The Port Hedland port authority has today approved three new developments at its existing inner harbour that will give BHP Billiton, Fortescue Metals Group, Atlas Iron and Brockman Resources more export capacity.
The agreements follow comments earlier this week by BHP chief Marius Kloppers and Fortescue’s Nev Power, who said there was sufficient capacity in the inner harbour to facilitate increased iron ore exports.
The new agreements will push back the need for an expensive outer harbour development.
They also represent a decisive response to the aspirations of iron ore exporters,which have been seeking cost-effective expansion opportunities.
Fortescue has been granted approval to develop a 5th berth (AP5) for iron ore exports, with one ship loader servicing both AP4 and AP5.
North West Infrastructure, which is effectively Atlas Iron and Brockman Resources, will be able to develop two berths for iron ore exports at South West Creek. These berths will have capacity of 50 million tonnes per year.
BHP Billiton will be able to develop two additional berths within the company’s existing State Agreement tenure at Burgess Point.
Transport Minister Troy Buswell said in a statement issued late today that the decisions followed a whole-of-port review of its productivity and capacity utilisation.
The review identified under-utilised capacity available at the port and a number of development opportunities to access that capacity, he said.
Mr Buswell said the review arrangements do not involve an increase or decrease in the export capacity allocations for any port user.
The Minister said the State Government and port authority had worked together to deliver a good outcome for Western Australia.
“These developments will see the PHPA optimising its export capacity within the inner harbour and are a significant step towards the port realising its target throughput capacity of 495Mtpa,” he said.
“These initiatives represent an advance for both the junior miners and the major iron ore companies at Port Hedland.”
BHP has a capacity allocation of 240mt, and has been upgrading its mine, rail and port infrastructure to achieve exports at that level. Its exports last year totalled 180mt.
Fortescue has a capacity allocation of 120mt, but is developing mine and rail infrastructure with a capacity of 155mt. It has previously announced its application for a fifth berth.
The opportunity for iron ore miners to exceed their official capacity allocation rests on their abilty to use the unused allocation of other exporters.
In a statement issued late today, BHP elaborated on this.
It stated that the new berths do not come with guaranteed shipping capacity beyond its current 240 mtpa throughput allocation.
WA Iron Ore believes there is substantially more opportunity to optimise its inner harbour throughput, given there is significant underutilised inner harbour port capacity, the statement said.
Port users may ship beyond their shipping allocation if unused capacity is available, it added.
“What has become apparent through this process is that a number of the existing facilities have, or with minor modifications will have, the potential to deliver substantially more capacity than was assumed originally.”
Mr Wilson stated that development of the outer harbour remains attractive.
“Its initial development would require dredging a shipping channel and turning basin, as well as constructing a four kilometre jetty with associated stockyards and car dumpers at Boodarie. Additional expansion in the Inner Harbour would delay the requirement for many of these investments.”
Mr Wilson added that “despite the substantial establishment costs associated with this greenfield facility, our analysis concluded that development of the first 50 mtpa phase of the outer harbour project would deliver a value-adding investment return as a standalone project. The outer harbour therefore remains a critical part of our future growth plans, but is not our best option right now”.
Mr Power issued a statement that said “Fortescue believes total port capacity can be increased beyond the current cap of 495mtpa by working with the PHPA and other users”.
“The fifth berth will allow us to further develop our highly successful and efficient lay-by berth configuration. It will lead to the more efficient use of the inner harbour capacity by providing the PHPA with greater flexibility to improve the movement of ships,” Mr Power said.
“The fifth berth will enable us to maximise the use of the under-utilised capacity of the Port, which is a benefit to all parties, including the State which will receive increased royalty income.”
Mr Power concluded: “Given the delay in reaching this agreement, we now need to develop a schedule to integrate the construction of the fifth berth into our works program.”
The costs of a fifth berth, expected to be approximately $250 million, are not currently included in Fortescue’s budget for the expansion to 155mtpa. The ultimate cost of the project will be influenced by remobilisation charges.
Apart from the four companies affected by today’s announcement, the other major exporter at Port Hedland will be Hancock Prospecting, which has completed dredging at South West Creek for two berths with a combined capacity of 55mt.
The port also has common user berths with capacity of 25mt.