BHP (BHP) Billiton Ltd., the world’s biggest mining company, is seeking to stop planned strikes by tugboat engineers at Australia’s Port Hedland export terminal which ships more than half the country’s iron ore.
Members of the Australian Institute of Marine & Power Engineers notified Teekay Shipping (Australia) Pty that they intend to stop for four hours each time on Aug. 9, Aug. 11 and Aug. 13, Teekay said today. BHP, which contracts the company to tow vessels, believes that the industrial action is unlawful and Teekay said it’s seeking an injunction to halt it.
Stoppages threaten exports by companies including BHP and Fortescue Metals Group Ltd. Iron ore is Australia’s biggest export earner and disruptions could cost suppliers about A$100 million ($93 million) a day, BHP estimated in May. Shipments through Port Hedland represented 55 percent of the country’s iron ore exports last year and a quarter of global seaborne supply, according to government data. Morgan Stanley doesn’t believe the action will affect prices.
“We do not expect the 12 hours of lost time to materially impact the global seaborne iron ore market or pricing,” bank analysts including Joel Crane wrote in a report. If conducted at high tide, each four-hour stoppage could affect as much as 500,000 tons, or 1.5 percent of monthly volumes, they said.
Iron ore has tumbled 29 percent in 2014 as companies from Rio Tinto Group to BHP increased output, betting higher volumes will more than offset falling prices. Ore with 62 percent content delivered to Tianjin in China advanced 0.4 percent to $95.90 a dry ton today, according to The Steel Index Ltd. The raw material will average $80 in 2015 from $106 this year, Goldman Sachs Group Inc. estimates.
The engineers union said Teekay didn’t want to employ additional crews to help cap 12-hour shifts. “Negotiations are at an impasse,” union official Andrew Williamson told Bloomberg by phone. “That’s the reason why the union decided to elevate the matter and issue protected industrial action.” Stoppages would take place at low tide to minimize disruption, he said.
The strike falls outside the protected action ballot order, BHP said. Teekay considers the stoppage unprotected and is applying to the Federal Court for an injunction, it said.
“Any industrial action has the potential to cost our business, and the local and national economy, millions of dollars,” BHP said in a statement. “The company intends to pursue all options available to prevent it.”
A separate union representing deckhands at Port Hedland approved industrial action on July 23 for a second time at the terminal, located 1,300 kilometers (808 miles) north of Perth and handling output mined in the Pilbara, Australia’s biggest producing region. The union has 30 days to notify stoppages.
Teekay said it’s continuing negotiations with all three unions, including the Australian Maritime Officers Union.
Shipments from Australia will jump 17 percent to a record 680 million tons this year and climb to 764 million tons next year, the Bureau of Resources and Energy Economics estimates. Global seaborne output will exceed demand by 72 million tons this year and 175 million tons in 2015, Goldman says.
While the expansion in supply will probably moderate in the second half, an increase in seaborne cargoes that’s spurred a global glut is set to accelerate, the bank said today. This will cause prices to extend a drop through 2015, with upside risks being limited in the absence of loosening by the Chinese government and supply disruptions.
China buys 67 percent of the world’s seaborne ore. More than 80 percent of Port Hedland’s ore is shipped to China.
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