Port Hedland expansion exposes West Pilbara folly

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From the West Australian:

The constrained shipping channel at Port Hedland is the major drag on exports from the port.

It is now capped at a theoretical limit of 495 million tonnes a year – a figure that puts a crimp on the expansion ambitions of Fortescue Metals Group, BHP Billiton and Gina Rinehart’s Roy Hill project.

Speaking at the Mining the Pilbara conference yesterday, Pilbara Ports Authority chief executive Roger Johnston outlined a raft of measures aimed at pushing Port Hedland’s iron ore capacity beyond 495 million tonnes a year, confirming the Port was modelling a new theoretical cap.

…The iron ore industry has long said Port Hedland’s capacity could exceed 600 or 700 million tonnes a year.

…BHP Billiton is pushing towards a 270 million tonne run rate but has a priority channel allocation of only 240mtpa.

Fortescue is already at 155mtpa, and has priority allocation of only 120mtpa.

…Roy Hill executives have previously said their project’s 55mtpa allocation is the major restraint on any expansion of Mrs Rinehart’s iron ore ambitions.

Altas, Brockman and Mineral Resources have 25mt capacity now and another 55mt planned. Given they’re going to disappear that’ll leave more scope to get much more chap ore to market for the majors. Rio has already added the port capacity at Cape Lambert for its next ramp up to 360mt. There’s oodles of port capacity coming online to ship very cheap iron ore in the years ahead.

I know money is free and all right now but the West Pilbara and Anketell port expansion still makes no sense to me given the iron ore will be more expensive than that available via existing idle infrastructure.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.