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Port Hedland Has ‘Use It or Lose It’ Capacity of Iron Ore

Port Hedland, the world’s biggest bulk export terminal, said iron ore shipping allocations are made on a “use it or lose it” basis.

“Harbor capacity is tight,” Roger Johnston, chief executive officer of Port Hedland Port Authority, said today in an interview in Perth. “There is no more ability to build other infrastructure. You can’t let people sit on it.”

BHP Billiton Ltd. (BHP), Fortescue Metals Group Ltd. (FMG) and Atlas Iron Ltd. (AGO) export ore through the port in Western Australia, with all three planning to expand shipments. Billionaire Gina Rinehart’s Roy Hill Holdings Pty and North-West Infrastructure, including Atlas and Brockman Resources Ltd., also hold rights to develop berths.

The principle for allocation is “use it or lose it,” said Johnston. “If you’re unable to use it on terms and conditions that have applied against that, then it comes back to the port.”

Port Hedland shipped 247 million metric tons in fiscal 2012, up 24 percent from the previous year. Shipments are expected to rise to 285 million tons during fiscal 2013, Johnston said, reaching 495 million tons by 2017.

The port’s inner harbor is fully allocated with a maximum of 495 million tons capacity after Western Australia state in August approved two new port berths for BHP’s iron-ore exports. The new berths were allocated two days after the world’s largest mining company shelved plans for a potential new outer harbor, estimated to cost $22 billion.

The inner-harbor berths don’t guarantee BHP, the world’s third-biggest iron-ore shipper, will be able to boost its capacity beyond its current allocation of 240 million tons of the raw material a year, the Melbourne-based company said in August. Iron ore is BHP’s most profitable unit, and Australia’s most valuable export.

Mining companies maintain rights to current and future berths if they are acquired, Johnston said.

“An allocation is vested in an entity,” he said. “If that entity changes hands there’s not a lot a port can do.”

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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