The dramatic growth in seaborne trade has made ports politically and commercially valuable.
Look at almost any port in Western Australia and major developments are required if the expected level of trade, especially exports, is to occur unimpeded by the ability of producers to get their goods on a ship.
At the biggest of our harbours, Port Hedland, which sat around 15th in terms of global rankings by tonnage in calendar 2009, last financial year had output of 199 million tonnes (mainly consisting of iron ore). It is hoped to reach 495mtpa, the estimated full capacity of the inner harbour.
The port’s biggest customer, BHP Billiton, is planning to spend $2.3 billion on new berths and ship loaders as part of a $7.3 billion plan to reach its tonnage allocation of 240mtpa, up from 144mtpa in the past financial year.
There is also a planned outer harbour with a further 400mtpa capacity at completion.
Further south, Rio Tinto is the only iron ore exporter from two ports at Dampier and Cape Lambert where it has all but reached the current annual capacity of 225mtpa.
Rio has advanced plans to increase capacity to 283mtpa by 2013 and says it is on a pathway to 333mtpa by 2015. That is mainly at Cape Lambert, which is thought to be expandable to more than 300mtpa from its current 80mtpa capacity.
But even these staggering numbers do not meet all the forecast needs of WA’s exporters if the commodities boom continues at the pace it has since the global financial crisis briefly stalled development plans.
Apart from these two massive port expansions, there are two nearby iron ore-focused ports on the drawing board – Anketell in the Pilbara and Oakajee in the Mid West – as well as plans to expand Esperance, Albany, Bunbury, Fremantle and Geraldton.
Furthermore, new LNG export terminals are proposed at Onslow, in the Pilbara, James Price Point, north of Broome, Barrow Island and Dampier, while Derby’s mothballed facilities may be returned to export coal from the Kimberley.
Almost none of these new ports or expansions of existing facilities come without some form of controversy and, as a result, uncertainty, which creates doubt about what will be delivered.
With an expected commodity price crunch coming, it is resources companies which have built or accessed port facilities that will be in the best position to survive. Those with stranded assets will struggle to fund their development.
In many cases ports have become part of a chicken and egg argument – with those funding mines reluctant to commit without a guaranteed port allocation while those offering berth space wanting more assurances that production will take place before they commit to the infrastructure.
This has become increasingly acute as more projects have sought to move to production in recent years. In some cases, port allocations have been used as leverage in mergers and acquisitions.
For example, Atlas Iron cited Aurox Resources’ significant port access rights at Utah Point in Port Hedland as a key asset, along with its Balla Balla project, which made its merger last year attractive. This year, Atlas claimed to use its strategic port access arrangements as one of its strengths in an off-market takeover bid for Giralia Resources. Even the target of its latest corporate move, FerrAus, has an allocation at the former North West Iron Alliance berth in Port Hedland.
Intriguingly, there has been considerable acrimony around berth allocations at Port Hedland where juniors like those mentioned above and numerous others have been competing for space with BHP Billiton and two of Australia’s richest mining groups, Andrew Forrest’s Fortescue Metals Group and Gina Rinehart’s Hancock Prospecting.
Similarly, at Esperance, there has been controversy surrounding mining hopeful Cashmere Iron’s tight grip on half of two separate expansion stages in return for funding a study into the development.
The fallout from these highly politicised dramas appears to have cost at least one port CEO his job and has caught the attention of state Transport Minister Troy Buswell, who is seeking to restructure the way ports are developed and run to ensure resources assets are not left stranded.
But even where the government has been in close control difficulties have arisen.
The former state Labor government backed a Japanese-funded consortium involving Mitsubishi and Murchison Metals to build the Oakajee port, considered necessary for the development of the Mid West iron ore sector due to Geraldton’s limitations.
But the 45mtpa Oakajee port has stalled as Chinese-backed customers have hesitated to commit to the port and Murchison has admitted it can’t fund its half share of the port. Even state government intervention led by Liberal Premier Colin Barnett has failed to erase doubts the harbour will be built.
At Anketell, just north of Dampier, a proposed port which could be as big as 350mtpa, a consortium led by Aquila Resources is vying with Fortescue for the right to lead the development.
Fortescue recently claimed it would be comfortable to be in a consortium with Aquila.
At Bunbury, big plans to expand existing facilities and, in the future, develop an outer harbour may be held hostage to an arm wrestle between new coalmine owners, customers and the state government.
