THE state government last week announced sweeping changes to port management in Western Australia, reining in the ability of customers to influence development and access to the main conduits for the state’s export wealth.
The biggest changes were the expected amalgamation of bulk commodity-focused ports in four distinct regional precincts, including the Pilbara, where a new authority will take charge of the Dampier and Port Hedland iron ore facilities and be responsible for a host of new ports servicing minerals and energy products.
Port Hedland’s proposed growth to 850 million tonnes per annum was already on track to make it the biggest bulk commodity export port in the world.
The proposed Pilbara Ports Authority will be like adding steroids to that mix, with Dampier’s existing capacity, Cape Lambert’s expansion, the new ship-loading facilities at Cape Preston, the expected port at Anketell, and various LNG export points all making significant contributions to the whole.
This could amount to nearly 2 billion tonnes per annum of iron ore exports alone; a staggering amount of capital development followed by major logistics issues, shipping movements and huge wealth.
It is worth noting that Dampier and Port Hedland already run a joint headquarters in West Perth.
The state’s move, jointly announced a week ago by Premier Colin Barnett and Transport Minister Troy Buswell, seeks to maximise the potential for that growth to occur by acting on long-mooted merger plans and more short-term squabbles over customer favouritism and debt concerns.
Part of the new plan includes the removal of customer representatives from the boards of key ports, including Port Hedland. Historically, users who funded the development of these remote assets – and had near-exclusive use of them – have had a seat at the decision-making table.
Competition for port space has made this practice look archaic.
Some observers of the ports’ landscape view these changes as necessary but largely cosmetic when it comes to the true issue the state needs to grapple with – the financial viability of these government-trading enterprises.
Recent criticism of port deals with mining companies has focused on the fact that many of these isolated operations were financially hamstrung by high capital requirements and the need to pay big dividends to Treasury, resulting in high debt.
That situation weakened the position of port boards and management in the face of companies willing to do commercially astute deals to secure one of mining’s most valuable assets – export capacity.
Examples abound but the cost blowout at the development of Utah Point at Port Hedland and the framework agreement struck by Cashmere Iron to fund the feasibility study for expansion at Esperance received a lot of attention.
Cashmere Iron has since struck a new deal with Esperance similar to those of other miners seeking access to the port.
“Ports must be hugely savvy, as savvy as the guys in the mining companies,” said one observer.
Merging ports and pushing all customers outside the tent may well make them better able to negotiate beneficial longer-term outcomes for the state and all users and, therefore, better manage their finances.
Mr Buswell hinted at the issue at the recent announcement.
Last week he said he was concerned about some aspects of financial performance at the state’s ports, but said the government needed to undertake more work on the best methodology for evaluating port performance.
The downside of last week’s announcement is the time involved. The new regional port authorities are not due to be in place for at least two and half years, a period during which massive investment is planned and frenetic jockeying for position among mining companies is likely to be intense.
