................................................................................................................ 46

8.5 ANKETELL ...................................................................................................................................... 48

8.6 ASHBURTON NORTH .................................................................................................................... 48

8.7 BROOME ......................................................................................................................................... 49

9 SCENARIO ANALYSIS .............................................................................................................. 51

9.1 SCENARIOS ................................................................................................................................... 51

9.2 INPUTS ........................................................................................................................................... 51

9.3 ASSUMPTIONS .............................................................................................................................. 55

9.4 OUTPUTS ....................................................................................................................................... 56

9.5 SENSITIVITY TESTING .................................................................................................................. 56

10 SUMMARY – KEY ISSUES AND NEXT STEPS ........................................................................ 58

10.1 ROADS ............................................................................................................................................ 58

10.2 CO-ORDINATING/COMMUNICATING............................................................................................ 58

10.3 SHIPPING ....................................................................................................................................... 59

10.4 PORTS ............................................................................................................................................ 60

10.5 FUNDING ........................................................................................................................................ 60

10.6 GOVERNANCE/LEGISLATION ....................................................................................................... 61

11 APPENDIX .................................................................................................................................. 62

Hyder Consulting Pty Ltd-ABN 76 104 485 289


1 EXECUTIVE SUMMARY

In February 2012, the Freight and Logistics Council of Western Australia commissioned Hyder

Consulting to examine the potential for a partial coastal shipping solution in the North West

(Pilbara) inbound logistics task as it relates to iron ore and liquefied natural gas (LNG)

production.

The study encompassed several significant considerations, namely around viability, support

requirements, and capacity to alleviate pressure on road networks; it found there is a prima

facie case for supporting a coastal shipping service to play a greater role in the Pilbara inbound

logistics task.

Both the iron ore and LNG sectors in the Pilbara are experiencing unprecedented growth with

current mining and LNG outputs totalling 470 million tonnes per annum (Mtpa) and forecast to

reach over 1.2 billion tonnes per annum (Btpa) by 2030. This increasing output will foreseeably

drive the inbound logistics task for mining and LNG in the Pilbara; it is forecast to climb from 6–7

Mtpa and reach 10–12 Mtpa by 2030. Inflows will predominantly comprise fuel, ammonium

nitrate, mobile mining equipment, mine consumables and project cargo.

To date, road transport has dominated the Pilbara inbound logistics task with some recent

increases in domestic and international shipping. Both here and abroad however, there is

growing concern over the social and economic implications of road-dominant transport. Work

being undertaken to develop the Western Australian Regional Freight Strategy recognised the

potential growth in the Pilbara inbound logistics task, as well as implications for Western

Australia’s roads and ports infrastructure.

This study finds there is a prima facie case for supporting a coastal shipping service to

the Pilbara.

In principle, a coastal shipping service can be an attractive alternative to land transport when

large cargo volumes and long distances are involved. This study confirms that based on net

tonnes per kilometre, sea freight rates are lower than both road and rail line-haul freight rates

and offset some of the externalities for the community and the environment. The coastal

shipping option whilst subject to other ancillary costs, is comparable with road services.

Using a Net Present Value (NPV) approach, the study found that an alternative coastal shipping

pathway provides a marginally lower NPV cost, thus supporting the case for a coastal shipping

service catering to the Pilbara inbound task. Analysis indicates that coastal shipping can be cost

effective for movements into the Pilbara’s coastal region, however the Pick Up and Delivery

(PUD) costs for movements from ports to mines near Newman and Tom Price are significant—

at about 35 per cent of the direct road cost from Perth to Newman—and may therefore, still

favour road transport.

That said, the matter of converting current (and potential) modal preferences from road

transport to coastal shipping is a strategy facing considerable commercial and operational

challenges, including a highly competitive and entrenched road transport market. Part of the

challenge arises from inbound flows being less integrated than outbound flows owing to the mix

of goods involved, differences in cargo origins, as well as varying terms of trade between

different suppliers and customers; all of this influences who has control over the transport

process and the chosen transport mode.

Furthermore, not all cargo groups are contestable. Commodity groups sourced from overseas

(e.g. fuel and most construction/project cargo) can be immediately discounted along with most

general freight cargo, which tends to be highly price-driven. This study identified three key cargo

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groups deemed contestable for a coastal shipping service: (i) mobile mining equipment (such as

dump trucks and parts/tyres); (ii) ammonium nitrate; and (iii) industrial consumables.

To ensure a viable offering, a coastal shipping service must secure a minimum share of the total

annual south–north volumes across all three contestable markets, in addition to the potential for

north-south movements. Analysis found these thresholds to be: 10 per cent share for mobile

mining equipment; 15 per cent share for ammonium nitrate; 15 per cent share for industrial

consumables. On its own however, high market share will not provide the basis for a

sustainable service. A more holistic view, in the first instance, requires consideration for capital

and operating costs, service offerings, and market pricing. With regard to market prices, coastal

shipping will need to compete with road transport pricing on a door-to-door basis yet still cover

associated PUD costs in addition to ‘quay-to-quay’ sea freight rates.

In its current configuration, the existing Government-supported North West coastal shipping

service into the Pilbara Region (at 22 sailings per year) competes poorly on both cost and

service in contrast to road transport, which offers a highly cost-competitive and well-established

daily service. It should be noted however, that the Government subsidy is directed at the

Kimberley Region and not the Pilbara. A viable, sustainable and competitive weekly coastal

shipping alternative must at a minimum employ two ships operating on a 14-day rotation and

transporting 0.5 Mtpa of Pilbara inbound freight. This volume equates to around 15 per cent of

contestable cargo. With a higher market share, voyage frequency and service could be further

improved.

Appropriate vessel choice will play a large part in providing surety of service within fixed

arrival/departure schedules needed to win market share from road transport. In view of this, the

study compared suitable vessel types, noting their relative advantages and disadvantages, as

well as their capacity to accommodate the requirements of the target cargo markets. In carrying

out this comparison, the study also considered some specific port, land-side and other

associated infrastructure requirements. Achieving desired service levels will depend heavily on

required port infrastructure being in place and also being capable of accommodating forecast

levels of inbound activity and various vessel types. Inbound freight would include ‘out-of-

dimension’, oversized, modular or pre-assembled cargo as found in some target contestable

markets.

In examining existing port options (including roads into and out of port areas) and the

requirements to support a coastal shipping service, this study found that current general

capacity for the Pilbara inbound logistics task is highly constrained in terms of berth capacity,

terminal/lay-down facilities and port road access. While there is better likelihood for participation

at some facilities (e.g. Australian Marine Complex and Fremantle Port), others that are

proposed for development or are currently in early development offer only a small window in

which to consider the needs of a coastal shipping service. Planning and development decisions

will therefore need urgent resolution in order to remain relevant to industry aspirations and

timeframes. At present, a number of proposals that may boost port participation in coastal

shipping services lack approval and/or funding.

At the strategic level, there is a potentially significant role for government to play as seen

overseas where ‘short-sea shipping’ programs have been executed. Forms of support in

Western Australia to effect similar conditions conducive to a viable, sustainable and competitive

coastal shipping service may include: policy and legislation; funding mechanisms;

communication and governance initiatives.

Government also has a role to play in ensuring the right transactional/commercial arrangements

are established among supply chain participants and that road and infrastructure access pricing



has been targeted effectively. It should be noted that the Governemnt does not see any need

for funding support in respect of a future Pilbara shipping service of the sort underpinning the

current Kimberley service.

A key task for Government, perhaps through the WA Freight and Logistics Council is to

undertake a “market sounding” phase with potential and interested shipping operators to review

and refine tha analysis conducted to date.


2 INTRODUCTION

In February 2012, Hyder Consulting was engaged by the Freight and Logistics Council of

Western Australia to review the potential for a partial coastal shipping solution specific to the

North West (Pilbara) inbound freight task.

This posed several strategic considerations:

What is the viability of coastal shipping playing a more significant role in the inbound

logistics task for the Pilbara;

Assuming there is a viable role, what requirements (including port infrastructure and land-

side logistics) are needed to support those shipping services;

Would these services and associated pertinent investment help to alleviate the need for

increased investment into road networks?

Historically, much of the inbound freight into the Pilbara has been transported by road along the

Great Northern Highway but recent trends indicate an increasing proportion is travelling along

the North West Coastal Highway or arriving as maritime shipments originating from Australian

and overseas destinations.

The contestable market for coastal shipping therefore, is only that freight moving by road from

Perth to the Pilbara, currently around 4.6 Mtpa and forecast to grow to 7.0 Mtpa by 2030.

Despite general agreement that coastal shipping could play a more significant role, it is a

strategy faced with considerable commercial and operational challenges including a highly

competitive and entrenched road transport market.

2.1 PURPOSE

This report captures findings from the assessment of strategic options for coastal shipping in

light of the growing inbound logistics task. It considers inbound logistics flows based on

commodity group and also assesses each for transport by coastal shipping.

Using the scenarios developed for this study, a high level assessment of the scope, frequency

and vessel configuration for a coastal service was completed; it takes into account market

perceptions, as well as current modal choice. The inclusion of high level costs for coastal

shipping enables a ready comparison against the costs for road transport.

The study feeds a secondary purpose, namely to assess the high level requirement for port

infrastructure that would be needed to support increased volumes and services; this includes

different vessel types and their respective advantages and disadvantages.

2.2 OUTLOOK FOR THIS REPORT

This report captures findings specific to the Pilbara inbound freight task as it relates to iron ore

and liquefied natural gas (LNG) production. Currently, the Pilbara region generates over

470 Mtpa of mining and LNG outputs.



There is a high correlation between output and the inbound logistics task (inbound flow is

around 1.0–1.5 per cent of output) with some variance depending on the lifecycle of the mining

or the processing facilities in question.

Both the iron ore and LNG sectors are undergoing unprecedented growth. Increased production

within the LNG sector is expected in relation to the Gorgon, Wheatstone and James Price Point

Projects, while the number of iron ore mines is anticipated to double from 30 to 60 mines by

2030.

This combined expansion underpins the forecast production increase, expected to be over

1.2 Btpa by 2030. Accordingly, inbound flows are forecast to grow from the current 6–7 Mtpa to

reach 10–12 Mtpa by 2030. This growth will predominantly involve fuel, ammonium nitrate,

mobile mining equipment, mine consumables and project cargo.

2.3 RELATIONSHIP WITH THE WESTERN AUSTRALIAN REGIONAL FREIGHT PLAN

The WA Regional Freight Plan is a high level, whole-of-state review of the freight task. Its

deliberations have recognised that the Pilbara inbound logistics task will continue to grow and is

likely to raise pressures on the state’s infrastructure, particularly roads and ports.

This report is primarily concerned with the inbound logistics task facing the Pilbara’s iron ore

mining and LNG sectors, as well as the potential role for coastal shipping in this task.

2.4 APPROACH AND METHODOLOGY

Industry stakeholders have acknowledged an underdeveloped body of research looking into

inbound logistics for the iron ore and LNG sectors, so while exact figures for the inbound task

are difficult to determine, this study adopted an approach and methodology that helped to

establish inbound volumes and the associated logistics task. The chosen approach also

reviewed the options for future investment in transport-related infrastructure encompassing

roads, shipping and ports.

Key steps of the approach were:

- review existing material including relevant prior studies;

- conduct face-to-face and/or telephone interviews with industry and government

stakeholders;

- collect data from a wide range of subject matters and sources including stakeholder

interviews, company websites, publicly available government and industry sources;

- use a tailored ‘top-down’/‘bottom up’ approach to help analyse the inbound task according

to commodity group and then determine inbound demand as a ratio of output (demand

was forecast to years 2020 and 2030)

- analyse the inbound task based on a subdivision of the region into several production

‘hubs’ in addition to supply chain models covering cargo origin/destination, current

transport modes and pathways, drivers of mode choice;


- examine the constraints of different transport modes and pathways and use comparative

cost models to analyse future investment options across roads, ports and shipping;

- examine the actions required (from shipping, ports and cargo perspectives) to ensure a

viable and sustainable coastal shipping alternative to road-dominant transport;

- examine the relative suitability of each cargo type for coastal shipping (‘contestable

cargo’), produce relevant SWOT analysis of each based on a shipping cost model, and

determine the minimum market share needed to sustainably compete with road transport;

- identify next steps including the potential role of government and industry to deliver the

factors needed to support effective and viable coastal shipping services.

2.4.1 ANALYSING ROAD FREIGHT MOVEMENTS

The approach for the study considered road freight movements as part of the inbound logistics

task to the Pilbara, and a generalised approach was adopted to classifying road freight, so as to

avoid any underlying complexity of analysis. At it’s simplest; road freight movements were

considered as follows:

- Road trains, whether double or triple configuration that operate within the standard vehicle

dimensions and under a general access vehicle arrangements

- Road trains configured as above however have a heavier mass and operate under

restricted access vehicle arrangements; these vehicles carry more tonnes however appear

to be the same as the general access vehicles

- Vehicle movements which operate as high and/or wide loads, operating under an

approved permit, and may or may not require an escort

A generalised consignment mass of 70 tonnes per movement is used throughout the analysis

and the percentage of vehicles operating as oversized is assumed to be 10%1.

2.4.2 OVER SIZE OVER DIMENSION LOADS

This report makes reference to Over Size Over Dimension road cargoes. It should be noted that

there is no nationally accepted terminology for the movement of restricted access vehicles

(RAVs) carrying cargo that is a High Wide Load (HWL), Excess Dimension and Mass (EDM),

Over Height and Mass (OHM), Out of Gauge (OOG)—follows rail and shipping terminology—or

Over Size Over Mass (OSOM).

This is because loads can possess some (but not all) of these characteristics. Some loads may

be longer than standard but not necessarily wider, higher or heavier. This report uses OSOM as

a generic term for non-standard movements or those requiring permit approvals.2

1 The analysis undertaken for the study found that varying these assumptions does not demonstrably affect the relativity

of the scenario results.



2.5 ACKNOWLEDGEMENTS

Hyder would like to acknowledge the assistance of many stakeholders including various iron ore

producers, LNG producers, transport companies, logistics providers, shipping lines, port

authorities, the Chamber of Minerals and Energy WA, Department of State Development and

Main Roads WA.

Specific acknowledgement is given to Mr Bill Preston (Department of State Development) for his

assistance with compiling data on future iron ore mine expansion in the Pilbara and forecast

production through to 2030.

In undertaking this study, Hyder referred to prior works: Meyrick and Associates’ Pilbara Freight

Study—December 2008; SKM’s Pilbara Freight Movement Study—October 2004.

2.6 STRUCTURE OF THIS REPORT

This structure of this report reflects the logical development of the study itself. Section 3

provides an overview of the iron and LNG sectors whose production forms the key driver for the

inbound logistics task. Section 4 separates the two sectors according to industry location and its

impact on the inbound logistics task.

Section 5 examines the inbound task according to cargo category and assesses each in terms

of market size, source, as well as suitability and contestability for coastal shipping. Sections 6

and 7 compare the road freight task and the coastal shipping task in terms of demand,

constraints and future options for shipping.

Section 8 examines the port infrastructure requirements based on the shipping options

developed in Section 7 and also using current/proposed port development plans.

Section 9 looks at the financial impact of different road, shipping and port options. Other issues

and next steps are presented in Section 10.

2 This issue is also highlighted by the ‘Out of Gauge Co-Ordination Unit’ Report prepared for the FLCWA by Adam Pekol

Consulting.


3 PILBARA REGION PRODUCTION DRIVERS

Western Australia’s thriving resources sector is the country’s largest single export market.

Ninety-five per cent of total merchandise exports from Western Australia comes from the

minerals and petroleum sectors and in 2010-11, the resource sector employed over 92 500

people across the state.3

The outlook for this state’s minerals and resources sector remains positive with continued

growth expected to drive more than $200 billion worth of major new resource projects—either

committed or under consideration—in both the iron ore and LNG sectors4.

The majority is located in the Pilbara region, which accounts for over $150 billion of the

proposed new resource projects. Around 60 per cent of this investment is in the oil, gas and

condensate sector, with iron ore comprising the second largest spend and capital-intensive

magnetite projects also increasing the average iron ore project spend.

The Pilbara region now accounts for approximately 20 per cent of the nation’s exports and

encompasses various forms of oil and gas reserves off the north-west coast and iron ore from

the inland mines.

3.1 IRON ORE SECTOR

The Pilbara iron ore sector presently generates around 450 Mtpa of exports, most of which is

exported through Port Hedland and Dampier Port. Growth in production is expected to reach

more than 1.1 Btpa by 20305 with new ports at Anketell and Cape Preston handling a proportion

of this volume. Forecast growth is around 8 per cent annual compound to 2020 and then

slowing to around 3 per cent afterwards by 2030. Table 1 and Figure 1 depict this growth.

The next 3–4 years will see a wave of construction activity in the iron ore sector as it nears the

peak of its initial mine production phase. A number of existing mines will be expanded while

greenfield developments are yet to be established by incumbent players and new entrants into

the Pilbara mining sector.

Expansions are expected to include BHP Billiton’s Rapid Growth Project, Rio Tinto’s Pilbara

Expansion and Fortescue Metals Group’s Chichester Hub (2013) and Solomon Hub (2013).

New mine developments are expected to include CITIC Pacific Mining’s Sino Iron Project

(2012), Hancock Prospecting’s Roy Hill Mine Project (2014) and Aquila Resources’ West

Pilbara Project (2014). These combined developments are projected to account for the majority

of growth in Pilbara iron ore exports over the period to 2030.

Appendix B provides a detailed overview of iron ore mine locations and production forecasts to

2030.

3 WA Department of Mines and Petroleum

4 Chamber of Minerals and Energy WA

5 This report has drawn on the valuable contribution of Bill Preston from the Department of State Development. The

present outlook of 1.1 Mtpa is marginally lower than that expressed in the Pilbara Outlook Study undertaken as part of

the WA Regional Freight Study.



Table 1 - Iron ore forecast production by port

(Mtpa)

Port 2012 2020 2030

Port Dampier/Cape Lambert 229 320 380

Anketell Port 0 25 70

Port Hedland 221 453 630

Cape Preston 0 22 70

Total 450 820 1150

Source: WA Department of State Development, Bureau of Resource and Energy Economics

Figure 1 - Iron ore production

3.2 LIQUIFIED NATURAL GAS SECTOR

Presently, LNG production is focused on the North West Shelf joint venture situated on the

Burrup Peninsula near Dampier. Expansion in LNG production over the next 5–8 years will see

output increase to more than 80 Mtpa by 2020—near term growth is forecast around 30 per cent

per annum6–with long run production possibly exceeding 100 Mtpa by 2030.

These projects include: the Pluto Project due to commence operations in 2012; the Gorgon

Project on Barrow Island (2014/15); Wheatstone (2016) and Browse Basin Projects at James

Price Point (2016/17).

Table 2 draws from the Pilbara and Kimberley case study report prepared by the Department of

Transport as part of the WA Regional Freight Plan.

6 Bureau of Resource and Energy Economics


Table 2 - Scope of emerging LNG projects

Project status

Gas field Processing/stage Location Potential capacity (Mtpa)

Gas production commencement

Operating NWS NWS JV; 5 trains Burrup 16.3 Current

Under construction

Pluto/Xena Pluto; train 1 Burrup 4.3 2011

NWS NWS life extension and expansion Burrup 4.3 2015

Gorgon Gorgon; trains 1–3 Barrow Island 15.0 2014

Under consideration

TBA Pluto; train 2 Burrup 4.3 2015

Wheatstone Wheatstone; trains 1–2 Ashburton 8.6 2014

TBA Pluto; train 3 Burrup 4.3 2015

Prelude / Concerto Shell FLNG 3.5 2016

Browse Woodside; trains 1–3 James Price Point 15.0 2016

Future prospects

Scarborough Scarborough Ashburton 6.0 2016

Gorgon Gorgon; trains 4–5 Barrow Island 10.0 2020

Browse Woodside or other proponents; trains 4–6 James Price Point 15.0 2021

Total 106.6

Source: Department of Transport WA, ‘WA Regional Freight Plan: Case Study – Pilbara and Kimberley iron ore and LNG

sectors’ (2011)

3.3 A CONSOLIDATED VIEW OF OUTPUT

While long forecasts are known to vary with time, a consolidated view of production provides a

basis for long-running infrastructure planning.

Combined output for the iron ore and LNG sectors is currently around 470 Mtpa and forecast to

reach over 900 Mtpa by 2020. By 2030, the combined output is forecast to exceed 1.2 Btpa.

Industry is in general agreement with these forecasts.

Table 3 summarises the forecast outbound volumes for the iron ore and LNG sectors.

Table 3 - Consolidated view of iron ore and LNG production

Sector 2011 2020 2030

Mtpa Mtpa Mtpa

Iron Ore 450 820 1150

LNG 20 80 100

Total 470 900 1250



4 THE PILBARA LOGISTICS PRECINCT

While production and outbound flows in the region are forecast to grow substantially, these are

mostly vertically integrated processes that are managed by the relevant producer companies.

Industry has substantially invested in building capacity to support efficient outbound product

flow and ultimately, exports sales. In contrast, the inbound flows are less integrated owing to the

variety and nature of goods carried, differences in cargo origins and destinations, and the

individual Terms of Trade between different suppliers and customers; all this influences who has

control over the transport process and the transport mode chosen.

Key drivers in the choice of transport mode include response time and reducing inventories.

Skills and labour shortages in the Pilbara have further seen inventories of inbound goods and

materials relocated from the Pilbara region back to the Perth area. The requirement for ‘Just In

Time’ delivery and the local availability of transport also have great bearing on the choice of

transport mode.

This section examines the scale of the Pilbara inbound logistics task and the emerging issues

and impacts affecting the operation of road networks to, from, and within that region.

4.1 A SUPPLY CHAIN MODEL

The Pilbara iron ore and LNG sectors operate like many other industrial processes—inbound

movement of materials is needed to support production and outbound flows of product as

exports (iron ore and LNG specifically). A supply chain approach was therefore proposed to

describe the dynamic transport processes that can be observed across the region. A

generalised model for the supply chain is shown in Figure 2.

Key points about the supply chain:

a. Production is dominated by the iron ore sector and the outbound transport flows are

mostly by rail, excepting several mines located along the Pilbara coastal region.

b. The outbound flows for the LNG sector do not generate transport movements (per se) as

after processing, product gets diverted to export shipping via pipeline. Inbound gas flows

to the processing facility similarly occur by pipeline.

c. While the iron ore and LNG sectors both use processing plants and equipment, the iron

ore sector also requires other mining inputs including explosives, fuel, grinding media,

metals and mobile handling equipment (e.g. excavators and dump trucks).

d. Inbound flows occurring in the construction phase of the mine site or processing plant

are generally much higher than during the ‘steady state’ operating phase.

e. The inbound freight task relies heavily on public infrastructure (e.g. road networks,

general purpose berths, related facilities), which invariably entails Government

involvement either in an ownership or policy capacity.

In general, bulk commodities and/or manufactured materials originate from:

a. Perth or Fremantle and are transported to the Pilbara region by road or shipped by

coastal vessels through Pilbara ports;

b. Overseas (as imports) and are stored at the marine ports (such as with fuel) or at

logistics facilities.


Imported bulk commodities and/or manufactured materials are transport to iron ore mines by rail

(e.g. as with fuel) or by road as either ‘general’ or ‘over size over mass’ (OSOM) loads.

Figure 2 - generalised supply chain and transport model for Pilbara iron ore and LNG sectors

Supplier’s

warehouse and

inventory

Fremantle port or

AMC Henderson

Port Hedland,

Dampier or other

Pilbara port

Port logistics

precinct and/or

storage

Mine site (inland)

or LNG site

(coastal)

Perth metro

PUD move

by road

Pilbara region

distribution

by road or rail

Road train

assembly area

(Wubin/Apple St.)

Shuttle movement

to Wubin

(semi or double

road train)

Regional/intrastate

movement by road

(triple road train)

Regional/intrastate

movement by road

(double road train)

Gorgon

development

(Barrow Island)

Coastal shipping

movement

Coastal shipping

movement

Overseas supplier

Plant and

equipment; bulk

fuel, etc

4.2 PRODUCTION HUBS

The forecast growth in the iron ore sector will see the doubling of mines from around 30 at

present to more than 60 mines by 2020. A number of these mines will replace depleted mines

while others are ‘greenfield’ developments. An optimal method of assessing current and future

transport flows into the region is to view these mines within ‘hubs’ rather than individually. The

relationship between the hub and the transport networks will therefore, influence the inbound

pathways.



a. Iron ore production hubs in the Pilbara are mostly located inland, predominantly in the

Newman and Tom Price regions. A number of mines are also located along the coastal

belt in proximity to the Pilbara ports. Many of these hubs are proximate to road and rail

networks.

b. The LNG industry is located along the coastal region at Burrup (Dampier), Ashburton

(Onslow) and James Price Point (north of Broome).

The location of each mine cluster or LNG plant, and the origin of the inbound materials, will also

influence the desired pathway. By 2020, it is anticipated the coastal region will account for

20-25 per cent of production, and therefore, will also account for a similar proportion of inbound

logistics activity.

Table 4 - Distribution of production in Pilbara precinct

Sector/region Current 2020 2030

Iron ore production (Mtpa)

Coastal 31 102 198

Tom Price 109 154 185

Newman 310 564 767

Total 450 820 1150

LNG production (Mtpa)

Coastal 20 80 100

Total production (Mtpa)

Coastal 51 182 298

Tom Price 109 154 185

Newman 310 564 767

All 470 900 1250

Total production (%)

Coastal 11% 20% 24%

Tom Price 23% 17% 15%

Newman 66% 63% 61%


Figure 3: Regional base map showing iron ore mines, LNG facilities and port locations



5 THE INBOUND FREIGHT TASK

The inbound freight task encompasses the overall demand for input goods and materials

needed to support iron ore and LNG production output. Within this general description however,

are two distinct sub-groups with different characteristics and logistics requirements. One group

covers the needs and cargo flows associated with construction/project and expansion phases,

while the other encompasses those flows supporting ‘steady state’ operations.

Construction/ Project phase: refers to goods and materials used in construction of iron ore and

LNG production facilities (e.g. building materials, steel fabrication, accommodation units, plant,

gas storage and processing units, pipeline material).

Steady State operations: refers to goods and materials required to support ongoing iron ore and

LNG production. These include industrial ‘inputs’ such as fuel, ammonium nitrate (as

explosives), mining equipment (including excavators, dump trucks and parts), as well as general

freight to support the workforce.

5.1 MEASURING THE TASK

The inbound logistics task is highly correlated with the outbound task and as the latter grows, it

is foreseeable that the inbound task will similarly grow. This may accelerate over the next

3–5 years as the construction material needed for expanding new iron ore and LNG production

facilities is transported to, and across, the Pilbara region.

Industry acknowledges that inbound data is less than mature, although a number of prior

studies have estimated the inbound task to be between 0.6 and 2.0 per cent of output volumes.

Mature operations with stable production outputs tend to be at the lower bound, whereas the

upper bound is more likely during expansion.

It is worth noting that analysis of the Pilbara and Kimberley iron ore and LNG sector outlook

found a range from 1.1 to 1.3 per cent for iron ore, and up to 1.6 per cent for the LNG sector.

The present study, which leverages some of the prior findings and is informed by further

input from sector stakeholders, has confirmed a similar range. Results support a ratio

around 1.5 per cent at present, then declining to around 1.1 per cent by 2030.

The present inbound logistics task is estimated around 6-7 Mtpa and expected to rise to

10-12 Mtpa by 2030.

While further analysis should continue to refine this forecast, it is imperative to note that

the current road-dominant transport flows presents immediate challenges for

community, industry and government. The forecast 40 per cent increase in road freight

by 2020 and 75 per cent by 2030 underlines this point.

All of these factors pose great challenges for managing the inbound task, which is made more

complex by the nature of the goods and materials, multiple points of origin and destination being

involved, and diverse Terms of Sale that influence management of the transport arrangements.


Table 5 provides a high level summary of inbound logistics forecasts while the following report

sections provide further supporting information for these estimates. These include separate

analyses for construction and project cargo, as well as ‘steady state’ cargo.

Table 5 - Forecast inbound logistics task to 2030

Sector Cargo volumes (Mtpa) Current 2020 2030

Iron ore Outbound 450 820 1,150

LNG Outbound 20 80 100

Total Outbound 470 900 1,250

Ratio Inbound to outbound 1.47% 1.10% 1.03%

Total Inbound 6.9 9.9 12.9

5.1.1 CONSTRUCTION OR PROJECT CARGO

Both the iron ore and LNG sectors are going through a major expansion phase. Within the LNG

sector, the North West Shelf, Pluto and Gorgon projects are ongoing while the Wheatstone and

Browse projects are commencing over the coming years. Within the iron ore sector, new and

expanded mines are planned in the West and Eastern Pilbara.

Where construction material was previously sourced and fabricated locally (‘stick-built’), labour

and skills shortages in the Pilbara have seen fabrication moved to Perth or overseas.

Construction units are often pre-assembled as large/modular structures that require transport

from the point of fabrication to the Pilbara.

By their nature, project cargo is often ‘indivisible’ due to abnormal dimensions and weights that

are not easily conveyed by standard equipment. Such cargo includes steel structures,

transformers, generators, pre-fabricated buildings, accommodation units and oversized/heavy

machinery.

Volume

Volumes for project cargo are generally more complex to determine than for other categories7.

With much of the construction work contracted out to construction specialists, data is often at

‘arm’s length’ to the mine owner. Given the state of construction activity though, the current

volumes are expected to increase over the next 3–5 years as construction continues. After

2017-18, this should reduce to around 1.0 Mtpa by 2020 and 0.5 Mtpa by 2030.

7 The estimation for project cargo was undertaken with industry specialists. One method for estimating volume was to

assess the weekly volume of shipping capacity assigned to this category. Presently, there are 2–3 weekly ship visits for

construction cargo.



Table 6 - Estimated volume of construction and project cargo

Project Cargo Current 2020 2030

Volume (Mtpa) 1.4 0.9 0.5

Ratio to gross output 0.30% 0.10% 0.04%

Source: Industry and project stakeholders

Source

Pre-fabrication of construction/project cargo is predominantly undertaken in Asia and to some

extent, locally in Perth. The Australian Marine Complex Henderson8 (AMC Henderson) is

playing a key role as a centre for the LNG industry.

Transport method

Material sourced from Asia is transported directly to the Pilbara by ocean shipping, either on

liner vessels or specifically chartered vessels. This is particularly the case for the LNG sector

where production and distribution units tend towards ‘large scale’.

A number of specialist shipping lines cater for the international maritime transport of

modularised construction/project cargo: Spliethoff Shipping; Austral Asia Line; BBC Chartering.

Project cargo that is pre-fabricated in Perth (e.g. at AMC Henderson) is loaded directly from the

AMC onto dedicated charter vessels and shipped directly to Dampier or Barrow Island. Table 7

provides an estimate of these flows.

Table 7 - Estimate of maritime movements of construction cargo

Project cargo (Mtpa) Current 2020 2030

Ex Perth by sea 0.5 0.5 0.25

Ex Intl. by sea 1.0 0.5 0.25

Total 1.5 1.0 0.5


5.1.2 MINING EQUIPMENT AND TYRES

The iron ore sector is ending one stage of operations and entering another, so demand for

mining equipment is currently very high. This includes earthmoving equipment used in mine

construction, as well as dump trucks, dozers and tyres used in ongoing ‘steady state’ mining

operations.

Volume

With demand so high, mining companies are buying both new and second-hand equipment,

particularly dump trucks. The study found that one mining company has been replacing dump

trucks at the rate of two per week due to exhaustive use.

This is exacerbated by the current trend towards larger, heavier vehicles and larger load trays

that offer greater carrying capacity.

8 AMC Henderson refers to the Australian Marine Complex located south of Fremantle.


In keeping with this, demand for tyres is also changing. Road transport operators are now

adapting their vehicles to transport tyres stacked upright whereas previously, tyres were stacked

flat that create wide loads.

The recent surge in demand for mining equipment and their parts/tyres has been a key factor

behind increased northbound road movements and southbound ‘backload’ movements

delivering parts and machinery for repair or refurbishment.

Table 8 - Estimated volume of mining and mobile equipment

Mining Equipment Current 2020 2030




Source

New equipment is mostly sourced from overseas (United States and Asia) where it is

manufactured under licence and imported through Fremantle on RORO9 vessels. All major

manufacturers of mining equipment have representation in the Perth area— CAT, Komatsu,

Liebherr, Bucyrus, Terex—where imported machinery is first brought up to Australian standard

before being transport northward.

Most second-hand equipment is similarly sourced overseas. They are imported through

Fremantle and then transferred to supplier depots within the Perth area. Prior to leaving their

port of arrival for transport northward, imported second-hand equipment must first be approved

by AQIS (Australian Quarantine and Inspection Service) as this equipment often requires a

‘wash-down’.

Transport method

The Terms of Sale for mining equipment generally entails ‘Deliver to Site’, so transport

arrangements are the responsibility of the suppliers rather than mining companies. Suppliers

tend to sub-contract this haulage to heavy haulage specialists such as HWE.

An ever-increasing number of these loads are now classified OSOM, so northbound road

movement is restricted to the Great Northern Highway via Wubin and Newman. This report

notes one observer’s comment that, ‘the Great Northern Highway will eventually become a

freight-only highway’.

Current ‘Special Permit’ applications are estimated to be in excess of 200 per day with 80 per

cent related to OSOM loads. An industry view supports this type of cargo being suitable for a

coastal shipping service for both new and second-hand equipment.

5.1.3 FUEL

Fuel is a key input into the iron ore sector, particularly for explosives used during ore extraction

and to fuel mine equipment and rail operations. Demand from the LNG sector is negligible.

9 Refers to Roll-on/Roll-off vessels



Volume

Current demand is in the vicinity of 700 000 tonnes per annum. As new mine sites are being

developed, demand is forecast to rise to around 2.2 Mtpa by 2020 and reach 3.1 Mtpa by 2030.

Table 9 - Estimated volume of fuel inputs

Fuel Demand Current 2020 2030



Source: Assembled from stakeholder interviews and data and analysis of prior studies

Source

Most of the fuel delivered to the Pilbara is sourced from Singapore and shipped directly by

tanker vessel to the ports of Dampier and Port Hedland. Fuel arriving by seagoing tankers is

stored at the port before on-transport to different mine site clusters.

Transport method

In 2010-11, the port of Dampier imported some 485 000 tonnes of product annually. This port

has two storage tanks dedicated to the Woodside Supply Base and two storage tanks

(100 000 litres) dedicated to Mermaid Marine Supply Base. Rio Tinto has an arrangement with

BP covering four fuel storage tanks from which product is railed to Rio Tinto’s mine site fuel

storage facilities at Brockman, West Angelas, Tom Price and Paraburdoo (Tom Price is being

wound back in favour of Paraburdoo). Rio Tinto currently has a single dedicated fuel train and a

second forecast for 2013 in line with mine expansion.

In 2010-11, Port Hedland imported around 100 000 tonnes of fuel. Both BHPB and FMG have

also established their own dedicated fuel trains serving their respective mines sites in the

Pilbara region.

Mine sites in the coastal hub, closer to Dampier and Port Hedland, are generally serviced by

road tanker.

5.1.4 AMMONIUM NITRATE

Ammonium nitrate is used principally as an explosive in the iron ore mining sector.

Volume

Demand for ammonium nitrate is currently in the region of 300 000 tonnes per annum. This is

forecast to rise in line with new mine production to reach some 750 000 tonnes per annum by

2020 and 1.3 Mtpa by 2030.

Table 10 - Estimated volume of ammonium nitrate inputs

Ammonium Nitrate - Mtpa Current 2020 2030





Source

Current demand is being met almost entirely from the CSBP plant at Kwinana, WA. From time

to time and as an exception rather than the rule, some product has been shipped from CSBP’s

Queensland plant or from overseas through the North West ports (including Wyndham).

Current capacity at the Kwinana plant is around 520 000 tonnes per annum, which is sufficient

for current demand. CSBP has announced plans to increase production to 780 000 tonnes per

annum with construction due to commence later in 2012 with first additional production in 2014.

Norway’s Yara Group has announced a planned joint venture with Burrup Holdings to build an

ammonium nitrate plant on the Burrup Peninsula offering a production capability of

330 000 tonnes per annum. Whilst not yet approved, construction is anticipated to commence

mid-2012 and first production in 2014.

Once all proposed developments are complete, production capability will exceed 1.1 mtpa and

will meet the level forecast demand at the ratio of Kwinana 70 per cent to Pilbara 30 per cent.

Distribution from Perth remains a substantial task and will increase.

Transport method

With Kwinana being virtually the sole source of ammonium nitrate, all inbound requirements are

moved north to mine sites by road. Current road movements are in the vicinity of 14 road trains

per day. Trucking has been the preferred transport method given that volume limits were

imposed on ports and shipping companies in relation to its ‘Class 5.2’ hazardous classification.

Ammonium nitrate volumes present an opportunity for transfer to coastal shipment, particularly

now that volume restrictions at WA ports have been eased.

5.1.5 INDUSTRIAL CONSUMABLES

Industrial goods and materials used in production—mainly in the iron ore sector—include

grinding media, grinding rods, chemicals, wire rope, rail wheels and axles, bar stock (for

grinding media feed) and rebar and machinery parts.

Volume

The current inbound volume to the Pilbara region is around 400 000 tonnes per annum and as

with other industry inputs, volumes are forecast to rise in line with increased production to

reach 850 000 tonnes per annum by 2020 and 1.5 Mtpa by 2030.

Table 11 - Estimated volume of mine site consumables

Industrial Consumables Current 2020 2030






Source

Perth is the primary source for much of the industrial consumables entering the Pilbara region.

This is growing as mining companies move their inventory holdings back to Perth and close

Pilbara workshops and stores due to lack of labour and skills in the non-mining industries. This

is in contrast with higher availability of both in Perth.

Transport method

Mine site industrial consumables are carried on general road trains along with other general

freight. Current demand is around 25 road trains per day, which is expected to increase to over

100 road trains per day.

The requirement to move parts and equipment back to Perth for repair and refurbishment has

resulted in increased ‘back-load’ movements heading from the Pilbara to Perth. This opportunity

to divert more northbound and southbound freight to a costal shipping service should be

considered.

5.1.6 GENERAL FREIGHT

General freight encompasses those goods and materials required for general business function,

the community and for workforce amenity. They include foodstuffs, clothing, stores and other

provisions.

Volume

Currently, the annual volume of inbound general freight is around 400 000 tonnes per annum,

similar to the volume of industrial consumables. Both have similar forecast growth in line with

increase production.

Over the longer term, the ratio of general freight is expected to rise as the Pilbara cities take

shape and as the current ‘fly-in, fly-out’ workforce is increasingly replaced by a local workforce.

Table 12 - Estimated volume of general freight

General Freight Current 2020 2030



Source: Assembled from stakeholder data as well as analysis of prior studies

Source

The majority of general freight for both the iron ore and LNG sectors is sourced from Perth. The

Terms of Sale tend to be ‘ex warehouse’, so loads are consolidated either at depots run by

logistics operator or directly from Distribution Centres where volumes are sufficient.

Transport method

Transport of general freight from Perth to the Pilbara occurs by road, wherein major logistics

operators work with major mining companies and oil & gas producers on a contractual basis.

These operators will often manage the inventory process on behalf of their clients.

The general approach is for transport and logistics companies to operate from depots in Perth’s

eastern industrial areas (e.g. Hazlemere, Canning Vale, Welshpool) in conjunction with their

depots at key destinations points and en-route (e.g. Carnarvon, Karratha Dampier, Port

Hedland, Kununurra, Tom Price, Newman, Broome).


The preferred northbound transport route is the North West Coastal Highway, along which

numerous en-route cargo drops may be made.

General freight does not ideally lend itself to a coastal shipping service where sailing is

infrequent and costs are higher compared to the cost and flexibility of daily road transport

options.

5.2 PATHWAY ANALYSIS FOR INBOUND FREIGHT

Unlike the outbound flow of iron ore—which follows specific pathways from mine to port and

onto ship—the pathways for inbound logistics are subject to a variety of demands and

commercial drivers.

Table 13 and analysis of the pathway flows associated with inbound logistics is based on

several assumptions:

a. Project cargo is imported directly into the Pilbara Ports except for cargo moved from AMC

Henderson to Dampier/Barrow Island by coastal shipping.

b. Mining equipment is mostly sourced from Perth as the main inventory point for new

equipment or imported second-hand equipment.

c. Fuel is imported into the Pilbara ports and distributed mainly to mining hubs by rail.

d. Ammonium nitrate, industrial consumables and general freight are mostly sourced from

Perth as the location of key inventories. With future nitrate production expected in the

Pilbara, products will be sourced locally. Future supply from Perth will also be higher than

at present. It is assumed that with increasing demand, there is an opportunity to establish

a local stockholding of industrial and general goods imported directly.

The following observations emerged during the study:

a. Road freight movements from Perth are expected to increase from around 4.6 Mtpa to

more than 7.0 Mtpa even after allowing for increased local inventories (of general and

industrial goods) and local production of nitrate.

b. Of this volume, the opportunity for additional coastal shipping services lies in attracting

market share for the carriage of nitrate from Perth and through an increased share of the

mining equipment and industrial consumables.

c. General freight tends to travel along the coastal highway in line with the network of

transport depots servicing the local markets and line-haul operations.

d. Current coastal shipping of project cargo ostensibly relates to equipment inbound to the

Gorgon project, yet this is a model for future coastal shipping services to coastal ports.

e. The distribution of fuel (within the Pilbara) used to serve the mining sector can leverage

the rail capacity that is available.



Table 13 - Pathway analysis of forecast inbound flows

Demand forecasts Volume ex Perth Volume ex Pilbara ports Comments

Current 2020 2030 Current 2020 2030 Current 2020 2030

Project Cargo Volume (Mtpa) 1.4 0.9 0.5 Volume (Mtpa) 0.47 0.45 0.25 0.94 0.45 0.25 Coastal shipping, ex Perth

Ratio to gross output 0.30% 0.10% 0.04% % share by pathway 33% 50% 50% 67% 50% 50%

Mining Equipment Volume (Mtpa) 3.8 4.5 5.0 Volume (Mtpa) 3.57 4.05 4.00 0.19 0.45 1.00 80% as Special Permit or OSOM loads


Fuel Demand Volume (Mtpa) 0.7 2.2 3.1 Volume (Mtpa) 0.00 0.00 0.00 0.71 2.16 3.13 Rail distribution from Ports


Ammonium Nitrate Volume (Mtpa) 0.3 0.7 1.3 Volume (Mtpa) 0.28 0.58 0.75 0.00 0.14 0.50 Road train movements


Industrial Consumables

Volume (Mtpa) 0.4 0.8 1.5 Volume (Mtpa) 0.38 0.73 1.20 0.00 0.08 0.30 Road train movements


General Freight Volume (Mtpa) 0.4 0.8 1.5 Volume (Mtpa) 0.38 0.73 1.20 0.00 0.08 0.30 Road train movements


Totals Volume (Mtpa) 6.9 9.9 12.9 Volume (Mtpa) 5.1 6.5 7.4 1.84 3.37 5.48


Volume by mode

- Road 4.61 6.08 7.15 1.13 1.21 2.35 Includes road movement of project cargo from Pilbara Ports

- Rail 0.00 0.00 0.00 0.71 2.16 3.13 Assumes full movement of fuel by rail

- Coastal ship 0.47 0.45 0.25 0.00 0.00 0.00

Totals 5.07 6.53 7.40 1.84 3.37 5.48


5.3 THE CONTESTABLE FREIGHT MARKET

The opportunity to create a sustainable and viable coastal shipping service requires that firstly,

a sufficient proportion of the contestable inbound freight originating from Perth and destined for

the Pilbara be won.

The previous section of this report examined the key commodity groups that constitute the bulk

of the inbound freight task, including their volumes, source and transport method. Table 13

shows the total inbound freight task at nearly 7.0 Mtpa and forecast to increase to around

13.0 Mtpa by 2030.

Not every commodity group however, is equally contestable and assessment of different groups

needs to account for many factors (e.g. point of origin, Terms of Sale, product value, inventory

costs, transport price, service regularity, delivery frequency, transit time).

To help identify which commodity groups are suited for a coastal shipping service, the SWOT

analysis in Table 14 looks at each key commodity group in terms of contestability between road

transport and coastal shipping mode.

Table 14 - SWOT analysis of inbound freight task

Category Strengths Weaknesses Opportunities Threats

Fuel * Demand is ongoing and increasing

* Essentially non-contestable

* Shipped directly to Pilbara ports from Singapore

* Limited - only if supply from Singapore is interrupted

* Port congestion leading to delays in supply

Ammonium Nitrate * Key component in ‘steady state’ mining operations

* Readily convertible to shipping

* Reduced south-north shipping opportunities

* PUD component makes competition against road extremely difficult

* Demand is ongoing and increasing

* Possible future road pricing may assist shipping task

* Class 5 hazardous cargo - volume limitations may be imposed on carriage by ship

* New production capacity planned for the Pilbara

Industrial Consumables * Key component in ‘steady state’ mining operations



* Requires more than weekly departures


* Potential for return cargo – repairs and refurbishment

* Highly competitive nature of road transport

General Freight * Key component in ‘steady state’ mining operations.



* Requires more than weekly departures


* Highly competitive nature of road transport



Category Strengths Weaknesses Opportunities Threats

Mining Equipment * Key component in ‘steady state’ mining operations

* Main port of import Fremantle makes transhipment to coastal a good option

* Requirement for onward delivery by road from ports to mine sites

* May require differential road-pricing to assist shipping task

* Demand is ongoing and increasing at a higher rate than other categories

* Volume and dimensions of northbound loads present opportunities for conversion to shipping

* Should attract higher seafreight rates

*Possible future road pricing may assist shipping task

* PUD costs associated with onward delivery by road from ports to mine sites

Project Cargo * High inbound volumes during construction phase

* Fabrication activity in the Perth area

* Role of AMC Henderson

* Short term requirement during construction phase

* Large modular nature makes road transport difficult

* Good opportunities for coastal service

* Should attract higher seafreight rates

* Increased direct shipment from Asia

Those commodity groups that are sourced from overseas—such as fuel and most

construction/project cargo—can be immediately discounted as contestable.

General freight is highly contested by the road transport sector and is largely driven by price,

frequency and availability of road transport. As a consequence, general freight has not been

greatly contested by coastal shipping. Were coastal shipping to be supported by a regular, two-

ship weekly service, general freight (especially those of non-perishable nature) may be

considered contestable; more so if the service was supported by three vessels.

The market sectors currently moved by road between Perth and Pilbara and deemed most

contestable for a coastal shipping service are:

a. Mobile mining equipment

b. Ammonium nitrate

c. Industrial consumables

While a SWOT is only one means of analysis, the potential the potential target market for a

coastal shipping service has already reduced to three key groups for further analysis.

Table 15 examines these three contestable cargo groups in more detail using three scenarios

predicting the potential volumes for high, medium and low market shares. The purpose is to

identify the required thresholds to yield sufficient volume to sustain two ships operating on a

14-day rotation, thereby providing a weekly service from Perth to the Pilbara.

A target volume of 0.5 Mtpa is required in order to achieve utilisation of 10 000 tonnes per

voyage. From the table data, it can be seen that a cumulative market share around

12–15 per cent achieves this outcome.


This is deemed to be relatively conservative because an ideal market share of around

20 per cent (i.e. the high growth scenario) would support a third ship operating and thereby,

improve voyage frequency and service.

The cost analysis to follow also indicated that the coastal shipping service (encompassing road

transport ‘Pick Up and Delivery’ or PUD10

services at either end) is competitive for cargo that is

destined for the coastal zone but less competitive for the Newman or Tom Price zone.

In time, there is likely to be an opportunity to attract ‘back-loading cargo’ onto the coastal

shipping service however, this has not been factored into the analysis here. It is understood that

the resource companies are already factoring in a four-year regular maintenance schedule for

all equipment, with the work to be done in Perth. This would represent a significant and regular

southbound trade that would positively impact on a shipping service’s bottom line, potentially

lowering the shipping line-haul selling rates by around 15 per cent, which in turn would stimulate

an increase in market share.

10 PUD relates to road transport charges for collection from point of origin to port of loading, and from port of discharge to

point of delivery.



Table 15 - Target market shares of contestable freight

Target markets (ex Perth)

High growth (20%) Medium growth (15%) Low growth (10%)

Current 2020 2030 Current 2020 2030 Current 2020 2030

Mining Equipment Total contestable demand Mtpa 3.57 4.05 4.00 3.57 4.05 4.00 3.57 4.05 4.00

Target % share % 15% 15% 15% 10% 10% 10% 5% 5% 5%

Secured demand Mtpa 0.54 0.61 0.60 0.36 0.41 0.40 0.18 0.20 0.20

Ammonium Nitrate Total contestable demand Mtpa 0.28 0.58 0.75 0.28 0.58 0.75 0.28 0.58 0.75

Target % share % 20% 20% 20% 15% 15% 15% 10% 10% 10%


Industrial Consumables Total contestable demand Mtpa 0.38 0.73 1.20 0.38 0.73 1.20 0.38 0.73 1.20

Target % share % 20% 20% 20% 15% 15% 15% 10% 10% 10%


Totals from above Total contestable demand Mtpa 4.23 5.36 5.95 4.23 5.36 5.95 4.23 5.36 5.95

Target % share % 16% 16% 17% 11% 11% 12% 6% 6% 7%



5.3.1 FREIGHT TYPES AND REQUIRED VOLUMES

In the previous section, the three main contestable cargoes were identified for coastal shipping:

mobile mining equipment; ammonium nitrate; industrial consumables. It was further established

that a conservative target volume of 0.5 Mtpa is required to achieve a vessel utilisation of

10 000 tonnes per voyage and that this outcome relies on a cumulative market share of around

12–15 per cent. Estimated market share by cargo category is provided as follows.

Mobile mining equipment

As noted in Section 5.1.2, demand for mining equipment—both new and second-hand—is

currently high. South–north road movements are approximately 3.8 Mtpa and forecast to reach

5.0 Mtpa by 2030.

Perth is the main origin point and south–north road transport occurs via the Great Northern

Highway. However, it has been observed that much of the present tonnage comprises OSOM

loads with associated restrictions (e.g. travel times, speeds and routes).

This category is considered contestable owing to the size of the market and the origin points

being accessible to either Fremantle or Henderson. It is even more contestable where

equipment is destined for mine sites in the coastal hub and reduces the added PUD costs

associated with road transport to either Tom Price or Newman.

To ensure sustainability for coastal shipping, the target market share of mobile mining

machinery needs to be a minimum 10 per cent of annual south–north volumes.

Ammonium nitrate

As noted in Section 5.1.4, demand for ammonium nitrate is currently in the vicinity of

300 000 tonnes per annu`m and forecast to reach 1.3 Mtpa by 2030.

Kwinana is presently the principal point of origin and south–north transport occurs by road.

While additional ammonium nitrate production capacity is planned for the Pilbara region, it will

not fully meet demand and so, Kwinana sourcing will remain.

Trucking has been the preferred transport method as volume limitations had been imposed on

ports and shipping companies due the hazardous classification of the product. Since restrictions

on storing this product at WA ports has now been eased, ammonium nitrate is now considered

highly contestable for transport by coastal shipping.

To ensure sustainability for coastal shipping, the target market share for ammonium nitrate

needs to be a minimum 15 per cent of annual south–north volumes.

Industrial consumables

As noted in Section 5.1.5 demand for industrial consumables is currently 0.4 Mtpa, forecast to

reach 1.5 Mtpa by 2030.

Perth is the epicentre for much of the industrial consumables moving into the Pilbara region and

transported south–north by road.

There is an emerging trend which sees mining companies moving inventory holdings back to

Perth and closing Pilbara workshops and stores. This is expected to increase southbound flows

to Perth for maintenance.



Mine site industrial consumables are carried on general road trains along with other general

freight. Current demand is around 25 road trains per day; this is expected to increase to more

than 100 road trains per day.

Industrial consumables are also considered highly contestable for transport by coastal shipping.

To ensure sustainability for coastal shipping, the target market share needs to be a minimum

15 per cent of annual south–north volumes.

Cumulative

Cumulative market share based on low growth (10 per cent) does not deliver the necessary

0.5 mtpa required for a sustainable coastal service. However, at medium (15 per cent) and high

growth rates (20 per cent), the cumulative volume translated as coastal shipping tonnage meets

the required hurdle volume.


6 THE ROAD FREIGHT TASK

Except for fuel distribution from the Pilbara ports, road transport remains the dominant transport

mode servicing the inbound task to the Pilbara region. This includes:

a. inbound movement of mining equipment, industrial consumables, nitrate and general

freight from Perth;

b. distribution of similar products originating from smaller inventories held in the Pilbara ports

and townships;

c. movement of construction/project cargo from the Pilbara ports to mining and LNG projects.

The cumulative road freight task to, and within, the Pilbara region is forecast to increase from

5.7 Mtpa to 9.5 Mtpa for flows from Perth and the Pilbara Ports.

6.1 KEY ROAD PATHWAYS

The road networks servicing the iron ore and LNG sectors in the Pilbara are characterised by

three key elements:

a. the inland corridor of the Great Northern Highway from Perth to Wubin, Newman and Port

Hedland and Broome;

b. the coastal corridor of the North West Coastal Highway from Perth to Geraldton,

Carnarvon, Karratha and Port Hedland;

c. various other local roads extending from the coast to Tom Price, Marble Bar and Newman.

The Great Northern Highway is the shortest route to the Pilbara and a considwerable volume of

RAVs and OSOM loads are directed to use this pathway. There is a substantial weight of

evidence to suggest this corridor is approaching maximum capacity in its current form and at its

current numbers of OSOM loads.

Despite the longer transit, lighter general freight movements generally use the North West

Coastal Highway via Perth/Onslow, even when accessing areas in the eastern Pilbara. This

highway however, runs through residential and tourist areas. This situation creates safety and

amenity concerns for towns such as Geraldton, where there is a width restriction of 8.0 metres

applied to heavy vehicles.

The Pilbara inbound task is equivalent to some 260 road train equivalents per day, of which

around 80 per cent is associated with mining equipment being OSOM11

. Accounting for forecast

growth of the inbound task, pressure will only further increase on both the Great Northern

Highway and the North West Coastal Highway.

11 Nominal estimates correlate broadly with stakeholder advice regarding permit applications



6.2 FORECASTING ROAD FREIGHT DEMAND

Demand forecasts for road freight movement from Perth to the Pilbara ports were provided in

the previous chapter of this report. Actual roadside CULWAY counts for relevant corridors were

last published for 2008/09, so do not reflect more recent growth in mining and LNG demand.

Industry advice suggests that the Great Northern Highway accounts for some 80 per cent of

total northbound road movements with the balance assigned to North West Coastal Highway.

Table 16 extends to year 2030 the demand forecasts that were previously developed to

estimate daily movements in the inbound road freight task.

Table 16 - Nominal road freight forecasts for inbound Pilbara freight (generalised)

Nominal road freight forecast estimates for inbound Pilbara freight

Volume ex Perth Volume ex Pilbara ports

Current 2020 2030 Current 2020 2030

Forecast road demand (Mtpa) 4.61 6.08 7.15 1.13 1.21 2.35

Nominal load (tonnes) capacity per trip 60 60 60 60 60 60

Average number of loads per day 260 340 400 60 70 130

(Assumes 300 days per annum)

Mining equipment

- OSOM @ 80% 160 180 180 10 20 40

- Other 40 50 40 0 10 10

Other general and bulk freight 60 110 180 50 40 80

Total 260 340 400 60 70 130

Nominal corridor share

- GNH 80% 80% 80% 80% 80% 80%

- NWCH 20% 20% 20% 20% 20% 20%

Movements

- GNH 208 272 320 48 56 104

- NWCH 52 68 80 12 14 26

Implications

The following points stem from observations made during analysis:

The generalised results broadly align with what is presently observed as northbound flows

to the Pilbara i.e. the Great Northern Highway is carrying around 200 northbound loads

per day, of which around 160 loads are deemed OSOM, requiring Special Permits and

police escort.

Despite OSOM movements being trialled for night-time operations, the overwhelming

volume of OSOM loads travel in daylight hours. This optimistically equates to around

10 loads per hour across a 16 hour day. Even if travelling in ‘convoy’, this is equivalent to

3–4 movements per hour or one every 15 minutes.

General freight road trains would also equate to 4–5 per hour in addition to the OSOM

convoys.


Forecast to 2020 and beyond, this will increase a further 20% in reference to OSOM

loads and considerably more for general freight loads.

6.3 OPERATIONAL ISSUES

The bulk of the northbound road task is undertaken by double and triple road trains. Triple road

trains are assembled at the road train assembly area in Wubin. South of Wubin, only double

road trains can operate to/from Perth. Around 70–80 per cent of the northbound loads are

currently undertaken by RAVs under special permit.

Freight vehicles that are 2.5–5.5 metres wide need a permit but no escort. Loads over

5.5 metres wide require a police escort while those over 8.0–8.5 metres wide require two police

escorts; the latter now averages up to four loads per week.

Many OSOM movements travel north on the Great Northern Highway irrespective of final

destination. Typically, these are dump trucks used for the iron ore sector and involve either new

equipment or second-hand replacements. Anecdotal evidence suggests that some mining

companies are replacing dump trucks at the rate of two per week.

The volume of current and forecast traffic, in addition to challenging operating characteristics

(i.e. size, reduced transit speeds, convoy length, reduced pavement widths and limited

overtaking opportunities), means that the Great Northern Highway is experiencing adverse

congestion that impacts on the freight operator and the community generally. As one industry

player observed, ‘the Great North Highway is becoming a freight only road’.

An opportunity exists to operate OSOM loads at night. This is presently being trialled as a

means of partially mitigating congestion however, it presents other operating challenges.

Other issues impacting road freight operations into the Pilbara include:

managing compliance with driver fatigue management laws

frequency and adequacy of rest areas and amenities

convoy parking area and overtaking zones

flooding impacts

power lines

‘last mile’ constraints in town areas.

A number of these issues are considered in the following section.

6.3.1 NETWORK CONGESTION POINTS

There are a number of potential congestion points on the road network that influence

movements to, and within, the Pilbara. Table 17 identifies the key points.



Table 17 - Network congestion issues

From To Issue Impacts

Fremantle Port Eastern Industrial areas Port access

OSOM loads on Roe Highway

Slow moving/wide loads ‘first mile’

constraints

Metro Perth AMC Henderson OSOM loads restricted from using

Kwinana Highway

Slow moving/wide loads ‘first mile’

constraints

Metro Perth Apple St RTAA Volume of single trailers moving to

RTAA

General volume of freight vehicles and

road congestion

Roe Hwy GNH interchange Vehicle volumes Mostly OSOM impacts

Double road train impacts

Great Northern Highway

interchange

Apple St/Muchea Swan Valley Conflict with local tourism traffic

Muchea Wubin Double Road Train only Shared traffic impacts

Wubin Newman Triple Road Train allowed Inadequate passing opportunities

especially for OSOM loads

Perth Newman OSOM loads—slow moving, convoys,

lack of overtaking opportunities

Virtually ‘forcing’ all other road

movements onto the longer NWCH—

impacting on other transit and tourist

traffic

Pilbara local

Pilbara local Flooding between Nov/May Potential for delays to road

trains/convoys

Driver hours/fatigue—increased costs

North West Coastal

Highway

Geraldton Width restrictions Local impacts—potential to slow traffic

North West Coastal

Highway

Carnarvon Other traffic / tourism

Overtaking areas etc.

Local impacts—potential to slow traffic


7 SHIPPING

In principle, coastal shipping presents a viable alternative to land transport especially when

large cargo volumes and long distances are involved. On a net tonne per kilometre basis, sea

freight rates are lower than both road and rail-line haul freight rates; it also realises additional

social and environmental benefits associated with reduced congestion, emissions (calculated

per tonne kilometre) and energy use (calculated per tonne kilometre).

Governments have long recognised the benefits afforded by coastal shipping as witnessed in

European Union and United States government-led initiatives to establish coastal shipping as a

viable, efficient alternative to ever-increasing road usage.

With the south–north road network between Perth and Pilbara falling under increasing

pressure—especially from OSOM loads—coastal shipping is potentially well-positioned to offer

a cost-effective and environmentally friendly alternative to all-road transport and to alleviate

some of the road network pressure.

In its current configuration however, the WA coastal shipping service is limited in its ability to

compete on a cost or service footing to the Pilbara region; this is in contrast to highly cost-

competitive and well-established road transport services that are available daily. It should be

noted however, that the present shipping service receives Government support in respect of

providing a competitive freight alternative to the Kimberley Region. Any activity it has in the

Pilbara Region is incidental and could in fact, be limited if there was evidence of the Kimberley

being neglected.

In order to provide an effective and viable alternative, a coastal shipping service will need to

satisfy a number of Key Success Factors. These are examined in more detail in Section 7.2.

7.1 ROLE OF SHIPPING SERVICING THE PILBARA

The inbound logistics task into the Pilbara is modestly served by shipping activity when

compared to road activity. Most inbound activity is associated with the current wave of

construction activity and more specifically, where goods and materials are sourced from

overseas and where consumption occurs closer to the Pilbara ports.

To a lesser extent, the region is served by a coastal shipping service from Fremantle that serves

the Pilbara with calls in the Kimberley. A second service between Perth and the Pilbara involves

a fixed term, dedicated service associated with construction of the LNG Gorgon LNG Project.

7.1.1 INTERNATIONAL SHIPPING

The Pilbara ports are served by a number of international shipping companies transporting

mostly project and general cargoes associated with LNG and iron ore construction projects.

Much of this material is in large, modular form that is pre-fabricated in Asia and requires

transport using shipping lines that specialise in carrying such materials.

Port calls are largely centred on construction schedules so once the construction phase is

complete, it would be doubtful whether these international shipping services would continue to

service the Pilbara ports other than on specific cargo inducement.



Key shipping companies that operate between Asian and Pilbara ports are Spliethoff Shipping,

Austral Asia Line (AAL) and Oceania Pacific Asia Line (OPAL). In many cases, other Australian

ports are called as part of a round-voyage.

Some of the project cargo vessels are voyage specific and chartered for individual construction

project loads. These lines include Hartmann Reederei, BBC Chartering and Mammoet Shipping.

7.1.2 COASTAL SHIPPING

Currently, there are three distinctly different shipping services participating in the Pilbara

inbound task:

1. Liner coastal shipping between Perth/Fremantle and the Pilbara/Kimberley region is

presently served by a single, dedicated Western Australian Coastal service that is

operated by Norwegian ship owner/operator, Jebsens International. The service has been

under Jebsens’ management since March 2010 and was previously operated by the Perth-

based SeaCorp.

The service utilises a single self-geared, container/general cargo vessel—the 3850 gross

tonne ‘Kimberley Queen’. It has a cargo carrying capacity of 4766 Dead-Weight Tonnes or

345 teus (multiplied by 14 tonne loaded containers).

With a sailing frequency of 17 days, this service currently includes port calls at Fremantle,

Dampier, Port Hedland, Broome, Wyndham and Darwin.The Kimberley port calls are

obligatory while the Pilbara ones are by inducement. Cargo types carried are mostly

containerised commodities and break-bulk, as well as general cargo.

2. The Gorgon LNG Project serving Barrow Island is utilising a dedicated shipping service

between AMC Henderson/Fremantle and Dampier/Barrow Island. The service operates on

a cargo-ready basis and uses two highly versatile, multi-purpose combination vessels

chartered specifically for the project to carry materials and equipment that have been pre-

fabricated or pre-assembled at the AMC facility.

Cargo destined for Barrow Island is discharged at Dampier Supply Base (DSB) and

transferred to Barrow using towed Landing Craft Tugs (barges) at a frequency of up to

three per day.

3 Some international shipping lines provide regular coastal services between Fremantle and

the Pilbara as part of their broader overseas schedule. Examples include Spliethoff

Shipping and AAL.

7.1.3 INTEGRATED COASTAL AND INTERNATIONAL SERVICE

A future coastal shipping service is likely to be one of two options:

1 One option is a dedicated coastal shipping service operating between southern ports

(Fremantle/Henderson) and ports in the Pilbara (Dampier/Port Hedland).

Its target market would be the contestable cargo identified in Section 5.3.1, namely mobile

mining equipment, ammonium nitrate and industrial consumables.


The minimum annual cargo volumes needed to ensure service viability is 0.5 Mtpa.

2 Another option is an integrated coastal–international service operating between Fremantle,

Singapore/Port Klang and Pilbara ports (for example). It would combine international cargo

moving between Fremantle and Singapore/Port Klang with cargo moving between

Singapore/Port Klang and the Pilbara, as well as coastal cargo moving between Fremantle

and the Pilbara.

Its target market will be three-fold: one market is international cargo travelling from

Fremantle to South East Asia (largely containers and break-bulk); the second consists of

contestable cargo moving from Fremantle to the Pilbara (this report previously identified

this as mobile mining equipment, ammonium nitrate and industrial consumables); the third

is already active market which consists of cargo moving directly from South East Asia to

Pilbara ports (e.g. modular construction/project cargo).

An overseas operator will have significantly lower operating costs than the operator of a

dedicated coastal service and could even price at marginal cost rates just as overseas

operators moving containers east–west tend to do.

Target market volumes for the coastal leg may be lower than for a dedicated coastal

service in that the shipping line has the ability to carry other cargo from Fremantle to South

East Asia and from South East Asia to the Pilbara, thereby offsetting operating costs.

7.2 KEY SUCCESS FACTORS

For coastal shipping to be an effective alternative to road-only transport, any potential service

offering will need to fulfil a number of key success factors; these are essentially the customers’

(and potential customers’) drivers for modal choice.

Service frequency and reliability

Market price

Vessel configuration

Port infrastructure

7.2.1 SERVICE FREQUENCY AND RELIABILITY

To achieve minimum competitiveness with road transport, a coastal shipping service needs to

provide weekly sailings between Perth/Fremantle and the Pilbara. These must have fixed

arrival/departure days for each port of call and would entail two vessels being employed

(specific type is described later), based on a forecast market share of 0.5 Mtpa.

To maintain service integrity, ports must be able to offer the coastal service fixed berthing

windows or priority berthing so that the vessel can be berthed and worked on upon arrival.

Berthing delays will be detrimental to service integrity and may ultimately force a return to road.

Service reliability is considered as high a priority as service frequency. When offering fixed

arrival/departure days, maintaining the service schedule is paramount, so vessels employed in



a coastal shipping service must have sufficient service speed to make up time if needed

(e.g. delays by inclement weather, delays in port).

This is extremely important where high value cargo has been ordered for construction and

scheduled production is reliant on port arrival of vessels as timetabled. Reliable vessel arrival is

similarly critical where delivery connections for pick-up and on-transport by road are in place

and specialised transport vehicles are involved.

The current coastal service receives priority berthing with the exception of AMC Henderson,

where Berth 4 of the common-user facility is understood to be prioritised around LNG project

ship arrivals for 21 months.

7.2.2 MARKET PRICE

Market prices for coastal shipping will need to compete with road transport pricing on a door-to-

door basis. This includes costs for PUD at the origin and destination (e.g. greater Perth and

Pilbara port-to-mine site respectively), in addition to ‘quay-to-quay’ sea freight rates.

The WA trucking sector is highly patronised and road freight pricing to the Pilbara region is

extremely competitive, particularly given there is not a regular coastal shipping alternative.

Anecdotal evidence suggests that door-to-door northbound road pricing is some 40 per cent

lower than the equivalent by sea – when PUD costs are added.

Rates at this level will make it hard for any coastal service to compete in the general freight

door-to-door market. Concentrating instead on the target markets previously identified presents

better opportunities for coastal shipping services to differentiate its product offering.

Prices for non-general freight should attract a higher rate level, particularly those inputs where

the opportunity costs of non-supply are of much greater value than the monetary value of the

inventory.

It should be noted that where the Government-supported Kimberley shipping service is required

to be competitive with road-based transport, any dedicated Pilbara shipping service would not

be subsidised by the Government.

7.2.3 VESSEL CONFIGURATION

To successfully market to those cargo types identified, future vessels operating in a coastal

shipping service will need be very different and more versatile than vessels currently in use.

Future vessels will be required to accommodate the needs of different cargo types: from

unitised to break-bulk; from divisible to non-divisible; from wheeled to heavy-lift cargo.

Accordingly, it is envisaged that future vessels should:

be larger than current with load capacity in the region of 1000–1200 teus;

provide Roll-on/Roll-off (RORO) capability incorporating heavy-load ramp capacity

provide Lift-on/Lift-Off (LOLO) capability with heavy-lift ship crane capability

(120–160 metric ton)

offer increased deck weight capability and tween decks


offer sufficient service speed to allow for a weekly service (minimum 14 knots).

Vessel types with the capacity to meet these requirements can be divided into the following

categories:

Container/general cargo

Roll-on/Roll-off (RORO)

Container/Roll-on/Roll-off (ConRo)

LASH Barge

Heavy Lift/Combi

Sea Barge

A fuller description of each vessel type and their relative advantages for a coastal service are

detailed in Appendix 3. Table 18 summarises the typical characteristics for a vessel highly

suited to a Pilbara coastal service.

Table 18 - Typical dimensions for future coastal vessel

Alternative vessel type From To

Length Over All (LOA) 100 m 200 m

Beam (Width) 20 m 25 m

Draft (depth) 6 m 10.5 m

Load capacity 10 000 tonnes 12 000 tonnes

Container capacity 1000 teus 1500 teus

RORO ramp Up to 750 tonnes

Ships cranes (heavy lift) X2 X2

As an example, the Gorgon project has a contract to charter two semi-submersible/heavy-lift

ships from Combi Lift of Denmark. The two vessels (Combi Dock I and Combi Dock III) offer

extremely high-loading and discharging flexibility with simultaneous RORO and LOLO capability

i.e. wheeled cargo can be done simultaneously (RORO) as other cargo is discharged (LOLO),

such as from the ship’s deck container, break-bulk and general cargo. The charter is for a two-

year term that will see the two vessels operate in a dedicated shuttle service between AMC

Henderson and Dampier/Barrow Island.

It should be noted that anlaysis of possible vessel types is purely for this costing exercise.

Ultimately, it will be the shipping companies who decide which vessel types best suit this trade.

7.2.4 PORT INFRASTRUCTURE

Earlier in this section, this report established that providing a competitive and viable alternative

to road transport requires a restructure of coastal shipping from its current configuration,

including across service frequency, schedule reliability and vessel type.



Port infrastructure including berths, laydown areas and road access serving coastal shipping

must also be capable of supporting forecast levels of inbound activity and accommodating the

type and number of vessels scheduled. This applies to all inward shipping activity including

coastal services, project ships serving iron ore and LNG construction, as well as vessels

supporting the off-shore oil and gas sector and local port tugs.

Whilst much is being done to cater for port infrastructure associated with outbound export

cargo, the same cannot be said for the inbound task.

Berth utilisation at existing common-user facilities is already high and delays for vessels

awaiting berths are not uncommon. Increased vessel activity due to ongoing fuel movements

and forecast iron ore and LNG construction will only exacerbate this situation.

In order for shipping to play a greater role in moving inbound material to the Pilbara, ports need

additional capacity in terms of wharves and sufficient terminal area to accommodate associated

land-side activity i.e. logistics areas, cargo lay-down and assembly areas. Access to, and

egress from, ports must also be sufficient to ensure through movements to the Pilbara without

hindrance from ‘first mile’ issues.

Having identified a range of vessel types that could serve in a coastal shipping service, any port

of call will still require (as a minimum) a number of additional infrastructure items.

Table 19 - Typical port infrastructure requirements for future coastal vessel

Port characteristics From To

Wharf frontage 400 m 500 m (min)

Wharf apron 50 m 100 m

Lay-down area 10 ha 20 ha

Load capability 40 kPa 50 kPa

Draft (depth) 8 m 12.05 m

RORO ramp yes yes

Mobile cranes yes yes

7.2.5 WHARVES

Additional wharf capacity will need to be able to accommodate a minimum of two 175 metre

‘handymax’ sized vessels simultaneously. It should therefore be considered that a minimum of

two 200 metre berths are required. Allowing for a wharf length of 500 metres would also cater

for port tugs and off-shore supply vessels.

Given the different types of vessels and cargo to be accommodated, wharf construction will

need to be of sufficient strength to accommodate large/modular loads, heavy RORO loads, as

well as containers, general cargo and break-bulk loads.

Wharves should be of a linear nature. Pier/jetty type structures are not suited for the types of

vessel and cargoes being targeted.

Given the flexibility in loading and unloading of the preferred vessel types, port equipment (in

terms of shore cranes) will be minimal however, the provision of shore-based mobile cranes

should be considered.

Cost estimates for delivering 400 metres of new wharf is estimated to be between $160 million

($400 000 per metre) and $200 million ($500 000 per metre), which covers dredging,


reclamation and provision of some 50–75 deep terminal area (2–3 hectares). When adding

sufficient terminal area to cater for logistics centres and lay-down (e.g. between 5 and

20 hectares), development costs of up to $500 million can be expected.

It should be noted that construction costs are estimates only and will vary depending on a

number of factors including: geotechnical and environmental issues that affect the type of

construction and amount of dredging required; channel depths and distance to open sea; wharf

construction.

7.2.6 TERMINAL AREA

The most common concern among current port users is the lack of terminal area for cargo ‘lay-

down’. Lay-down areas are required for cargo assembly, storage awaiting transport or convoy

assembly in the case of split consignments.

Both Dampier and Port Hedland are constrained by lack of sufficient ‘lay-down’ areas. Future

port developments should consider allowing for a minimal ‘lay-down’ area of 5–10 hectares in

any proposed terminal construction and should be contiguous with the wharf area. A 500 metre

wharf with a 100 metre depth will provide for 5 hectares of terminal.

Terminal design and construction should consider heavy duty paving to allow for extreme cargo

weights and masses.

7.2.7 PORT ACCESS

In addition to providing suitable and adequate wharves and terminal areas, adequate access

and egress both to, and from, the wharf and terminal area is critical in future port development.

Access roads into, and out, of the port must therefore be sufficient to provide road corridors

suitable for the types of cargo being moved, especially in respect of oversize project cargos and

OSOM road movements associated with the Pilbara mining areas.

This is particularly relevant for any WA coastal shipping service that aspires to successfully

converting current south–north movements from road to sea.



8 SYNOPSIS OF EXISTING PORTS

The preceding sections of this report examined the types of vessel best suited to operate in a

dedicated coastal shipping service and the infrastructure required by those ports within its

scheduled itinerary.

In this section, existing port facilities are examined. This encompasses their suitability (or

otherwise) to accommodate the proposed coastal shipping vessels and taking into consideration

current facilities, constraints and proposed development plans.

Potential alternative ports are also identified.

8.1 FREMANTLE

As well as being one the nation’s top container and fuel import ports, Fremantle is a key transfer

point for cargo associated with both the iron ore and LNG industry sectors. As well as being an

international port, Fremantle is also the initial point of entry into Australia for a range of goods

and materials comprising the inbound logistics task for the Pilbara.

Principal among these are the mining fleet and parts, which constitute a large proportion of the

overall inbound volume. Mining fleet and parts (mainly tyres) are manufactured principally in the

United States, Europe or (under licence) in Asia. These are then shipped into Fremantle on

board ocean-going RORO vessels. Once cleared by Customs and AQIS, they are transported

by road to dealer premises where they are upgraded to Australian standards before being

transported to the Pilbara region. Certain construction/project cargo also arrives into Fremantle

from overseas by the same means.

The increase in demand for mining equipment—particularly in the dump-truck sector—means

new equipment is being supplemented by second-hand sources that require additional work by

AQIS (including wash-down) before being cleared for onward transport.

Facilities

North Quay in Fremantle’s Inner Harbour provides 811 metres of common-user wharf,

specifically Berths 1 & 2 and Berths 11 & 12. The latter are heavy duty wharves that provide the

principal unloading point for international Ro/Ro vessels carrying mobile mining equipment and

certain project cargo.

Victoria Quay has six common-user berths of which four—Berths E to H—are used

predominantly by car carrier vessels, as well as by some project vessels.


Table 20 - Current port facilities suitable for coastal task

Fremantle Berths Length (m) Depth (m) Max vessel draft

North Quay 1 Common User 207.0 11.0 10.5

2 Common User 175.0 11.0 10.5

11 Common User 196.0 11.0 10.5

12 Common User 233.0 11.0 10.5

Victoria Quay D Common User 176.0 11.0 10.5

E Common User 230.0 11.0 10.5

F Common User 204.0 11.0 10.5

G Common User 206.0 11.0 10.5

H Common User 275.00 11.0 10.5

Constraints

Observed constraints:

Recent increased importing of large mining machinery is putting pressure on existing port

land. The terminal area serving Berths 11 & 12 is experiencing pressure not only from

increased volumes but from increasing cargo dwell times.

Berth occupancy rates are currently very high.

Increased dwell times stem from additional time being needed for AQIS to inspect and

wash second-hand equipment and for processing ‘Special Permit’ requests for Restricted

Access Vehicle movements.

Victoria Quay wharves are constrained by their lack of heavy duty capability. The

Fremantle Passenger Terminal occupies wharf frontage at Berths F and G, while a large

proportion of the terminal area is consumed by storage and processing of imported cars.

Internal transfer between North Quay and Victoria Quay wharves is also constrained,

especially for OSOM loads.

The handling of large, OOG freight is greatly constrained as Fremantle is not on the state’s

HWL corridor.

Requirements to support coastal shipping

Based on the requirements identified in Section 6 of this report, Fremantle is well-served to

accommodate the type of vessels in question. As the principal point of import, Fremantle is

obviously well-positioned to manage direct cargo transfers between international and coastal

vessels.

Current wharf facilities at North Quay are suitably equipped in terms of quay length, quay

strength and terminal area. Both RORO and LOLO operations can be accommodated, in

addition to heavy lift. Equally relevant is the ability of these berths to offer priority to a potential

Pilbara service.

Road access to the port is generally adequate, although OSOM egress is potentially

constrained as loads continue to increase in dimension.



To accommodate the requirements of the prescribed coastal shipping service, North Quay

Berths 11 & 12 provide the best option. Berth E at Victoria Quay is a potential alternative but is

constrained by its lack of heavy-duty capability.

In the longer term and should container trade be transfered to the proposed Outer Harbour

development at Kwinana, there is an ideal opportunity for the current container berths at North

Quay—specifically Berths 4 through 10—to provide dedicated facilities for coastal shipping

services and project vessels contiguous with the existing RORO Berths 11 & 12.

8.2 AUSTRALIAN MARINE COMPLEX - HENDERSON

The AMC at Henderson (23 kilometres south of Perth) was established as a centre for

manufacturing, fabrication, assembly, maintenance and technology development in addition to

serving the marine, defence, oil & gas and resources industries. The AMC is operated under the

auspices of the Department of Commerce and is home to the largest marine industry in

Australia.

Currently, it has also become a key centre for fabricating, assembling and shipping large

infrastructure modules needed for the offshore oil and gas industry. AMC is the key centre for

the Gorgon LNG Project—local fabrication takes place within the precinct and is loaded directly

to chartered project vessels operating between the AMC and Dampier/Barrow Island.

Facilities

The AMC has four wharves including one equipped with a 300 tonne capacity crane for load-out

and stowing on-board project cargo vessels. These wharves are supported by:

a 40 hectare common-user facility that includes a 99 metre x 53 metre floating dock and a

self-propelled modular transporter (SPMT) to transfer vessels and heavy modules

between land and water;

a common user facility with some 40 hectares of laydown area catering for modular

assembly and testing, and a Main Fabrication Hall with 168 000 cubic metres of space;

a 38 hectare Support Industry Precinct in close proximity to Perth’s heavy industrial zones

and provides ease of access to OSOM loads;

an 80 hectare Fabrication Precinct featuring direct access to the common user facility (the

precinct hosts a dedicated 20 hectare ‘Subsea Cluster’ that can manage fabrication and

load-out of pre-assembled units up to 15 000 tonnes in weight).

Constraints

Current high patronage from the LNG sector has raised concerns over berth availability,

particularly where fixed-day guaranteed berthing windows are required for a liner coastal

shipping service.

Shipping of project cargo operates differently to liner shipping in that ship loads are specifically

‘built’ and moved only when ready; not necessarily to a fixed schedule. Any dedicated coastal

shipping service will require guaranteed berthing arrangements.

A key constraint of AMC as the Perth base for a coastal shipping service would be any

dislocation from Fremantle. Since Fremantle is the principal import location for certain materials

and equipment, dislocation would rely on road transport to Henderson if the latter were to be the

main load point for northbound coastal cargo.



AMC Henderson is well-positioned to play an active role in a coastal shipping service. The

facility is well-served against the requirements previously identified i.e. sufficient quay length,

RORO and LOLO capability, heavy lift and sufficient terminal area.

Given its current role as the Perth base for the fabrication, pre-assembly and shipment of LNG

project cargo, the AMC offers exceptional opportunities for the iron ore sector also. As with the

LNG sector, construction material required for the iron ore sector can be pre-fabricated onsite

and loaded directly to coastal shipping vessels, most likely in addition to calls at Fremantle.

AMC is strategically located on the HWL corridor, thus enabling local transport of OSOM loads

and direct loading onto vessels from within the AMC. AMC’s proximity to the proposed

Fremantle Outer Harbour provides long term opportunities for closer operational synergies with

the Port of Fremantle, particulalrly as the the current Gorgon arrangements conclude by

mid-2014. Current Government policy is that AMC should not perform as a commercial port but

this could change given its potential in terms of a coastal shipping role.

8.3 PORT HEDLAND

Since handling its first iron ore export in 1965, Port Hedland has become the highest tonnage

port in Australia. In line with increased iron ore production, the Port Hedland Port Authority

(PHPA) has overseen ongoing capacity development to manage the growing task of iron ore

exports that now exceed 200 Mtpa.

In recent years, Port Hedland has also seen an increase in vessel calls associated with the

inbound logistics of the mining sector. These include fuel imports from Singapore,

construction/project cargo from Asia, as well as the current coastal shipping service.

Facilities

Existing facilities at Port Hedland for non-iron ore cargo are PHPA Berths 1 through 3 which

have a combined length of 527 metres. Associated terminal area for inbound logistics and cargo

lay-down/assembly is limited.

Table 21 - Current port facilities for non-iron ore cargo

Berths Length (m) Depth (m) Max vessel draft Comment

Berth 1 213.0 13.2 13.0 General/containers

Berth 2 131.0 13.2 13.0 General/containers

Berth 3 183.0 13.2 13.0 General cargo

Constraints

Capacity at Berths 1 through 3 is already constrained and berth utilisation exceeds acceptable

limits. As a consequence, inbound vessels of all types are often delayed—sometimes waiting up

to six days for a berth—which creates delays for critical cargo and incurs costs in terms of

vessel demurrage.



The projected new mine developments are driving forecast inbound ship arrivals to reach some

500 over the next five years—this equates to an average of two per week. General cargo

Berths 1 through 3 however, are likely to reach capacity within the next three years.

This berth capacity issue is further exacerbated by Port Hedland’s lack of terminal back-up land,

so inbound cargo has to be transported directly from ship to satellite locations away from the

immediate wharf area. Where consignments are split over more than one vessel, cargo that is

off-loaded from one vessel may be forced to wait days before the consignment balance arrives

with obvious consequences for consignments moving in convoy.

While the Lumsden Point proposal addresses much of the inbound task requirements, the

development proposal itself is constrained by lack of planning approval and funding sources.


Port Hedland is limited in its ability to accommodate the type of vessel advocated for a future

coastal shipping service. Indeed, existing port facilities struggle to manage the current inbound

task and port users are faced with unacceptable and costly delays.

Current wharf facilities are modest and limited to the type of vessel currently employed in the

coastal service i.e. small capacity container/general cargo. These facilities however, will not

support a future coastal shipping service employing multi-purpose vessels as prescribed.

The port will also struggle to accommodate the numbers of vessels and volumes of cargo

planned in association with the new iron ore mine construction.

In order to accommodate the requirements of increased vessel calls—including a coastal

shipping service—Port Hedland will need, as a minimum, two additional berths

(400—500 metres) and associated terminal area to cater for logistics and lay-down needs

(10–20 hectares).

The Lumsden Point development may resolve this issue and could potentially include RORO

capability; this review was given to understand that major international RORO shipping lines

that carry project cargo and equipment for new mine construction have expressed their interest.

The development will also support LNG rig tender vessels, off-shore supply and support craft,

imports of cement, fuel, and pre-assembled modules, as well as earth moving, mining and

processing equipment.

However, unless there is progress in terms of planning and funding such a strategy, mining

companies may seek alternative transport means to meet their inbound cargo requirements.

8.4 DAMPIER

Dampier Port is both the nation’s second highest port for iron ore exports and a major marine

hub for the LNG industry, owing to its proximity to the North West Shelf area of oil & gas

extraction and production.

In 2009/10, Dampier Port facilitated the inbound modular movement of the $12 billion Pluto LNG

Project. This entailed some 264 fabricated modules—the largest around 2000 tonnes—being

shipped on heavy-lift, wide-deck, RORO vessels and assembled on the Burrup Peninsula.

Dampier is well-versed in managing such project cargo/modular shipping vessels and has

become the marine hub for the North West Shelf, Pluto and Gorgon LNG projects. Its port

facilities for non-LNG activity however, are limited.


Facilities

Current port facilities catering for inbound, non-iron ore shipments are shown in Table 22.

Table 22 - Current port facilities for non-iron ore cargoes

Berths Length (m) Depth (m) Max vessel draft Comment

Cargo Wharf – West 209.6 10.0 9.0 General/containers

Cargo Wharf – East 142.0 6.5 5.5 General/containers

Bulk Liquids Berth 215.0 13.0 12.0 Bulk Liquids only

In addition to these berths, other infrastructure associated with inbound movements includes a

Heavy Load-Out Facility (HLOF) that was constructed to support the North West Shelf Venture.

The HLOF is a 50 metre facility used to offload pre-assembled modules. An Alternative Load-

Out Facility (ALOF) is located adjacent to the HLOF and has a 20 metre berth face.

Located next to the Dampier Cargo Wharf is the Dampier Barge Ramp; 59.5 metres long,

15 metres wide, with a ramp deck area of 773.5 square metres.

Constraints

The Dampier Cargo Wharf is the Dampier Port Authority’s (DPA) only common-user facility and

is constrained by a number of factors—it is of a pier construction and not contiguous with any

terminal, berth depth (Dampier Cargo Wharf East), berth capacity and current utilisation levels.

As with other ports, Dampier suffers from a lack of suitable and sizeable terminal land

contiguous with its wharves. While there are significant land parcels outside the designated port

area which represent potential to expand port activities, these are not vested in the DPA and not

contiguous with any wharf.

The forecast increase in inbound vessel calls associated with iron ore and LNG construction

activity will place further constraints on what is already, limited port infrastructure. Accordingly,

Dampier’s existing infrastructure will not be able to accommodate increased vessel activity

including a restructured coastal service.

As with Port Hedland, the planning for additional wharf and terminal infrastructure is recognised

although approvals and funding remain outstanding.


Dampier is similar to Port Hedland in its limited ability to accommodate the type of vessel

advocated for future coastal shipping services. Current facilities at Dampier are also extremely

modest and primarily servicing the LNG sector or vessel-to-vessel transfers. Dampier Cargo

Wharf with its two berths will not be able to manage increased vessel calls and like Port

Hedland, vessel operators will face berth congestion and vessel delays.

The DPA recognises the need for additional berth and land capacity in order to manage the

inbound logistic task. In its Development Plan 2010–2020, the DPA proposes the development

of a Dampier Marine Services Facility (DMSF) adjacent to the current Dampier Cargo Wharf.

This involves two stages—constructing a 300 metre jetty and reclaiming 22 hectares of land.

The development costs are estimated around $500 million.



While it may be that the proposed DMS, in conjunction with the existing Dampier Cargo Wharf,

could manage the short term requirements of the inbound logistics task (encompassing a

coastal shipping service), it might not be sufficient in the longer term. Other locations have been

identified as potential targets for reclamation and development to create marine wharves/jetties

and provide for land-side uses. These include the vicinity of King Bay Supply Facility and the

Mermaid Marine Supply Base.

Given the lead time needed to effect planning and funding approvals, the DPA is also

considering interim solutions such as the use of a barge (3000–4000 cubic metres of deck-

space) moored to the existing Dampier Cargo Wharf. This would effectively increase wharf

capacity by some 70–80 per cent.

As with the proposed Port Hedland development, continued delays in approval and funding may

force importers and shipping companies towards alternative transportation for inbound cargo

requirements.

8.5 ANKETELL

Anketell Port has been identified as the next major deep water bulk export port for the Pilbara.

The greenfield site 35 kilometres east of Dampier will be developed as a multi-user,

multi-commodity port with some 1400 hectares of associated strategic industrial area.

Anketell is expected to open up new growth opportunities for the export of bulk commodities

(principally iron ore) while reducing pressure on neighbouring bulk ports. Its design is based on

a potential export capacity of around 350 Mtpa of iron ore.

The DPA will manage the port and infrastructure corridors while the industrial precinct will be

developed by LandCorp.

Facilities

Whilst the development plans exclude specific facilities for general cargo, container, break-bulk

or project cargo vessels, it is understood there are two temporary jetties to be used during

construction that could be retained post-construction to cater for uses relating to the inbound

task. Construction is expected to begin late 2012 and first export shipment forecast for 2015.


With the development still in its infancy, consideration should be given as to whether Anketell

can accommodate the 400-500 metres of wharf and associated terminal area needed to support

the inbound logistics task and as a means to supplement planned capacity for Dampier Port.

Port infrastructure in Dampier is severely constrained and development proposals lack planning

and funding approval. The potential therefore, exists to develop Anketell Port to complement

Dampier in terms of managing the inbound logistics task.

8.6 ASHBURTON NORTH

The new port of Ashburton North is being developed primarily to serve the LNG sector and

exports of up to 50 Mtpa of LNG and other hydrocarbon-based products. It will incorporate the

proposed Ashburton North Strategic Industrial Area (ANSIA), developed as a site for LNG and

domestic gas processing primarily for the Wheatstone Project.


The DPA has been appointed the Port Authority managing the development of the proposed

ANSIA, located 11 kilometres south–west of Onslow.

Facilities

Ashburton North is expected to include a port precinct, multi-user facilities and a multi-user

corridor. As with the proposed Port of Anketell development, plans exclude any specific facilities

to handle the inbound logistics for general cargo, container or break-bulk cargo. There is

however, space being provided for two marine base operators to establish facilities and

lay-down areas.


Whilst these facilities have been designed with the LNG marine supply in mind, the

development is still in its early stages and so, could consider if it can accommodate the

400-500 metres of wharf and terminal area needed to service the inbound logistics task and

also provide a complement to planned capacity at Dampier. As with Anketell, the lead times

involved will require prompt planning decisions.

8.7 BROOME

Whilst the Port of Broome is not a Pilbara port, it is the principal deep water port for the West

Kimberley region and plays a key role in serving current and future offshore oil and gas

exploration supply vessels. If a future coastal shipping service focuses on the Pilbara ports only,

then consideration may be required as to how the Kimberley region is best served by south–

north shipping.

Given its importance to the LNG sector, Broome has been included in this study for comparison

only. Whether or not it is incuded in any future service (combined with the Pilbara ports), will be

for a coastal shipping operator to determine.

The Port of Broome supports the Browse Basin offshore oil & gas exploration industry and is the

preferred inbound point-of-entry for the proposed LNG precinct at James Price Point, some

60 kilometres north of the town.

The port also supports livestock exports and is also the main fuel and container receival point

for the region. Trade volume is dominated by petroleum product imports destined for the

Kimberley region.

The port is expected to accommodate LNG processing facilities and associated works needed

to handle a total 50 Mtpa of LNG output. The Broome Port Authority is planning to provide

project-ready land, additional logistic handling equipment and infrastructure modifications—for a

‘Broome Freight Precinct’—and is progressing with development plans for some 17 hectares of

land intended for this purpose.

Facilities

Current shipping activity is accommodated by three berths that are connected to the main port

area by a 640 metre road-enabled pier. The berths include an Outer Berth (331 metres long)

and two Inner Berths (170 metres and 96 metres long).



Table 23 - Current port facilities suitable for coastal/inbound task

Berths Length (m) Depth (m) Max vessel

draft

Comment

Outer Common User 331.0 10.0 9.6 General cargo/containers

Inner 1 Common User 170.0 8.0 7.6 General cargo/containers

Inner 2 Common User 96.0 7.0 6.6 General cargo/containers

Constraints

Port operations in Broome are constrained in that wharf operations are non-contiguous with

landside activities, separated by a 640m jetty structure.

In essence, only the Outer Berth can accommodate those vessels engaged in supporting the

inbound task however, the Outer Berth is not suited for either project or RORO vessels. It also

cannot accommodate any out-of-dimension or heavy cargo.

Broome is also constrained by its high tidal range, which determines the maximum size of

vessels using the port. Strong tides are evident across the entrance channel and at the berth.

Road access to, and from, the Port of Broome is also constrained with all port traffic having to

pass through residential and tourist precincts of the growing Broome township.


Current berth configuration, limited depth alongside and isolation of wharf/land-side facilities

means this port does not lend itself to the type of vessel or cargo envisaged for a restructured

coastal shipping service.

Whilst development plans are in place to make this port a focal point of inbound activity for the

LNG sector, its role in a restructured coastal shipping service is limited.

The question therefore remains as to how coastal cargo originating from the Perth area can be

transported by sea to the Kimberley region in order to avoid the all-road alternative. It may be

anticipated (and subject to further study) that in future, coastal cargo leaving Perth may be

trans-shipped from Pilbara ports by smaller vessels serving the Kimberley region expressly.


9 SCENARIO ANALYSIS

9.1 SCENARIOS

The following scenarios were modelled to provide an assessment of the conditions under which

a coastal shipping service would be competitive, and further to assess the economic viability of

the proposed service.

Table 24 - Proposed market share under each scenario

Scenario Coastal shipping market share

1 Base case (all road) 0%

2 Low market share Flat 12%

3 Medium market share 16–20%

4 High market share 20–30%

A simple Net Present Value (NPV) model was developed to test current road dominated flows

against an alternative model where a coastal shipping service is established targeting between

12 and 30 per cent market share (ostensibly focused on inbound flows to the Pilbara coastal

zone) with a modest volume also being delivered to the Newman and Tom Price inland zones.

Net Present Value represents the present value of current and future cash flows with a cost of

capital applied allowing different scenarios to be brought back to a comparative base.

9.2 INPUTS

9.2.1 ROAD OPERATING COSTS

Table 25 provides unit cost per tonne assumptions for five road movements relevant to the

analysis. These unit costs are used in a comparative analysis of pathway costs, whether (a) by

road door-to-door, or (b) by coastal shipping, terminal and PUD pathway.

An arbitrary premium of 30 per cent loading has been added to general freight rates for OSOM

out of gauge loads.



Table 25 - Derivation of road operating costs for relevant sections

Road operating costs A B C D E

Origin Perth Perth Pilbara port Pilbara port Perth Metro

Destination Port Hedland Newman Newman Pilbara coast (semi-trailer)

Distance (km) 1650 1200 450 150 50

Tonnes/trip (Triple Road Train) 70 70 70 70 7012

Tonne km 115 500 84 000 31 500 10 500 3500

Cents/tkm $0.085 $0.085 $0.085 $0.120 $0.200

Cost/trip $9 818 $7 140 $2 678 $1 260 $700

Road operating cost per tonne $140 $102 $38 $18 $10

9.2.2 COASTAL SHIPPING OPERATING COSTS

The following table provides unit cost per tonne assumptions for a coastal shipping service.

Costs were sourced from a standard sea voyage calculator with additional input provided by

industry stakeholders.

Table 26 - Derivation of coastal shipping operating costs

Shipping operating costs Per voyage Per tonne (General)

Per tonne (OSOM)

Tonnes 10 000 7 000

Chartering $280 000 $28 $40

Fuel $200 000 $20 $29

Port costs $50 000 $5 $7

Stevedoring (origin and destination) $200 000 $20 $29

Other costs $20 000 $2 $3

Margin $50 000 $5 $7

Total $800 000 $80 $114

12 This movement is undertaken as two or three discrete semi-trailer loads within the metro area and later assembled into

road train configuration for the linehaul journey


9.2.3 PATHWAY COSTS

The following table brings together road and coastal shipping costs to provide unit cost per tonne assumptions for LNG and mine pathways to the

Pilbara coast and the Newman area.

Table 27 - Derivation of pathway operating costs

Mode Road Road Shipping Shipping Road Road Shipping Shipping

Origin Perth Perth Perth Perth Perth Perth Perth Perth

Destination (region) Newman area Newman area Newman area Newman area

Pilbara (coastal)

Pilbara (coastal)

Pilbara (coastal)

Pilbara (coastal)

Freight type General OSOM General OSOM General OSOM General OSOM

Distances (km; one-way):

Warehouse to mine 1200 1200

Warehouse to LNG plant 1650 1650

Warehouse to Fremantle or Henderson 50 50 50 50

Fremantle/Henderson to Pilbara port 1700 1700 1700 1700

Pilbara port to mine site (Newman) 450 450

Pilbara port to LNG plant (Coastal) 150 150

Cost per tonne (one-way)

Perth metro PUD Road $10 $13 $10 $13

Coastal shipping Shipping $80 $114 $80 $114

Pilbara region distribution Road $38 $50 $18 $23

Direct line-haul (door to door) Road $102 $133 $140 $182

Pathway cost per tonne $102 $133 $128 $177 $140 $182 $108 $151



The coastal shipping service appears more competitive for the Pilbara coastal zone due mainly

to the PUD haulage costs from the Pilbara ports back to the Newman and Tom Price regions,

which represent more than 35 per cent of the direct road costs from Perth to Newman.

9.2.4 INFRASTRUCTURE UPGRADE COSTS

In addition to assessing transport operating costs, consideration has been given to the capital

cost of upgrading roads and ports infrastructure required under each scenario.

Required upgrades to the Great Northern Highway include pavement widening and increasing

the number of passing lanes. Main Roads Western Australia (MRWA) has recommended

2 kilometre passing lanes every 20 kilometres. Under the coastal shipping scenario, fewer

passing lanes are required given the reduction in road freight volume.

Table 28 - Derivation of road infrastructure costs

Road infrastructure costs No coastal shipping service With coastal shipping service

Origin Perth Perth Pilbara port Perth Perth

Destination Newman Port Hedland Newman Newman Port Hedland

Trip distance 1200 1650 450 1200 1650

Passing lanes per 100 km 5 5 3 3 3

Number of passing lanes 60 82.5 13.5 36 49.5

Passing lane length (km) 2 2 2 2 2

Cumulative distance 120 165 27 72 99

Passing lane cost/km ($) $1 000 000 $1 000 000 $1 000 000 $1 000 000 $1 000 000

Passing lane CAPEX $120 000 000 $165 000 000 $27 000 000 $72 000 000 $99 000 000

Pavement width distance 200 200 50 200 200

Pavement width cost/km ($) $250 000 $250 000 $250 000 $250 000 $250 000

Pavement width CAPEX $50 000 000 $50 000 000 $12 500 000 $50 000 000 $50 000 000

Total CAPEX cost $170 000 000 $215 000 000 $39 500 000 $122 000 000 $149 000 000

Tonnes (Mtpa) 4 4 1 3 3

Road infrastructure

cost per tonne $40 $50 $40 $40 $50

In order to support a coastal shipping service, additional berth capacity for general cargo and

adequate lay-down areas are required at Pilbara ports.

Given that berth upgrades will service a variety of cargoes, 25 per cent of the capital cost has

been attributed to the coastal shipping service.


Table 29 - Derivation of port infrastructure costs

Port infrastructure costs

Required berth length 400m

Berth cost per metre $400 000

Total CAPEX cost $160 000 000

Potential berth capacity (Mtpa) 3

Port infrastructure cost per tonne $53

Usage % attributed 25%

Total attributed CAPEX cost $40 000 000

9.3 ASSUMPTIONS

The following assumptions form inputs to the model:

The coastal shipping scenario is based on contestable markets including mobile mining

equipment (Roll On Roll Off cargo), ammonium nitrate and industrial consumables.

A ratio of 10:90 has been used for the volume of OSOM freight to general freight.

Externality road freight costs have been assigned $10.70 per net tonne kilometre13

.

An arbitrary discount rate of 10 per cent has been prescribed. Lower discount rates return

similar relativities.

The model assumes the coastal shipping service becomes operational in 2015.

The distribution of demand is presently dominated by the Newman area but increases

proportionally along the coast. By 2020, it is estimated that the coastal region will account

for 25 per cent of demand.

Road operating costs per tonne kilometre have been based on industry knowledge and

comparison with market pricing sourced through stakeholder engagement.

The model assumes no back-haul freight (backloading) as part of the coastal shipping

service.

13 Externality costs are the exogenous costs and benefits of transport, outside the purely ‘internalised’ commercial costs.

Specifically, they include negative impacts such as pollution, climate change, congestion, degraded respiratory health,

crashes, noise and severance - or the cost to mitigate these impacts – as a result of a development in transport

operations or infrastructure. The most widely used Australian externality cost estimates are originally sourced from

European data (Infras/IWW). The interpreted results however, vary widely, based on the selection of European countries

with which to compare Australia and other conversion factors. The two major data sources in this regard are the

‘National Guidelines for Transport System Management’ (ATC 2006) and AustRoads report ‘Valuing emissions and other

externalities’, which was authored in 2000 and updated in 2005. Estimation of the value of externalities is a complex task

and is the subject of ongoing research. Broadly speaking, theaccepted value of externalities for road freight is up to

$43.80 per thousand ntk (net tonne kilometres) in urban environments and up to $10.70 per ntk for rural. For rail freight,

the costs are $6.90 and $0.80 respectively, derived from the working documents used to support the AusLink (2006)

transport funding programs.



9.4 OUTPUTS

The comparative results of the financial modelling exercise are presented below in terms of the

relative NPVs returned.

Table 10 - Net Present Value modelling results

Scenario Coastal shipping market share Net Present Value (billion)

1 Base case (all road) 0% $5.48

2 Low market share Flat 12% $5.35

3 Medium market share 16–20% $5.28

4 High market share 20–30% $5.21

The NPV returned under all coastal shipping scenarios is marginally lower than that returned for

the base case, or the ‘road only’ option. These results demonstrate that the introduction of a

coastal shipping service is feasible under these scenarios.

The inbound logistics task is expected to see accelerated growth over the next 3–5 years as

construction material is brought into the region to meet expansion of new iron ore and LNG

production facilities. Coastal shipping would be able to service this task and in doing so, mitigate

OSOM and related loads on the northern highways.

Whilst these figures have been prepared at a high level (and more detailed financial analysis will

be required going forward), the analysis shows that a coastal shipping service warrants

consideration especially in terms of targeting movements inbound to the Pilbara coastal regions.

The base case scenario of road-only freight exhibits a higher NPV with none of the wider

opportunities associated with introducing a modal alternative.

9.5 SENSITIVITY TESTING

Key parameters in the NPV modelling were adjusted to test the sensitivity of outcomes including

freight composition, infrastructure costs (CAPEX) and shipping prices.

Test A assumes no oversized loads and no road infrastructure expenditure as a result.

Test B assumes 50% reduced road infrastructure expenditure.

Test C assumes 50% reduced road infrastructure expenditure and 25% increased shipping

costs.


Table 11 - Sensitivity testing results

Inputs Original

Scenario

Sensitivity test

Coastal market share A B C

Base case (all road) 0% 0% 0% 0%

Low (from) 12% 12% 12% 12%

(to) 12% 12% 12% 12%

Medium (from) 16% 16% 16% 16%

(to) 20% 20% 20% 20%

High (from) 20% 20% 20% 20%

(to) 30% 30% 30% 30%

Freight composition

General freight 90% 100% 90% 90%

Oversized loads 10% 0% 10% 10%

CAPEX

Road (base) $m 215 0 108 108

Road (alternative) $m 161 0 81 81

Port $m 40 40 40 40

NPV outcome

Base case (all road)( $m) 5483 5159 5390 5390

Low ($m) 5345 5066 5368 5445

Medium ($m) 5278 4998 5301 5419

High ($m) 5205 4924 5228 5391

Shipping costs Unchanged Unchanged Unchanged Increased by 25%

Results show in relative terms that coastal shipping could provide a partial solution under Test A

and Test B.

For Test C, shipping rates were increased by 25%. In this case, under the low and medium

scenarios, coastal shipping returns a higher NPV however parity emerges between the base

case and the high scenario.



10 SUMMARY – KEY ISSUES AND NEXT STEPS

This study finds there is a prima facie case for supporting a coastal shipping service to the

Pilbara. Such a service is most cost effective for movements into the coastal region of the

Pilbara, whereas higher PUD costs from port to mines in the Tom Price and Newman areas

continue to favour direct road supply from Perth.

The minimum service level is weekly and entails two ships operating on a 14-day rotation.

These need to carry 0.5 Mtpa cargo—equivalent to around 15 per cent of the contestable

market—in order to ensure a sustainable service.

Using a NPV approach, the coastal shipping pathway is shown to provide marginally lower NPV

cost than road. Further analysis and market testing will be required, along with analysis to test

the sensitivities of assumptions herein.

This study has raised a number of high level issues that need to be addressed in order to

support a future coastal shipping service. These included ensuring the right

transactional/commercial arrangements are in place among supply chain participants, as well as

ensuring government has targeted its road and infrastructure access pricing effectively.

10.1 ROADS

The inbound logistics task is forecast to grow from 6.96 Mpta to 12.13 Mtpa by 2030. While road

transport currently supports the majority of the inbound task, forecast growth is expected to

place undue pressure on the road network.

To measure road capacity or the costs for addressing road infrastructure or funding

improvements falls outside the scope of this study, however, it is worth noting that the ‘do

nothing’ scenario presents associated external costs including issues of congestion, air quality

and public amenity.

Next steps

Commendation is forthcoming to Main Roads WA, the Police and the Western Power in relation

to initiatives such as trialling night-time OSOM movements and the proposed ‘one-stop shop’ for

Special Permit loads. These measures however, do not serve to reduce overall volume and size

of vehicle loads that are moving northbound.

In future, consideration might be given to road pricing policies (and price signals) as one means

of attracting a range of freight movements (including OSOM freight) away from road and onto

coastal shipping. This could conceivably take the form of a price based on physical dimensions

of the load or a ‘per kilometre’ unit cost.

10.2 CO-ORDINATING/COMMUNICATING

Matters such as local ‘first mile’ traffic issues, Special Permit application requests, industry

communication and possible underground placement of power lines are being addressed by a

joint taskforce that includes the WA Police, Main Roads WA and Western Power (assisted by

Adam Pekol Consulting Pty Ltd).


Certain stakeholders have suggested that greater government engagement with the mining and

LNG companies is vital to ensuring appropriate input and contribution into the inbound logistics

task.

Next steps

A forum could be established to provide a channel through which major iron ore mining and

LNG producing companies could understand and contribute to the overall management of the

Pilbara inbound logistics task that potentially features a partial coastal shipping service.

The responsibility for co-ordinating this forum may lie with the Freight and Logistics Council in

the first instance.

10.3 SHIPPING

This study looked at the level of restructure that a coastal shipping service would need in order

to provide a viable, cost-effective coastal shipping alternative to road transport. It should be

anticipated however, that even a revised coastal shipping service will require a transition period

to build up trade.

Governments in the European Union and the United States recognise that increased road traffic

volumes present with the high social cost, so alternative transport (in particular ‘short-sea

shipping’) are considered a priority.

‘Marco Polo’ in the European Union is a funding program that helps to shift freight

transport from the road to sea, rail and inland waterways. Fewer trucks on the road can

contribute to less congestion, less pollution, and the more reliable and efficient transport of

goods.

The ‘Short Sea Shipping Co-operative Program’ is a similar scheme based in the United

States. It is a partnership of public and private interests that involves ports, road operators

and shipping employing RORO vessels and ferries used to alleviate highway congestion

on the Eastern Seaboard.

Next steps

These schemes on their own will not succeed when faced with strong competition from road

transport modes. Within these schemes, governments help to create favourable conditions for

the shipping alternatives to succeed, including providing administrative, pricing and regulatory

frameworks. In this respect, developing a greater understanding of the potential role for

government and its implications for a coastal shipping service may also lie within the remit of the

Freight and Logistics Council in the first instance.

The analysis in this study has not reflected any long term re-application of the current coastal

shipping subsidy presently applied to the existing Kimberley service. It is however envisaged

that the volume and market share opportunities of a Pilbara service would negate the need for

any subsidy.

A key task for Government, perhaps through the WA Freight and Logistics Council is to

undertake a “market sounding” phase with potential and interested shipping operators to review

and refine tha analysis conducted to date.



10.4 PORTS

The port capacity available to support the Pilbara inbound task—inclusive of any restructured

coastal shipping service—is highly constrained in terms of wharf capacity, terminal/lay-down

capacity and port road access.

Additional port infrastructure is therefore required yet the process of planning and development

requires a long lead time. This is in stark contrast with industry demands which are far more

short term focused as with the mining and LNG construction plans, which are due to commence

in the very near future.

Next steps

Given the proposed amalgamation of the Pilbara ports into one authority, it is assumed that a

more holistic approach to future port development will emerge and any current port

development plans fast-tracked.

The amalgamation also presents opportunities to examine the potential role of Anketell and

Ashburton North in the Pilbara inbound task.

As part of supporting a coastal shipping service, Pilbara ports should also consider amending

their pricing structure. Currently, all vessels and their cargo at Pilbara ports are incur standard

port tariffs. This is in contrast with Capital City ports where coastal and trans-shipment vessels

are differentiated and receive reduced rates; this can often be as much as 50 per cent off

standard tariffs.

10.5 FUNDING

Port infrastructure provisions in the Pilbara have largely been export-driven and funded by

producers and exporters. This is different to East Coast (capital city) ports where such

development is generally funded by port authorities.

Whether Pilbara should follow the practices of capital city ports with regards to inbound logistics

provision is open to debate. The question for government is likely to revolve around whether

public or private funding represents the best option.

Next steps

East Coast ports typically build a business for new infrastructure based on forecast trade

volumes and resultant income streams i.e. land rent, ships dues, wharfage fees, and pilotage.

As part of that process, interest is sought from industry participants (including potential

stevedoring companies) who will need to consider their business model based on income

streams associated with handling ships and their cargo. Neither will be considered in a short

term context.

Governments will fund port development through their port authorities but on the basis funding

is covered over the term of any lease at a ‘hurdle’ rate of return, possibly 7 to 10 per cent per

annum. With a lease agreed, the stevedoring company will carry the cost of finding its market.

Other funding options include Public Private Partnerships featuring open discussions with the

mining and oil and gas producers who are ultimately, the chief beneficiaries of future

infrastructure investment.


10.6 GOVERNANCE/LEGISLATION

The size of the identified future inbound Pilbara freight task suggests a strong case for a regular

coastal shipping service into the Region. The State Government’s position will have a major

influence on the outcome.

In that context, it is relevant to note the present Government funding commitment to a regular

coastal shipping service into the Kimberley Region. This subsidy has the objective of ensuring

that remote industries and communities in the Region have access to a competitive freight

alternative. The Pilbara Region is closer to Perth than the Kimberley and also represents a

significantly greater freight market. Under these circumstances, the Government does not

consider that a shipping service into the Pilbara Region requires a subsidy and does not see the

present Kimberley service as relevant to the issue.

While the Government will not be providing funding support for a new coastal shipping service

into the Pilbara Region, there are other steps it can take to encourage that outcome. The main

one of these is ensure that ports at either end of the service have capacity to support it. At the

Pilbara end of the service, and to a lesser extent the Fremantle end, this is an issue. However,

the current examination, together with an already growing interest by shipping companies in

providing a service, will assist the development of business cases and funding proposals for the

provision of related port infrastructure. The Government is well placed to facilitate that process.

The Government also has relevant legislative powers available to it, particularly in respect of

licensing intra-state shipping operations. These powers could certainly be used to encourage a

new coastal shipping service.

Next steps

It would be appropriate that the Freight and Logistics Council in its review of this Report, gives

consideration to steps that the Government may take to create an environment where industry

sees sound commercial reason to introduce a coastal shipping service into the Pilbara Region.

In other studies and with a rail context, this sort of positioning by Government has been called

“rail husbandry”. In this context, what is required is “shipping husbandry”.



11 APPENDIX

Appendix A - Summary of iron ore mines (hubs) and forecast production to 2030

Port Company Hub Existing Mine Site Location 2012 2020 2030

(Mtpa) (Mtpa) (Mtpa)

Panawonica

Mesa J 200 km southwest of Karratha

Warramboo (replaces Misa J)

Mesa A 60 km west of Pannawonica; 165 km south of Karatha

Brockman 4 60 km northwest of Tom Price

Brockman 2 60 km northwest of Tom Price

Nammuldi 60 km northwest of Tom Price

Silvergrass

Tom Price 370 km south east of Karratha

Western Turner Syncline 20 km northwest of Tom Price

Paraburdoo 80 km south of Tom Price

Channar 20 km from paraburdoo mine

Eastern Range 10 km from paraburdoo mine

Western range

6 Marandoo 45 km east of Tom Price 10 15 15

West Angelas 110 km from Newman

Bakers South

8Hope Downs (includes Hope 1/2/3 and Hope 4/5/6 to

replace in 2013 - 15Mtpa)100 km northwest of Newman 25 32 40

Yandicooqina 95 km northwest of Newman

10 Koodaideri / Koodaideri South 35 36 40

229 320 380

API (JV with Aquila

and AMCI)

West Pilbara; starts construction before end 2012; needs

to carry Mt Anketell port development

MCC (Chinese

Engineering Firm)

new prospect right at Cape Lambert; needs to commit to

building new track or expanded track

20% ownership of Cape Preston

FMG Solomon (subject to expansion of Anketell)

0 25 70

Newman Hub

- Mt Whaleback 6 km west of Newman 55 65 70

- Orebodies 23-25 8 km east of Newman

- Orebody 18 8 km east of Newman

- Orebodies 29, 30, 34 and 17

2 Jimblebar Mine 41 km from Newman 35 53 60

Southern Flank

- Mining Area C 92 km west-northwest of Newman 45 45 50

- Southern

Yandi 90 km north-west of Newman

Western 4

5 Jinadi (Greenfields) 70

Sub Total BHP 185 250 350

Chinchester Hub 30 80 110

- Cloudbreak 260 km from Port Hedland

- Christmas Creek 50 km east of Cloudbreak

- Nullagine CID / Bonnie Creek/BC iron JV 130 km northeast of Newman

- Iron Valley (Nyindinghu)(note: extension of Nit new deposit of FMG, can come into

portfolio of FMG)

2 Solomon East (to commence end 2012) due north of Brockman 40 60

30 120 170

Pardoo 56 km east-northeast of Port Hedland

Wodgina Mine 90 km south of Port Hedland

Abydos 130 km south of Port Hedland

Mt Webber 150 km south-southeast of Port Hedland

Dalton (note: has option of independent railway or trucking)

McPhee's Creek

Newman south and all around 15 15

Hancock ProspectingRoy Hill (2015-2016 operations) - will have stand alone

railway277 km south of Port Hedland 30 55

Brockman Resources Marillana (dependent on transport options) 100 km northwest of Newman 15 17

Moly Mines Limited Spinifex Ridge 50 km northeast of Marble Bar 1 1 1

221 453 630

CITIC Pacific Mining Sino IronMagnetite (approval granted for 27.6; will take 2.5-3

years to grow to 22 mtpa)22 70

0 22 70

450 820 1150

Rio Tinto

Port Hedland

Anketell Port

Atlas Iron Limited

BHP

FMG

4

1

Northern

Central

1

2

3

4

5

7

9

87 100

70 80

10 10

12 12

25 70

25

32 35

35

Port Dampier/

Cape Lambert

10 25 35

20 30 35

23 25

25 32 40

Cape Preston

Sub Total Port Dampier/Cape Lambert

GRAND TOTAL

Sub Total Port Hedland

25

17

5

17

Sub Total FMG

50

Sub Total Cape Preston

Sub Total Anketell Port

45

1

3


Appendix B – Potential vessel types for coastal service

Type Description

Role in inbound logistics task

Advantages Disadvantages

General Cargo/Container

General cargo/container vessels are the workhorse of

international shipping. Capable of carrying both containers

and break-bulk cargo, a certain amount of project cargo may

also be shipped on these types of vessels.

However, these vessels are limited to generally ‘unitised’

cargo, so are much less flexible in their cargo carrying

capabilities compared with other vessels describe.

Unitised cargos in containers makes for easy

transport from port to site.

Majority of ports are able to accommodate

vessels of this size and type.

Vessels of this type generally readily available.

Many vessels have own onboard cranes or can

be worked with mobile cranes.

Today, approximately 90% of non-bulk cargo

worldwide is transported by container and

modern container ships.

Has limited capacity for non-

containerised/over dimension cargo

Sub-optimal for large modular and heavy

cargoes

Less versatile and flexible than other vessel

types

Does not have RORO capability and so

offers limited ability to carry volumes of

wheeled cargo



Type Description



Roll-on/Roll-off (RORO)

RORO vessels, as the name suggests, are designed for the

shipment of wheeled equipment. With stern-loading ramps,

wheeled cargo is loaded on a number of internal cargo decks

and on the upper open deck. Internal ramps connect the

decks and along with adjustable deck heights, these vessels

can carry a wide range of cargo—from road vehicles to heavy-

lift equipment and project cargo.

Vehicles can be driven directly on/off the vessels making then

extremely versatile in terms of port time.

RORO vessels are ideal for the carriage of mining equipment

north. However, they tend not to be self-geared, so any non-

wheeled on deck cargo will require some form of shore-side

equipment.

Large stern ramps enable wheeled cargo to

simply drive on and off.

It is more versatile than container vessels in

terms of the different cargo types it can carry.

Internal configuration allows for carriage of

trucks, heavy machineries, tracked units, Mafi

trailers break-bulk cargoes. Containers can be

loaded on ‘mafi-trailers’ and wheeled on/off.

There are liftable decks to cater for increased

vertical clearance) as well as heavier decks for

‘high and heavy’ cargo.

RORO vessels can perform at eco-speeds of 16

knots while at full speed, more than 19 knots can

be achieved—key for maintaining service

integrity.

Flexible loading/unloading results in quicker

turnaround times in port and making for higher

schedule integrity.

This is a good option for coastal shipping:

Melbourne/Tasmania; NZ South Island/North

Island; N. Europe (North Sea, Baltic,

Mediterranean).

There is a requirement for ports to be

equipped with RORO landing capability (not

suited to ports with ‘jetty’ type structures).

The use of static ‘mafi’ systems requires

port or stevedores to be equipped with

prime movers to load/unload vessel.

http://www.ferry-site.dk/picture/ferry/7389194a.jpg


Type Description



CON/RO (ConRo)

The ConRo vessel is a hybrid between a RORO and a

container ship. This type of vessel has a below-deck area

used for vehicle storage while containerised freight is stacked

on the top decks. ConRo vessels can also load up to 1000 teu

of containerised cargo on deck and has capability to load

on/off with ship’s own gear.

Separate internal ramp systems within the vessel segregate

the different cargo types (vehicles, ‘high and heavy’ loads,

break-bulk, project and oversized cargo) on a number of

decks inside the vessel.

The advantage of ConRo vessels is their self-sustainability,

which requires only minimal port infrastructure. For obvious

reasons, this vessel type has proved popular with the military

given their ability to operate in non-designated ports.

Large cargo carrying capability

Flexible in terms of cargo types carried

Self-sustaining and requires minimal port

infrastructure

Vessels tend to be larger than other types

under review owing to their high cargo

capacity

These vessel types are not commonly

available



Type Description



LASH BARGE

The Lighter Aboard Ship (LASH) system involves the practice

of loading unpowered barges (lighters) aboard a larger mother

vessel for port-to-port sea transport. Once at the port of

destination, the lighters are lowered into port area and

typically towed or pushed to a berth or offshore facility, usually

by the vessel’s own gantry crane.

LASH ships can carry a varying number of lighters which,

depending on their cargo, can be stored and secured under

removable decks (hatch covers). Whilst not as flexible or

versatile as the RORO, ConRo or Combi-Lift, the LASH

system is capable of carrying much greater capacities than

the other types.

LASH barges are ideal for shallow ports and ports with limited

quay moorings or lack of port equipment for

loading/unloading. It’s greatest down-side however, is the

need for harbour tugs to move the lighters between mother

vessel and berth.

Large cargo carrying capability

The LASH vessel does need to berth alongside

wharf

(it can stay within main harbour)

Capable of handling a range of cargo types

loaded in individual barges/lighters

Requires shore-side means of unloading

barges/lighters

Slow speed of ‘mother vessel’

Barges are unpowered and require tugs to

provide propulsion to/from wharf

Good for use in port but slow in transit

between ports

Less than ideal where quick port

turnaround times are required

Globally becoming less popular

http://upload.wikimedia.org/wikipedia/commons/b/b8/Lash_vessel.JPG


Type Description



HEAVY LIFT/COMBI

These extremely versatile vessels are capable of managing

each aspect of the cargo task described. In essence, they are

a combination of RORO, container, general cargo and project

cargo vessel. The ideal Combi vessel has twin heavy-lift

cranes (suitable for large, heavy and indivisible project loads),

strengthened decks for break-bulk and heavy loads, heavy

capacity RORO capability for self-drive cargoes such as

mining equipment.

The Combi-Lift vessels currently being chartered for the

Gorgon project are classic examples of this vessel type.

Highly flexible in terms of cargo carrying

capability (containers, break-bulk, RORO cargo,

heavy lift, modular cargo)

Vessels are self-sufficient in loading/unloading

with minimal port requirement for cranes and

equipment

High flexibility reduces time in port

Per diem cost is higher than other vessel

types



Type Description



SEA BARGE

The use of unpowered/unmanned heavy lift barges is

common in other parts of the world for project shipments,

module transportation, and particularly in offshore energy

exploration and development. Sea-going barges offer large

carrying capacity.

In being un-manned sea barges however, ocean-going tugs

need to tow them from loading port to their port of destination.

The use of ‘Dumb Barges’ has been considered; these could

be directly discharged at port and towed to say Anderson

Point.

Use of sea barges from Fremantle/AMC Henderson to the

Pilbara ports however, would require ocean-going tugs. This

makes them slower than other vessels outlined and prone to

extremes of weather.

Large cargo-carrying capability

Well-suited for large, ‘out-of-dimension’/modular

cargo that is common in LNG construction

Cost effective compared to other vessel types

Unpowered so would require ocean-going

tug to assist in port-to-port sea movement

Slow moving and also sub-optimal in

maintaining schedule integrity

Suitable for project movements but less

suited for a ‘fixed day’ weekly coastal

shipping service

report final june 2012

Documents

pilbara inbound logistics

pilbara logistics precinct

australia tel

north sydney nsw

iron ore sector

liquified natural gas

walker street locked

conditions of appointment