IN September last year, Rio Tinto contracted construction firm John Holland to conduct the early stages of major expansion at its Port Walcott facility at Cape Lambert.
IN September last year, Rio Tinto contracted construction firm John Holland to conduct the early stages of major expansion at its Port Walcott facility at Cape Lambert.
The $276 million contract includes the construction of a 920-metre jetty and two berths.
The deal hardly made news, yet the value of that contract is greater than any single year’s total port construction in Western Australia in the 15 years between 1989 and 2004, even when past expenditure is converted into current values.
It represents just a portion of the massive expansion of port capacity taking place in the state, led by the iron ore sector, but also including LNG players and their suppliers who are adding or establishing port capacity at Dampier and Barrow Island and have plans to do so at Onslow, Broome and possibly Derby.
Over the next three years, as the iron ore miners gear up their shipping facilities to match the spectacular rise in production, port development spending is forecast to reach more than $5 billion, almost as much as that spent in the past two decades in real terms.
And these numbers may well swell, given the news last month that BHP Billiton intends to develop the outer harbour at Port Hedland, a planned finger wharf project that would allow it to load ships 4.5 kilometres offshore, avoiding the congestion and tidal issues of the existing inner harbour. Huge ships capable of taking 320,000 tonnes would be able to use this facility.
Just the first component of the outer harbour – two berths for cape-size vessels – would increase capacity by 50 million tonnes per annum. Ultimately, the outer harbour is thought to be expandable to 16 berths capable of handling 400mtpa.
But despite BHP’s plans, there is plenty to happen in the inner harbour before that offshore capacity comes on stream.
With total throughput of 178.6mt last financial year, Port Hedland was the world’s second largest bulk commodities port after Qinhuangdao in China, near Beijing. BHP represented the majority of that with 133.8mt but it has committed to expansions that are expected to take it to 240mtpa from within the inner harbour.
Fortescue Metals Group achieved 39.1mt for the year ending June 30, ramping up to an annualised rate of 48mtpa by the close of the financial year. FMG’s current capacity at its two berths is up to 55mtpa and it is establishing a third berth to take output to 95mtpa.
The other players at Port Hedland are also forging ahead. Hancock Prospecting has been dredging as part of its plans to have two berths capable of handling 55mtpa and North West Infrastructure (formerly the North West Iron Ore Alliance) is expected to have a capacity of 50mtpa for its members – Atlas Iron, Brockman Resources and FerrAus.
With the capacity of the existing inner harbour thought to be around 495mtpa, the addition of the outer harbour could take total annual tonnage close to a staggering 900mtpa. And that is without assuming that technology and better management won’t push the limit further.
Already the capacity of the existing harbour has been expanded by improved traffic management to make the most of the tidal conditions and by squeezing extra space on the wharfs. Broader ships that can operate in shallower water is seen as one answer. Another more immediate example is the first-ever adoption of the Cavotec vacuum mooring system at a bulk commodities port. Suction caps on the Utah wharf have removed the importance of ropes and keep the boats more stable, thus reducing mooring time and avoiding movement that can interrupt loading, especially at the rougher harbour entrance.
Further west, Rio Tinto’s operations are also expanding rapidly. It is tweaking its Dampier operations at East Intercourse Island and Parker Point by 10mtpa to about 150mtpa but it is at Cape Lambert where the real action is taking place.
The John Holland contract is just part of a $14.8 billion production expansion, of which somewhere between $5 billion and $7.5 billion will be spent on ports and related infrastructure.
Cape Lambert is currently exporting 80mtpa but a further 105mtpa is under way or expected to be approved. SKM is doing the engineering procurement construction management for that two-phase, four-berth project but Rio Tinto has already flagged a vision to add another four berths, or a further 100mtpa, taking Cape Lambert to close to 300mtpa.
Nearby at the proposed multi-user port of Anketell, three players have plans for as much as 115mtpa in the first phases of their projects – Aquila Resources is 30-40mtpa, FMG 30-60mtpa and China’s MCC has 15mtpa. That port is thought to be ultimately capable of 350mtpa.
Aquila alone has identified port development costs of $1.8 billion out of a total project cost of $5.8 billion for its West Pilbara Iron Ore Project. The state has agreed to the multi-user port concept, but there is no doubt that such developments are trickier than the monopoly port developments that have occurred at Dampier, Cape Lambert and Port Hedland.
Even at Port Hedland the newer multi-user parts of the facility come with serious conjecture about who will have the rights to access them. It’s expected the use-it-or-lose-it policy will be strictly enforced if some proponents require the port space ahead of others.
At the state’s other major port project, the proposed multi-user facility at Oakajee north of Geraldton, the developer has bought time from the government to extend until December 31 the sign-off on a number of critical milestones.
One major issue at Oakajee is that the port proponent’s joint venture partners, Mitsubishi and Murchison Metals, have a mining project that is tied to the infrastructure development.
The joint venture is adamant it is committed to the $5.2 billion port but other, Chinese-backed, potential users have questioned the viability of the current structure and want to see the port ownership opened up.
The extension puts on hold that argument for most of this year, however this week there was renewed public speculation about a cost blowout to as much as $6.7 billion.
The row, however, has highlighted the potential for some new miners in the Mid West region to use alternative ports such as Esperance, which already handles iron ore. Golden West is seen as the most likely candidate, even though it would prefer to export out of Oakajee, which is much closer to the Asian market. Some players view the prospect of an alternative route to market as a threat to the Oakajee project.
Esperance’s biggest customer is already iron ore. Cliffs Natural Resources is looking to gradually increase its throughput at the port to 11.5mt from 8.8mt last year. Nickel hopeful First Quantum Resources is also planning to use the harbour to export minerals from the Ravensthorpe project, which it bought from BHP.
Esperance is preparing for the increase in land-based traffic by putting up for tender a contract to construct a port access corridor for road and rail, a project expected to be worth as much as $100 million.
Also in the southern half of the state, Bunbury port is expected to undergo a significant transition as it continues to move and expand its facilities away from the population centre on its southern boundary. Significant road works have already taken place but more development is required to stop congestion at the port access, especially if Lanco Infratech’s plans to export coal via a new Collie rail link come to fruition.
Albany’s issues around harbour traffic and development to allow for iron ore to be exported from Grange Resources’ Southdown project appear to have been dealt with. Wartime ordnance dumped in the harbour has been removed to allow bigger ships to enter the port.
At Fremantle, the battle with private port group James Point over the development of facilities at Kwinana to ease future pressure on the existing harbour appears to remain unresolved.
