CBH offering long-term port agreements

by World Grain Staff
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WEST PERTH, AUSTRALIA — The CBH Group on Aug. 26 proposed an allocation of port capacity to customers and the Australian Competition and Consumer Commission (ACCC), which for the first time includes long-term agreements (LTA) with exporters.

Under the proposal, 14 customers were offered LTAs with 11 of the 14 agreeing to subscribe to LTAs. The remaining customers are able to obtain capacity through the auction system.

CBH Operations General Manager David Capper said the LTA process has seen three entirely new entries offer capacity in Western Australia, and with them greater competition for WA grain.

“CBH is pleased by the huge interest in LTAs, as customers have been asking for this type of arrangement for some time,” Capper said. “There was so much demand for the LTA slots we had to go back to marketers and ask them to reassess their requirements a couple of times before proposing a conditional allocation, with 80% of customer's accepting the allocated capacity under the LTAs.

"The inclusion of LTA's as an option for exporters to secure port capacity over three years (the term of an agreement) provides greater certainty in terms of supply, with better planning over the long term but there is still the option to use the auction system to top up capacity for the individual marketing needs.” Marketers also can bid for the remaining capacity, Capper said.

There is a provision for a minimum of 34% of total availability each month to be reserved for non-LTA capacity. This capacity, and any not taken up in an LTA, will be auctioned through the existing process.

Under the currently proposed arrangement 8 million tonnes of capacity could be allocated through LTAs and 6- 6.2 million tonnes would be offered under an auction system.

"It also gives CBH further confidence to make investment in the West Australian supply chain with the aim to increase capacity over the four port terminals to better match exporter demand, which is historically high in the first half of the year," Capper said. "It remains a regulated process and does not reflect a purely commercial approach but the balance offered is a definite improvement for CBH and its customers and we have seen that in the response to this offering.”

The LTAs are still subject to final approval from the ACCC and the ACCC has asked customers for their feedback.

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