Draft Determinations Viterra Operations Pty Ltd Exemption assessments of port terminal services provided at the following port terminal facilities: Port Adelaide Inner Harbour Port Adelaide Outer Harbor Port Lincoln Wallaroo Port Giles Thevenard 6 October 2020 2 Contents Executive Summary .............................................................................................................. 4 1 Introduction .................................................................................................................... 7 1.1. Exempt service providers ........................................................................................ 7 1.2. Viterra’s exemption application ............................................................................... 8 1.3. Public consultation undertaken to date.................................................................... 8 1.4. Consultation on the Draft Determinations .............................................................. 10 1.5. Outline of this document ....................................................................................... 11 1.6. Terminology used in the Draft Determinations ...................................................... 12 1.7. Glossary/Definitions .............................................................................................. 12 2. Bulk wheat port terminal services ............................................................................. 15 2.1. Port terminal facilities and capacity ....................................................................... 17 2.2. Exports and exporters ........................................................................................... 37 Charles River Associates profit and loss analysis ......................................................... 53 3. Competition across the bulk grain supply chain, container exports and domestic demand ........................................................................................................................ 61 3.1. South Australian port terminals’ upcountry links .................................................... 62 3.2. Grain catchment areas by port .............................................................................. 83 3.3. Containerised exports and domestic demand ....................................................... 99 4. ACCC’s draft exemption assessment of Viterra’s South Australian port terminals106 4.1. Port Adelaide Inner Harbour ............................................................................... 106 4.2. Port Adelaide Outer Harbor ................................................................................. 135 4.3. Port Lincoln ......................................................................................................... 144 4.4. Wallaroo ............................................................................................................. 154 4.5. Port Giles ............................................................................................................ 164 4.6. Thevenard .......................................................................................................... 172 5. Draft Determinations ........................................................................................... 181 3 Executive Summary Under subclause 5(2) of the Port Terminal Access (Bulk Wheat) Code of Conduct (the Code), the Australian Competition and Consumer Commission (ACCC) has made Draft Determinations that Viterra Operations Pty Ltd (Viterra) should be an exempt service provider of port terminal services provided by means of its port terminal facilities at: Port Adelaide Inner Harbour (IHB); and Port Adelaide Outer Harbor (OHB). The ACCC has also made Draft Determinations that Viterra should not be an exempt service provider of port terminal services provided by means of its port terminal facilities at: Port Lincoln; Wallaroo; Port Giles; and Thevenard. If the ACCC makes Final Determinations consistent with these Draft Determinations, Viterra’s Port Adelaide IHB and OHB facilities will be subject to a lower level of regulation, as Parts 3 to 6 of the Code will not apply to Viterra in relation to these port terminal services. However, if the ACCC makes Final Determinations consistent with these Draft Determinations, Viterra will remain subject to Parts 3 to 6 of the Code in relation to its Port Giles, Port Lincoln, Thevenard and Wallaroo facilities. In making its Draft Determinations the ACCC has: considered each of Viterra’s port terminal facilities individually; and carefully considered the matters listed at subclause 5(3) of the Code. A summary of the ACCC’s draft views in relation to each of Viterra’s facilities is set out below. The ACCC notes that the exemptions proposed in relation to Viterra’s IHB and OHB facilities are finely balanced, and are based on the information available to the ACCC at the time of making its Draft Determinations. • Port Adelaide IHB o Viterra’s Port Adelaide IHB facility likely faces sufficient competitive constraint from the combination of third party port terminal service providers (PTSPs), domestic markets, the Port Adelaide container market and Victorian markets (including domestic, container and PTSP markets) to incentivise Viterra to provide fair and transparent access to third party exporters. o Determining Viterra to be an exempt service provider in relation to its Port Adelaide IHB facility is unlikely to be detrimental to competition in port terminal services markets, or in upcountry grain storage and handling markets. o Determining Viterra to be an exempt service provider in relation to its Port Adelaide IHB facility will likely allow Viterra to provide more flexible services for its customers, as well as reducing regulatory burdens and any distortions which may result from differing regulatory arrangements applying to competing PTSPs. 4 • Port Adelaide OHB o Viterra’s Port Adelaide OHB facility likely faces sufficient competitive constraint from the combination of third party PTSPs, domestic markets, the Port Adelaide container market and Victorian markets (including domestic, container and PTSP markets) to incentivise Viterra to provide fair and transparent access to third party exporters. o Determining Viterra to be an exempt service provider in relation to its Port Adelaide OHB facility is unlikely to be detrimental to competition in the port terminal services market, or the upcountry grain storage and handling market. o Determining Viterra to be an exempt service provider in relation to its Port Adelaide OHB facility will likely allow Viterra to provide more flexible services for its customers, as well as reduce regulatory burdens and any distortion which may result from different regulatory arrangements applying to competing PTSPs. • Port Lincoln o Viterra’s Port Lincoln facility likely faces an uncertain level of competitive constraint from T-Ports Pty Ltd’s (T-Ports) Lucky Bay facility. T-Ports’ facility is relatively unproven, having only commenced operations in March 2020, and also relies on a loading arrangement that is unproven in the context of the Australian grain market.1 o Viterra’s Port Lincoln facility likely faces limited competition from domestic and container markets, meaning that grain grown on the Eyre Peninsula is largely reliant on access to export markets. o Viterra has a dominant position upcountry on the Eyre Peninsula, where it owns the vast majority of storage. o Determining Viterra to be an exempt service provider in relation to its Port Lincoln facility would likely be detrimental to exporters’ interests and access to port terminal services, and to competition in upstream and downstream markets. • Wallaroo o Viterra’s Wallaroo facility likely faces limited competition from third party PTSPs, and domestic and container markets, for the majority of grain that is likely to be exported from this facility. o As such, determining Viterra to be an exempt service provider in relation to its Wallaroo facility would likely be detrimental to the interests of exporters, and to competition in upstream and downstream markets. • Port Giles o Viterra’s Port Giles facility likely faces only limited competition from third party PTSPs at this time. In addition domestic and Port Adelaide container markets also likely place limited competitive constraint on Viterra’s Port Giles facility. o As such, determining Viterra to be an exempt service provider in relation to its Port Giles facility would likely be detrimental to the interests of exporters, and to competition in upstream and downstream markets. 1 T-Ports uses a transhipment vessel to move grain from the Lucky Bay harbour to deep water ocean going vessels. The ACCC understands that this type of operation, while likely reducing upfront capital investment requirements, requires the double handling of grain and may be subject to other constraints in practice (such as weather conditions). The ACCC also notes that transhipment operations have not been widely used in the context of the Australian bulk grain market. For further information see https://tports.com/lucky-bay/. 5 • Thevenard o Viterra’s Thevenard facility is in a relatively remote location and faces limited competition from domestic and container markets. As such grain grown on the Eyre Peninsula is largely reliant on access to export markets. o There is likely limited overlap between the catchment area of Viterra’s Thevenard facility and T-Ports’ Lucky Bay facility. However the level