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Demand analysis for the concept project

3.1 General approach

This chapter outlines the demand analysis that was undertaken for the concept project that is the focus of this case study. This demand analysis has not been updated for changes to the project concepts that are currently subject to a pre-feasibility study by the Port of Brisbane.

It is expected that the demand for the freight only railway would be made up of five separate commodity and geographic groupings:


International containers – to/from Acacia Ridge and Bromelton

Other Western Queensland freight to/from the port

Inland Rail domestic freight from/to Melbourne/Brisbane on the Inland Railway assumed to be built for commencement in 2030

South and Western Australia and Northern Queensland freight travelling on the Inland Railway

The following sections of this chapter outline recent trends and analysis for each market segment and presents forecasts used for the purpose of this concept project.

3.2 Coal

3.2.1 Historical coal exports

Coal exports through the port of Brisbane have grown dramatically in the last decade. The table below shows a rise from 3.1mtpa to 9.6mtpa over 9 years.

Table 28: Coal Exports through the Port of Brisbane: 2003/04 – 2011/12, (millions)

03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12*

Exports 3.1 3.7 4.1 4.2 5.2 6.3 6.3 6.6 9.6


Rate 19% 11% 2% 24% 21% 0% 5% 45%

* POB Estimate

This ramp-up is part of a wider coal boom affecting Queensland, with multiple proposals to develop mines in the Galilee Basin in the north of the state with concomitant rail and port expansions.

Further south, planning is well advanced to close the ‘southern missing link” rail line between Wandoan and Banana to allow coal to exit on the Moura system to a new coal terminal at Wiggin Island in the Port of Gladstone. Wandoan is roughly half way between Gladstone and Brisbane ports at 380km and 403km respectively.

3.2.2 Forecast coal exports

The Port of Brisbane (POB) has had coal consultants Wood McKenzie undertake a study to identify the prospective coal resources that are significantly closer to their port rather than Gladstone. The current limit in distance they are working on is Yan Coal’s mine at Cameby Downs 380kms from the port and 583km from Gladstone. The table below contains the Wood McKenzie forecasts and distances from Brisbane and Gladstone. The Wood McKenzie report also looks at worldwide demand and supply of thermal coal (used to generate electricity) and forecasts that sufficient demand exists for the 50 mtpa coal resource to be moved through the Port of Brisbane.

Australian Government Department of Infrastructure and Regional Development

A study of the potential for dedicated freight infrastructure in Australia Ernst & Young ÷ 128 Table 29: Coal mines, annual tonnages and port distances of prospective mines

Company Mine Tonnes (mtpa) Distance to

Brisbane (km) Distance to Gladstone (km)

Yang Coal Cameby Downs 10 380 496

Peabody Wilkie Creek 10 293 583

New Hope New Acland 10 227 649

New Hope Jeebropilly 0 closed by 2022 82 N/A

New Hope New Oakleigh 3 82 N/A

OGL Ebenezer 2 82 N/A

Other – Metro, Blackwoods, CSE

Various in Wandoan and West Moreton Fields

15 250 avg 620 - 750

Total 50

Source: Port of Brisbane

At the time this case study was developed, (mid-2012) considerable uncertainty existed as to the health of the world economy, with particular issues in Europe and, to a lesser extent, China. The latter is of major importance to the Australian economy and its exports of coal and iron ore.

As shown by the ten year price trend as of 2012 in the figure below, (in US dollars) prices for thermal coal fell significantly during the preceding months, but were still at high rates compared to periods only ten years earlier. However, the cost of production for many coal mines were also climbing perceptively and if prices were to trend below US$45 it was considered that many Australian mines would become uneconomic137.

Figure 15: Ten year monthly Australian thermal coal prices in US$

Source: http://www.indexmundi.com/commodities/?commodity=coal-australian&months=60

While acknowledging the high degree of uncertainty involved, for the purposes of this case study EY has used the forecasts of the Port of Brisbane and their consultants and has not undertaken any analysis beyond what they contain.

Work on the Port’s proposal has not advanced to the stage of forecasting the actual ramp up in production of the mines it has identified. Therefore the Port and EY have made the assumptions in table 30.

137 See Australian Financial Review, Friday 4 May 2012, page 23, “Plenty of fish in the mining sea”

0 50 100 150 200 250

May-02 Nov-02 May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12

Australian Government Department of Infrastructure and Regional Development Table 30: Coal tonnages by year

Year 2022 2025 2030 2035 2040 2045 2050 2057

Mtpa 20 30 50 50 50 50 50 50

Source: Port of Brisbane and EY assumption

The table shows a rapid ramp up from 20 to 50 mtpa over eight years from the commencement of the railway in 2022. While this is rapid, it is possible given the long lead time the mines would have after the commencement of the railway. Most of the mines listed in Table 29 above are either in production or at an advanced stage of planning. Much of the required mine development will involve scaling up of current production.

3.2.3 International containers – to/from Acacia Ridge and Bromelton

The second major commodity group considered for the new dedicated railway and the one central to the theme of this study is the carriage of containers to and from the port on the new railway. Up until now, only a small quantity of containers, (in 2010/1, 57,000 TEU which represents 6% of the Port’s container flows) is being carried on the existing railway. Moreover, none of these containers are destined for, or originate at, Acacia Ridge, the major intermodal terminal in Brisbane’s main industrial centre. The Queensland Government, unlike other state governments in Australia, does not have an active policy to encourage shipping containers on rail. The current road network, particularly since the recent large investments, comfortably handles the port’s truck traffic. In part, this is because Brisbane is not a port so close to the city centre (like Melbourne) or another major traffic generator such as an airport (like Sydney) to have major interaction with passenger traffic.

This is despite it being reliant on the busy Gateway Motorway for access. Recent expansion of this route, including additional bridge capacity with a combined eight lanes of traffic have given Brisbane some breathing room compared to the major roads around Melbourne and Sydney.

There are three aspects that support an argument for a radical change in the historical situation with containers on rail to short haul destinations such as the current and planned intermodal terminals.

These are:

The increasing level of congestion on Queensland’s strategic road network, particularly the Gateway Motorway which by the mid to late 2020s would be reaching a peak flow of around 2000 vehicles per hour per lane thus falling into the outer levels of E and F on the Level of Service (LOS) scale.138 All traffic will be travelling slower, increasing trucks’ journey times.

The potential that by the mid to late 2020’s there may be some form of mass-distance-location road pricing in place, particularly for heavy vehicles. Road user charging policies are currently under scrutiny as part of the Road Reform Program at the Council of Australian Governments (COAG) level. While progress has been slow, we are allowing them to be in place in ten years’

time. They are expected to increase the direct costs for trucks competing with short-haul rail in heavily congested areas. Short haul rail currently has a major structural cost disadvantage in requiring an additional pick-up and delivery (PUD) leg and also high fixed cost access charges for short rail journeys as rail owners seek to cover their costs over a short component of their network.

The separation of freight and passenger train movements, where current conflicts are

considered to be a major impediment for prioritising freight movements, increasing delays and reducing reliability.

138 The 2000 figure is calculated in Excel from base figures and growth rates supplied by Queensland Motorways Ltd, the owner. For higher levels of precision in forecasting, sophisticated transport modelling software is used which takes into account multiple variables. This analysis is not based on modelling, but rather on historical trends, with some allowance for tailoring off to reflect higher congestion levels and motorists choosing other routes. The 2000 vehicles per hour per lane figure is commonly registered as a high level of congestion. In this analysis, it includes 187 heavy trucks which have a passenger car equivalence (PCU) of three.

Australian Government Department of Infrastructure and Regional Development

A study of the potential for dedicated freight infrastructure in Australia Ernst & Young ÷ 130

The potential to double stack containers on the new rail freight line139. This will give far greater efficiency and reduce per unit costs for rail, thus further improving its competitive position compared to road.

It is a combination of these factors that lie behind our forecasts of how many shipping containers will travel on the new railway.

The modal share for containers though the port assumed in the model is as per Table 31 below

Table 31: Port of Brisbane container flows and road and rail market share assumptions



(millions) TEU Rail share % Road Share % Rail share

(million) Road Share (million)

Sources: Container forecast – Port of Brisbane, land transport shares EY and Port of Brisbane assumptions

In terms of millions of tonnes for the railway, based on a calculated average of 8.83 tonnes per TEU, for all TEU (full and empty) though the port in 2010/2011, we have calculated the net tonne figures as follows (Table 32 below):

Table 32: Port of Brisbane container flows on new railway in tonnes

Year Volume (million tonnes)

Source: Calculation from POB 2010/2011 figures

For modelling purposes we are assuming that the destination of the rail flows will be as follows in Table 33 below:

Table 33: Origin/Destination of additional rail containers Origin/Destination Share % Distance (km)

Source: POB Origin and Destination study 2007, plus EY and POB assumptions

Bromelton is a new location in this mix, which is otherwise substantially based on a 2007 study the Port undertook looking at the source and destination of its containers. Bromelton is located further

139 See Section 3.2 below for the operational requirements to make double stacking a reality

Australian Government Department of Infrastructure and Regional Development

south of Acacia Ridge near the East coast railway line from Sydney to Brisbane. It is also near the junction point for the Inland Rail from Melbourne to Brisbane. Land has been set aside for an intermodal terminal. There is some discussion in freight circles in Brisbane as to whether it will take over from Acacia Ridge as part of a chain of intermodal terminals 80 – 90 kilometres from the port.

Acacia Ridge is in an area subject to a small amount of urban encroachment and with sub-optimal road access along suburban streets. But it is at the heart of the main destination of containers from the port. For the purposes of our model, we have assumed the beginning of a movement out to Bromelton (with the other sites under discussion being Ebenezer to the west and Landsborough to the north), but with Acacia Ridge still the major destination point for rail containers.

3.2.4 Other Western freight to/from the port

Toowoomba and further out west in the Darling Downs are important agricultural areas for both the domestic and international markets. Apart from coal, grain volumes are an important export through the Port of Brisbane as is cotton. For this study we drew on ARTC’s 2009 study on the Inland Rail from Melbourne to Brisbane. This was an in-depth study for which all reports are available on the ARTC’s website and it informs the demand identified from the west and from Melbourne and other parts of Australia. For other Western freight the ARTC study identified the following in 2008:

Table 34: Commodity types, 2008 rail market share/volumes and growth rate Commodity Type Total Volume (million

Tonnes) Rail share Rail Volumes

(million Tonnes)

Growth rate

Manufactured products 1.20 20% 0.24 2.8%

Agricultural products 1.00 75% 0.75 2.2%

Grains and oilseeds 2.00 75% 1.50 2.2%

Timber and Timber products 0.85 30% 0.26 2.8%

Non-metallic minerals 0.50 40% 0.20 2.8%

Source: ARTC Inland Rail Alignment study WP# 1, Demand and Volume Analysis and Final report, July 2010

Using the data from this table, we have calculated the volumes of other freight that would be available for the railway in 2022 as follows:

Table 35: Other Western freight volumes on the new railway

Year Volume

We have assumed that all this freight, bar the manufactured products will travel from the hinterland to the Port of Brisbane. The split for origin we have used is as follows:

Table 36: Origin points for Western freight on the railway Geographic origin point % of freight

Toowoomba 40%

Australian Government Department of Infrastructure and Regional Development

A study of the potential for dedicated freight infrastructure in Australia Ernst & Young ÷ 132

3.2.5 Inland Rail domestic freight from/to Melbourne/Brisbane

The inland rail project from Melbourne to Brisbane has been studied in depth for at least the last ten years, with the latest study been a comprehensive one by the ARTC in 2009/10. The economic modelling to date has shown it to have a negative present value (NPV). The Port of Brisbane railway does open opportunities for the Inland Rail. The ARTC report showed that 44% or $1.625 Billion of the $3.7 Billion capital costs would be consumed by the work from Gowrie to Kagaru, covering the Toowoomba range and the Southern Freight Rail Corridor. If these two items were paid for as a part of this project, the capital cost element of the Inland Rail would be reduced dramatically. We have not sought to model this, based on it, we have assumed that the Inland Rail would be built by 2030, eight years after the Port of Brisbane railway140. Therefore from Oakey to Acacia Ridge, the traffic forecast in the ARTC 2009 report (minus the coal) would be travelling on the POB railway. The forecasts from the ARTC report are in table 37.

Table 37: Inland Rail freight from Melbourne–Brisbane and return

Year Volume

Source: ARTC Inland Rail Alignment study WP# 1, Demand and Volume analysis and p. 49 for mode share

3.2.6 South and Western Australia and Northern Queensland freight travelling on the Inland Railway

The final category of freight is also drawn from the ARTC study and encompasses freight that will as a result of the Inland Railway being built from 2030, travel on the POB railway from Acacia

Ridge/Bromelton south from North Queensland or north from South and Western Australia (connecting to the Inland Railway at Parkes). The volumes are as follows:

Table 38: South/Western Australia and North Queensland freight travelling on the railway

Year Volume

Source: ARTC Inland Rail Alignment study WP# 1, Demand and Volume analysis

3.2.7 Summary

Combining these five freight demand scenarios and converting the container freight into net tonnes, the forecast total freight volumes sum to just under 100 million tonnes of freight on the railway, at the end of our model period of 2057, as shown in Table 39 below.

140 We understand ARTC is looking at 2035 for the start of the Inland Rail, a time when, among other things, the coastal rail will be at capacity. For our model, we have bought this forward to 2030.

Australian Government Department of Infrastructure and Regional Development Table 39: Total freight volumes in millions of tonnes on the Port of Brisbane railway

Year Volume (million tonnes


2022 55.82

2025 57.29

2030 65.54

2035 72.48

2040 78.11

2045 83.32

2050 89.67

2057 97.05

Taking the 2030 figure of 65.54m tonnes per annum, Table 40 below shows what sector the freight is on:

Table 40: Freight by sector on the POB railway for 2030

Sector Commodity Type Volume (mtpa) 2030

Western Areas - Port of Brisbane Coal 50

Western Areas - Port of Brisbane Grain and General

freight 4.91

Oakey - Acacia Ridge Inland Rail freight 1.83

Port of Brisbane to/from Acacia

Ridge/Bromelton Containers 8.80

Total 65.54

Australian Government Department of Infrastructure and Regional Development

A study of the potential for dedicated freight infrastructure in Australia Ernst & Young ÷ 134