mining review

Mining Firms allowed to increase iron ore exports from Port Hedland

After a long-awaited assessment of the facility's export capability, Port Hedland, Australia's most profitable export business, will be allowed to boost its iron ore exports significantly.
iron ore export

Estimated reading time: 3 minutes

Roy Hill, Fortescue Metals, and BHP Group have emerged winners from the Western Australian government study. Those three exporters informed their port allocations are expected to be enhanced by 25 percent when the plans are finalized later this year.

Port Hedland allowed exporting 660 million metric tons of iron ore annually

As of Tuesday, the Western Australian government has approved a proposal that would allow Port Hedland to export up to 660 million metric tons of iron ore annually, all but assuring the increased allocations in the future.  In comparison to the 523 million tonnes of iron ore carried in the past financial year, the new capacity would be 26% greater and far above the port’s extended redundant capacity of 495 million tonnes per year, which has long been redundant.

Iron ore exports might theoretically grow by $US23.38 billion a year if the greater capacity could be accessed; however, it would take years and billions of dollars to build the new capability, likely resulting in lower pricing for iron ore.  There has been an effort by the WA government to distribute the additional berth capacity among the significant Port Hedland iron ore tenants. Still, it seems that Mrs. Rinehart’s firms have come out on top with their winning bid for Stanley Point Berth 3.

Mrs. Rinehart’s private firm Hancock Prospecting and ASX listed company Mineral Resources will be allocated Stanley Point Berth 3, according to WA Ports Minister Rita Saffioti.  Mrs. Rinehart and Mineral Resources talisman Chris Ellison promised to form a joint venture if they won the Stanley Point Berth. The result looks to reward this uncommon cooperation between Australia’s iron ore moguls.

Having Mrs. Rinehart and Mr. Ellison work together on this project was crucial. It allowed both firms to beat Fortescue Metals Group, which bid to create the new port, which would need digging and expanding South West Creek in Port Hedland.  Western Australia made this commitment a decade ago, but all tiny miners have either failed or been bought over by more prominent tenants in Port Hedland.

In particular, Stanley Point Berth 3 was set aside for Atlas Iron, which Mrs. Rinehart purchased in 2018 after winning a bidding battle over Fortescue and Mineral Resources.  As a result of Tuesday’s announcement, Fortescue has the authorization to build a new ship loader at its Anderson Point hub in Port Hedland, Australia.

exporters to create and pay for additional infrastructures

It will be up to the exporters to create and pay for much of the additional infrastructure outlined in Tuesday’s proposal.  Investment in infrastructure would be a formality, though, as long as iron ore prices remain high, at US$141.75 a tonne, according to S&P Global Platts.

In the Pilbara iron ore heartland of Western Australia, Mr. Ellison said the company’s statement on Tuesday marked a significant breakthrough in its quest to “unlock trapped reserves.”  Additionally, in December, Mrs. Rinehart and Mr. Ellison reached an agreement under which an iron ore project stuck for years would be carried to Port Hedland through Roy Hill’s railway.

Australian Premium Iron (API), a joint venture, has decided to sell several assets as part of a series of actions in 2021.  When China’s Baowu and Aurizon bought the API assets in 2014, a proposal to integrate them into one iron ore mining, rail, and the port operation failed to materialize.

Many of the assets in the West Pilbara are anticipated to utilize the new port that Mineral Resources is developing at Ashburton. In contrast, others, like the Hardy project, are slated to use Roy Hill’s infrastructure at Port Hedland.

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