Concise Sustainability Report - Delivering for a sustainable future - Aurizon
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2020 | Concise Sustainability Report Delivering for a sustainable future
Managing Director & CEO message
We are pleased to present our 2020 Concise driving further significant improvements by
Sustainability Report, demonstrating our continuing to invest in technology, processes
continued commitment in being open and and people.
transparent in relation to social, environmental
Despite the emergence of COVID-19 this
and economic aspects of our business.
year, we have continued to provide safe,
We have worked hard to build a stronger, reliable services to our customers, and
more sustainable business in recent years continued to support regional communities
to focus on our core capabilities of hauling where our people live and work. Our people
bulk commodities and managing the Central are to be commended for their commitment,
Queensland Coal Network. dedication and discipline throughout this
challenging time.
While it is important to note that over the
past decade there has been long-term To read our full 2020 Sustainability Report,
improvement in our safety performance and visit www.aurizon.com.au/sustainability.
culture, we remain absolutely focused on
Andrew Harding
Managing Director & CEO
As Australia’s largest rail-based transport business, we transport more than 250 million tonnes of Australian commodities each year,
connecting miners, primary producers, and industry with international and domestic markets. Our operations primarily span Queensland,
New South Wales and Western Australia, and consist of three business units: Coal, Bulk and Network.
More than 80% of our employees and Local procurement Indigenous businesses is one way that we can
their families live and work in regional Our supplier relationships extend from local have greater social value impact and support
Australia. By providing job opportunities operators through to international suppliers. the communities in which we operate.
to people in these regions, and engaging This gives us the flexibility to match As a part of our commitment within our
with local business and suppliers for supplier solutions to the specific needs Reconciliation Action Plan (RAP), we have
products and services, we can help to create of operational requirements or a project. committed to increasing our procurement
a more economically sustainable community. Through local procurement, we can spend year-on-year with Aboriginal and
In FY2020, we spent an estimated $1.3 billion generate employment opportunities and Torres Strait Islander-owned businesses from
with suppliers, a large percentage of which provide economic benefits at all levels of a nominated baseline of approximately
was in regional Australia (see figure 1). the community. $2 million. We achieved this in FY2020 with
an overall spend of $5.38 million, an increase
Inclusion at Aurizon goes beyond what we of $1.29 million from FY2019. Maintaining a
Regional Australia do internally as an organisation. Our ability membership with Supply Nation2 is key to
Council 2031 to create greater social value is reflective of enabling us to achieve this commitment.
During FY2020, we became a founding who we are. Increasing our spending with
member of the Regional Australia
Council 2031 (RAC2031), with other Figure 1 – Aurizon’s FY2020 regional spend
leading Australian companies1, to give
a greater voice and support to the
future development of regional Australia.
Established by the Regional Australia
Institute (RAI), RAC2031 aims to use the
collective knowledge and influence of the
Council and corporate members to help
transform the regions. The Council’s work
will focus on four pillars – jobs, population,
liveability, and people/leadership.
We are already well invested in regional
Australia, but there is more potential to
unlock for the benefit of local communities
and the Australian economy. We know,
for example, that recruiting and training
people locally means a greater connection
with the local community and likelihood
to stay. This also builds a talent pipeline of
future leaders who live and work close to
home and their communities.
total spend >$100k in a location.
1 Telstra, KPMG, NBN, Prime Super, Expedia Group, Bendigo Bank, Commonwealth Bank, APPEA
(The Australian Petroleum Production & Exploration Association) and TransGrid.
2 Supply Nation is an organisation that works to connect verified Indigenous businesses with paid corporate, government and
not-for-profit members in every state and territory in Australia. Available: https://supplynation.org.au/.
Bulk
Our Bulk business includes haulage of a range of bulk commodities, future opportunities. For batteries, the global uptake of electric
such as iron ore, bauxite, alumina, base metals, grain and livestock. vehicles (EVs) is expected to drive demand for commodities
During FY2020, our Bulk business delivered 48 million tonnes of such as nickel, cobalt, copper and lithium.
commodities. The business also provides supply chain services to
In December 2019, the Queensland Government announced a
customers, including ballast cleaning, hook-and-pull, and handling
$13.8 million New Economy Minerals Initiative to encourage
and stevedoring services.
exploration for minerals such as copper, nickel and rare earth
Our business growth aspirations are underpinned by an optimistic minerals used in emerging technologies, including EVs and
outlook for bulk commodity markets within Australia that are renewable energy products3. Western Australia’s Future Battery
required to support the demands of the modern economy. Industry Strategy also outlines the state’s plans to become a globally
In addition to commodities that are needed to build infrastructure, competitive producer and exporter of battery minerals through
exposure to growth markets of fertilisers and batteries will unlock increased exploration, innovation and investment4.
Future of coal
Aurizon’s role in Australia’s coal transportation For thermal coal, 99%6 of Australian exports are destined for Asia
(see figure 2), a region that now commands 81% of the seaborne
Our Company plays a significant role in Australia’s coal supply chain,
market, increasing from just 35% in 19907. It is this region (rather than
with approximately two-thirds of Australia’s coal exports using
global consumption) that is projected to use coal-fired generation
our below rail Network and/or carried by our above rail business.
assets for a prolonged period, in addition to increased renewables
We also haul coal domestically for energy use.
and other energy sources. Australian thermal coal export volume
Seaborne coal demand to South-East Asia was 25 million tonnes in FY20208, more than
double the volume from just five years prior.
Rather than global consumption, demand for Australian coal is
dependent on seaborne-traded markets, which are increasingly Given the quality and the cost competitiveness of Australian coal,
concentrated in Asia. The differing properties of metallurgical the opportunity remains for Australia — and therefore, our business
coal (for steel making) and thermal coal (for energy generation) and our customers — to continue supplying the coal requirements
mean that there are distinct markets and, therefore, drivers of of Asia.
future demand.
For metallurgical coal, steel-intensive growth in India is expected
to be the single largest driver of seaborne trade demand over
the coming decades. After surpassing annual production of more
than 100 million tonnes for the first time in 2017, India’s crude steel
production was 111 million tonnes in 20195. The Indian Government’s
National Steel Policy (2017) projects annual crude steel production
to reach 255 million tonnes by 2030–31.
Figure 2 – Export destinations for Australian coal9
Metallurgicalcoal
Metallurgical coal(FY2020)
(FY2020) Thermalcoal
Thermal coal(FY2020)
(FY2020)
75
75 75
75 74mt
74mt
Total:177mt
Total: 177mt Total:213mt
Total: 213mt
60
60 60
60
52mt
52mt
50mt
50mt
45
45 45
45
40mt
40mt
35%
35%
32mt
32mt 32mt
32mt
30
30 30
30
24%
24% 23mt
23mt
28%
28%
19mt
19mt
22%
22% 16mt
16mt 16mt
16mt
1515 18%
18% 1515 15%
15% 13mt
13mt
10mt
10mt 10mt
10mt 11%
11%
11%
11% 8%
8%
9%
9%
6% 5% 6%
6% 3mt
3mt
6% 5%
1%
1%
00 00
China
China India
India Japan
Japan South Taiwan
South Taiwan Rest
Restof
of Rest
Restof
of Japan
Japan China South
China South Taiwan
Taiwan Vietnam
Vietnam Rest
Restof
of Rest
Restof
of
Korea
Korea Asia
Asia World
World Korea
Korea Asia
Asia World
World
3 Queensland Government Department of Natural Resources, Mines and Energy: 5 World Steel Association, Statistics.
New Economy Minerals. Available: https://www.dnrme.qld.gov.au/mining-resources/ 6 Australian Bureau of Statistics (Customised report, June 2020).
initiatives/new-economy-minerals. 7 International Energy Agency, Coal Information (Data) (2020).
4 Government of Western Australia Department of Jobs, Tourism, Science and Innovation: 8 Australian Bureau of Statistics (Customised report, June 2020).
Future Battery Industry Strategy. Available: https://www.jtsi.wa.gov.au/docs/default-source/ 9 Australian Bureau of Statistics (Customised report, June 2020). Note: Due to rounding,
default-document-library/future-battery-industry-strategy-wa-0119.pdf?sfvrsn=ccc7731c_6. the sum of the individual elements may not equal the total value.
Australia
120 15% 57
111
ASEAN Member States (Selected) 109 53 6
The future of seaborne metallurgical coal
100 +5.5%
95
101 50 51
48 6 The future of seaborne thermal coal
6
87 89and associated infrastructure development,
Driven by urbanisation 42 43
6
The 6United Nations projects that India’s urbanisation rate will
requirements are imported
80 81 38
77
the opportunity remains for India and 10%
South-East Asian nations 7 increase to 40% in 2030 compared to 34% in 2018, lifting the urban
73 7
90% of coking coal
69
00 to increase
15,000 steel
20,000 usage,
25,000as measured
30,000 per capita
35,000 (see
31 figure
40,000 645,000
3). population
50,000 55,000 from 461 million
60,000 to 607 million14. While renewables and
65,000
60
26
Crude steel production GDPhas grown by 5.5%
per capita perUSD)
(PPP annum
7 in India other cleaner energy sources will undoubtedly grow in significance,
over
40 the past decade, driving demand for 5% metallurgical coal.
7 the age of the Asian coal-fired energy generation fleet and projected
Faced with a structural deficiency of high-quality metallurgical coal10, capacity additions provides insight into the continuing demand for
20 25 20 32 36 37 44 45 42 47 52
India turns to the seaborne market to meet demand (see figure 4). thermal coal (see figure 6). Figure 7 shows the International Energy
Underpinned by shorter distances between mines and ports, Agency’s long-term projection for electricity generation in South-East
0 0%
as well as significant port and rail capacity exclusively servicing Asia under the Stated Policies Scenario. On average, Australia’s export
CY10
FY10
CY14
CY16
CY19
CY18
FY14
CY13
CY15
FY16
FY19
CY12
CY17
FY18
FY13
FY15
FY12
FY17
CY11
FY11
coal exports, Australia has comparatively low transportation and thermal coal has the highest energy content and relatively low ash
Crude steel5).
production Domestic production Imported volume
port costs (see figure content, when compared to most other major sources of seaborne
thermal coal (see figure 8).
Figure 3 – Apparent steel use (crude steel equivalent) Figure 6 – Average age of coal-fired electricity capacity15
per capita vs. GDP per capita11 33 years
120 15%
1,200
109 111
South Korea
(crude steel equivalent) per capita (kg)
100 population +5.5% 101
95
1,000 87 89 24 years
80 81
77 10%
73 21 years
Apparent steel use
69
800
60
China 16 years
Japan
40 600 Germany 5% 13 years 13 years
20 400 USA
Australia
0 ASEAN Member States (Selected) 0%
200
CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY2019
India
Crude steel production
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 China India South Korea Taiwan Australia
Japan
GDP per capita (PPP USD)
0% Top five global thermal coal import nations (by volume)
Figure 4 – India: coking (metallurgical) coal requirements12 Figure 7 – International Energy Agency (IEA) outlook
Indonesia: Export Average
Australia:
57
10% (Stated Policies Scenario) for electricity generation in Export Average
51
53 6 South-East Asia, by source (TWh)16
Ash content
50
48 6 South2,345TWh
Africa:
6 6 20%
requirements are imported
42 43 Export Average
6
38 China: 2,009TWh
7
90% of coking coal
7 Domestic Average
31 6
30% 1,693TWh
26
7 Increasing
7 1,400TWh quality
40% India: Domestic Average
25 20 32 36 37 44 45 42 47 52
1,045TWh
4,250 4,500 4,750 5,000 5,250 5,500 5,750 6,000 6,250
684TWh
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Energy (kcal/kg, gross as received) +123%
40%
Domestic production Imported volume 40%
41%
43%
40%
27%
2010 2018 2025f 2030f 2035f 2040f
Nuclear Oil Non-hydro renewables Hydro Gas Coal
Figure 5 – Land transport, port, and sea freight costs from major Figure 8 – Thermal coal energy and ash content17
seaborne metallurgical coal export countries to India (USD/t)13
0%
$71
$11 Indonesia: Export Average
10% Australia:
Export Average
$12
Ash content
$44 $45 South Africa:
$41 20%
Export Average
$8 $14 China:
$12 Domestic Average
$11
$5 $49 30%
$20 $9 Increasing
quality
$9
$26 $26 40% India: Domestic Average
$4 $20
$7 4,250 4,500 4,750 5,000 5,250 5,500 5,750 6,000 6,250
Australia Canada Russia United States Mozambique Energy (kcal/kg, gross as received)
Sea freight Port Land transport
14 United Nations, Department of Economic and Social Affairs, Population Division (2018).
World Urbanization Prospects: The 2018 Revision, online edition.
10 Government of India, Coal Directory of India 2018-19 (page 8.1). 15 Platts UDI Electric Power Plants Database (March 2020), capacity weighted.
11 GDP (Purchasing Power Parity; international dollars) – World Bank (2018 data), Australia included as reference.
Population – World Bank (2018 data), Apparent Steel Usage & Apparent Steel Use per 16 International Energy Agency: World Energy Outlook (2019), Stated Policies Scenario.
Capita – World Steel Association (2018 data). ASEAN Member States (Selected, based on 17 Australia (Export Energy/Ash By Mine): Wood Mackenzie Coal Supply Tool (Year: 2020, Data:
data availability): Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam. Q2 2020). Australia (Export Energy/Ash): Wood Mackenzie Coal Cost Curves (Year: 2020, Data:
12 India Ministry of Coal, Coal Directory of India (multiple years), Provisional Coal Statistics May 2020). India (Domestic Energy/Ash): India Ministry of Coal Provisional Coal Statistics 2018-
(2018-19). Note: Financial year is April to March. Total Requirements is the sum of Domestic 19. China (Domestic Energy): IEA Coal Medium-Term Market Report 2016. China (Domestic Ash):
Coking coal (Washed) Production plus Imported Coking Coal volume. Wood Mackenzie ‘China Limits Coal Ash Content’ (April 2017). Indonesia (Export Energy): Wood
13 Wood Mackenzie Coal Cost Curves (Data: May 2020, Reference Year: 2020), Wood Mackenzie Coal Cost Curves (Year: 2020, Data: May 2020). Indonesia (Export Ash): Argus (Indonesia
Mackenzie Global Coal Markets Tool (Data: 2020 1H, Reference Year: 2020), Sea freight 5,000 benchmark), Methodology & Specifications Guide, April 2020. South Africa (Export
export terminal assumptions: US – East Coast, Canada – West Coast, Australia – Hay Point. Energy): Wood Mackenzie Coal Cost Curves (Year: 2020, Data: May 2020). South Africa (Export
Note: Due to rounding, the sum of the individual elements may not equal the total value. Ash): Argus (Richards Bay 6,000 benchmark), Methodology & Specifications Guide, April 2020.Scenario analysis: International Energy Agency Based on Australia’s export volume in 2018 and assuming
Australia’s participation in the trade market aligns with the
One recommended disclosure from the Task Force on
Stated Policies Scenario (including an estimated even split
Climate-related Financial Disclosures (TCFD) is to consider
of metallurgical and thermal coal export volume in 204022),
different climate-related scenarios, including a 2°C or lower
Australia’s export volume would be projected to reduce by 44%
scenario. Although the Task Force does not recommend the
in 2040 compared to 2018, representing a compound annual
use of a specific scenario, we have drawn upon the best known
growth rate of –2.6%. However, this projection for Australia takes a
and most widely used scenarios produced by the International
conservative approach, given an expected further preference for
Energy Agency (IEA) in the annual release of the World Energy
higher quality coal in such a carbon-constrained scenario.
Outlook. This is used for comparison with our internal scenarios,
as described in our full Sustainability Report.
Aurizon’s resilience under an IEA Sustainable
In addition to the (central) Stated Polices Scenario18, the IEA also Development Scenario
publishes the Current Policies Scenario19 and the Sustainable We consider the following points when assessing the resilience
Development Scenario20. According to the IEA, the Sustainable of our business under the IEA Sustainable Development Scenario:
Development Scenario ‘charts a path fully aligned with the Paris 1. Market share: We hold the view that in a carbon-constrained
Agreement by holding the rise in global temperatures to well environment, Australia could command a higher market
below 2°C … and pursuing efforts to limit [it] to 1.5°C, and meets share given an expected preference for higher quality coal23
objectives related to universal energy access and cleaner air’21. which Australia supplies. As such, we have modelled an
In the (central) Stated Policies Scenario, the IEA projects global increased Australian market share (+10 percentage points
coal trade to reduce by 7% in 2040 compared with 2018: compared to estimated market share of both metallurgical
and thermal coal from the estimated Stated Policies Scenario
For global metallurgical coal trade, the volume projection
volume in 2040). In this projection, Australia’s export volume
increases by 16% in 2040 compared with 2018, representing
would reduce by 112mtce in 2040 (–32% compared to 2018).
a compound annual growth rate of 0.7% across the period.
This represents a compound annual growth rate of –1.7%
For global thermal coal trade, the volume projection reduces
across the period, as illustrated as Aust exports: Sustainable
by 15% in 2040 compared with 2018, representing a compound
Development (adjusted market share) in figure 9.
annual growth rate of –0.8% across the period.
Australia’s export volume is projected to increase by 18% 2. Metallurgical coal: Two-thirds of coal volumes transported
in 2040 compared with 2018, representing a compound across the Central Queensland Coal Network (CQCN) is
annual growth rate of 0.8% across this period. metallurgical coal. Given the limited viable alternatives in
steel production, the Sustainable Development Scenario
In the Sustainable Development Scenario, the IEA projects global
projects more resilience in metallurgical coal trade (compared
coal trade to reduce by 62% in 2040 compared with 2018.
to thermal coal). When this figure is combined with the
As the Sustainable Development Scenario (and Current Policies expectation of increased market share for Australia export
Scenario) do not provide country-level trade projections, we have volume, we can expect the CQCN to be resilient in a scenario
applied market share assumptions for Australia in our analysis of reduced global coal demand.
(see figure 9).
Figure 9 – Projected Australian export volumes under IEA scenarios24
600mtce CAGR:
to 2040
500mtce +1.6%
Aust exports: Current Policies
Australia Export Volume
Aust exports: Stated Policies
400mtce +0.8%
Aust exports:
Sustainable Development
300mtce
Aust exports:
-1.7% Sustainable Development
200mtce -2.6% (adjusted market share)
100mtce
0mtce
2020 2030 2040
18 The Stated Policies Scenario incorporates today’s policy intentions and targets. Previously 21 International Energy Agency (IEA), World Energy Outlook (2019).
known as the New Policies Scenario, it has been renamed to emphasise that it considers 22 Although the coal type split of Australian export volume in 2040 is not disclosed in the
only specific policy initiatives that have already been announced (International Energy World Energy Outlook (2019), the IEA noted in the World Energy Outlook (2018) that in
Agency, World Energy Outlook (2019). 2040 the split between the two coal types is roughly even.
19 The Current Policies Scenario shows what happens if the world continues along its present 23 For metallurgical coal, higher quality coal is typically considered to have low Coke Reactivity
path, without any additional changes in policy (International Energy Agency, World Energy Index (CRI) results and a high Coke Strength after Reaction (CSR). For thermal coal,
Outlook (2019). higher quality coal is generally considered to be high energy, low ash and low sulphur.
20 The Sustainable Development Scenario maps out a way to meet sustainable energy goals 24 IEA World Energy Outlook (2019), Aurizon analysis. Note: Where individual year projections
in full, requiring rapid and widespread changes across all parts of the energy system. are not published in the IEA World Energy Outlook, figures have been extrapolated
This scenario charts a path fully aligned with the Paris Agreement (International Energy (straight line).
Agency, World Energy Outlook (2019).Safety
During FY2020, we updated our enterprise safety strategy to focus on and prioritise Figure 10 – Safety in Action
improvements to our safety systems and culture, and to achieve our safety goal of protecting
ourselves, each other and our communities. This strategy, Safety in Action, leverages the
principles of our existing programs, and incorporates various operational safety initiatives,
creating a newly aligned safety focus across Aurizon.
The centrepiece of the strategy is Safety in Action (see figure 10), which identifies the three Well-designed, Executed
key components of our work that enable us to deliver safe outcomes: planned and by engaged
resourced and enabled
Well-designed, planned and resourced work: we take the time to design and plan our work Delivering people
work, using clear and simple practices, with the right people and tools to deliver the work. Safely
Executed by engaged and enabled people: we take accountability, trust each other,
promote curiosity, and have the capability and competence to support each other.
Informed by risk: we understand the risk, we manage the risk, we know if our controls
are effective, and we share what we learn.
Supporting this change is an update of our Safety Value statement to ‘We know safe, we choose Informed by
safe’, supporting decision-making and reinforcing our personal accountability for safety. risk
Safety in Action will drive our focus as we engage with our teams, identify and execute
improvements to our safe systems of work, and how we report on safety performance.
Environment Benefits of rail freight
Environment: Road freight produces
As a rail operator with a large operational footprint we have a role in helping 16 times as much carbon pollution as rail
maintain a sustainable environment in our local communities. Our inaugural freight per tonne kilometre26.
Climate Strategy and Action Plan25 sets out our actions and long-term targets Safety: Rail transport is a far safer mode of
in reducing our emissions. It focuses on the role we can play in decarbonising transport than road, with the freight volume
Australia’s key export supply chains while continuing to support the current carried by one freight train equivalent to the
and future global competitiveness of our customers. volume carried by 150 semi-trailer trucks27.
Over the course of a year, the freight task
We adopt an evidence-based approach to environmental management.
carried by one train removes the need for
Our continued focus is on reducing our environmental footprint by improving
thousands of truck journeys on our roads,
resource use and energy efficiency, using cleaner fuels, operating electric
reducing congestion and improving safety.
locomotives as part of our fleet, and promoting rail over road freight.
Productivity: Significant economic and
Aurizon directly advocates for policy actions to increase the use of rail freight productivity gains are achievable where there
on key corridors. Rail offers productivity and environmental benefits and is far are large volumes of freight and/or where the
safer than road transport. freight is carried over longer distances.
People
Walking together to achieve reconciliation commitment of fostering respect in line with our RAP. Over 90%
Fostering respect is an important pillar of our RAP. Part of our of the workforce took the program within nine weeks, a testament
commitment included developing and rolling out an internal Cultural to the creative and stimulating learning experience.
Awareness Online Learning Experience during FY2020.
Our vision was to create an experience beyond simply learning.
For us, this was an experience that employees could engage
with that didn’t involve measuring their cultural awareness.
Rather, we designed a program that fosters respect, connection and
understanding. The interactive learning experience uses language,
messaging and tone that not only connects emotionally with people,
but also stimulates curiosity and insight across our Australian depots.
We knew that to create lasting change, the program should be
built on themes inspired by our Indigenous Reference Group (IRG).
The result – a product developed by our people, for our people.
It has set a new benchmark for how we engage employees in learning.
By ensuring the IRG are the custodians of the Cultural Awareness Aurizon’s Cultural Awareness Online Learning Experience
Online Learning Experience, this helps drive the delivery and
25 To be published in October 2020
26 Deloitte Access Economics 2017 Value of Rail: The Contribution of rail in Australia. Available:
https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Economics/deloitte-au-
economics-value-rail-contribution-australia-161117.pdf
27 NSW Government: Consultation Paper: Clean Air for NSW, 2016.You can also read
