A sense of sanity has returned to the WA grain trading industry judging by the results of last week's shipping slot auction where CBH offered 11.6 million tonnes of capacity from its four port terminals.
The auction, conducted by Melbourne-based company Trade slot, was over in two days and 33 rounds of bidding with the premium paid for capacity averaging $4.60 a tonne. A similar auction last year dragged on for six days and 99 rounds of bidding with a whopping $22/t average.
Some traders suffered big losses last year after biting off more than they could chew and struggling to secure grain to fill shipping slots purchased at very high premiums.
The high premiums also robbed the industry of capital, with access fees totalling about $220 million sitting in a pool for up to 18 months before being returned to traders in rebates. This year, about $46 million will be tied up in the pool and rebates paid quarterly.
The blind auction sees CBH, global giants such as Glencore, Bunge, Cargill and Mitsui and smaller players bidding for shipping slots from November to October next year.
It gives a strong pointer to which traders will lead the charge when it comes to buying up this year's harvest, expected to be worth more than $3 billion to the WA economy.
Australian Grain Exporters Association president Chris Aucote said traders appeared more realistic after overpaying for capacity last year.
Mr Aucote, the general manager of Bunge Australia, said the industry and WA grain growers would benefit from not having $220 million sitting in a pool.
Mr Aucote praised CBH for overhauling the capacity allocation system.
CBH pushed the auction back to give traders a clearer picture of expected yields, introduced greater flexibility and instigated the quarterly rebate payments under changes approved by the Australian Competition and Consumer Commission.
The 11.6 million tonne offering was undersubscribed by1.6mt but CBH logistics manager Andrew Mencshelyi said this was an anomaly created by a lack of demand through to the end of December. Shipping slots in the peak months from January to August were fully or oversubscribed.
Mr Mencshelyi said the changes appeared to have had a positive impact and he welcomed the big fall from $22/t to $4.60/t.
"Comparative to what east coast supply chains charge for take or pay it is around the same level," he said. "It is still enough to make people commit to shipping, which is what we have always wanted, but it is not too much of a burden on companies to stump up the cash."
Mr Mencshelyi said this year's auction reflected greater maturity in the market.
"A lot of people lost a lot of money last year with such high premiums and being absolutely committed to having to ship and it distorted the market. People did a lot more homework on crop size this year and were more realistic about their percentage of market share."It is believed some bidders from last year did not participate. Official auction details will be released this week.