AWB has recently introduced a new methodology for allocating Western Australian rail freight charges as part of its drive to encourage efficiency, and ensure the long-term viability of the rail network.
The new efficiency formula will prompt reduced rail freight costs at large efficient rail sites, which load trains at 1000 tph. Small, slow loading sites will see an increase.
The new approach also takes into account the characteristics of each track section, train speeds and the efficiency of unloading facilities at each port terminal.
Rail freight charges are determined by the industry rail freight contract which charges an annual fixed flagfall sum of at least $29 million, on top of a usage charge per tonne rate at each receival site.
AWB’s WA Manager, Lisa Wilson, said the flagfall charge was intended to compensate the rail company for the provision of train assets over a long period, however, it has never been properly allocated by industry to reflect true site-by-site rail costs.
"AWB has now developed a methodology that models the true rail loading costs at each site and allocates the flagfall sum on that basis," said Ms Wilson.
"This new approach clearly reflects the efficiency of rail loading at each site, which will be important in directing investment in order to maintain the integrity of the WA rail network in the future," said Ms Wilson.
For the first time, the industry will be able to measure the benefits of its investments in improved rail facilities. Properly targeted future investments will result in reduced freight charges and will help keep marginal sections of our rail network viable.
"AWB is constitutionally bound to reduce supply chain costs for growers and this initiative is consistent with that objective," said Ms Wilson.
Cost allocations to all rail sites will be adjusted. For example, this year AWB is showing the true fixed cost of deliveries to the Metro Grain Centre, the first time this has occurred.
"This year’s freight rates will not only reflect this new method, but will unfortunately see price increases due to the impact of the current drought, a result of less grain on rail," said Ms Wilson.
The reduced crop size will see a smaller tonnage on rail, therefore less tonnage to recover the fixed cost component of the industry rail freight agreement. In its concern about the impact of the drought on rail freight charges AWB is looking at options to minimise the cost increase, and has successfully secured a level of insurance
"It should be noted freight rate calculations are estimates and that AWB’s freight estimates may differ to those of other traders," said Ms Wilson.
"To provide transparency AWB has published its Estimated Silo Return (ESR) on its website for each site across Western Australia, as well as publishing the supply chain costs, or site to sea costs, used to calculate silo returns," said Ms Wilson.