BHP Billiton Ltd. (BHP), the world’s largest mining company, is likely to ask the Australian government to intervene to stop a threatened strike that would halt iron ore shipments from the world’s largest export harbor.
Mining operations may start winding down after two days of strike action because stocks at port Port Hedland are reasonably high, Jimmy Wilson, chief executive officer of BHP’s iron ore unit, told reporters in Perth today. “We choke reasonably quickly, two to three days,” he said.
BHP, the world’s third-biggest exporter of iron ore, is already facing reduced earnings at the unit as prices fell into a bear market in March and yesterday slumped to a 20-month low. Industrial action may cost producers about $94 million a day, prompting BHP to follow in the steps of Australia’s national carrier Qantas Ltd., which sought government intervention in a 2011 labor dispute.
“They are literally holding us to ransom and that is something we have to push back on,” Wilson said. “It is highly likely that we would” ask the government to help in the name of national interest, he said.
Disrupting global iron ore supplies may in the short term bolster the iron ore price, which has plunged 27 percent this year. Goldman Sachs Group Inc. (GS) yesterday warned a global surplus may be 175 million metric tons next year, up 21 percent on an earlier forecast.
Ore with 62 percent content delivered to the Chinese port of Tianjin fell 1 percent to $97.50 a dry ton yesterday, the lowest since September 2012, according to data from The Steel Index Ltd.
Fortescue Metals Group Ltd. (FMG), Australia’s third-largest ore exporter, and Atlas Iron Ltd. (AGO) also ship from Port Hedland. BHP fell 0.8 percent to A$37.17 in Sydney, while Fortescue declined 2.4 percent and Atlas lost 2.7 percent.
Deckhands at Teekay Shipping (Australia) Pty., which is contracted by BHP to run tugboat operations at the port, are seeking a 40 percent wage increase over four years and a cut in work time from six months to four-and-a-half-months a year, Wilson said. They are the highest-paid port workers in the country, he said.
The deckhands are paid about A$140,000 ($129,000) a year, according to BHP.
The Australian Institute of Marine and Power Engineers met with Teekay in Sydney yesterday and is due to hold another meeting in Perth next week. The Maritime Union of Australia approved unlimited stoppages of 24 hours, 48 hours and 7 days over its demands, Australia’s Fair Work Commission said on May 12. Workers must give Teekay three days’ notice before commencing industrial action.
A one-week strike at Port Hedland could result in the loss of 7 million tons, or 10 percent of an estimated surplus this year, Goldman analysts led by Christian Lelong said in a report yesterday. It may drive a temporary price rally that would ultimately be absorbed by global market fundamentals, they said.
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