Mitsubishi Corp., the biggest Japanese trading house, is holding up its A$5.9 billion ($5.7 billion) Oakajee port project in Western Australia as it reviews the Jack Hills iron ore mine.
Mitsubishi must decide on the scale of the expansion of Jack Hills before funding talks with six state-owned Chinese groups can be concluded, said John Langoulant, chief executive of the Oakajee Port & Rail project.
“The delay has a lot to do with the delay in the development of the mines,” Langoulant told reporters after a conference in Melbourne today. “Discussions with the Chinese parties are continuing but those discussions and the final decision will depend on a range of factors. Short-term market circumstances will be one.”
Mitsubishi, which paid A$325 million to buy out the Oakajee project and the Jack Hills mine from partner Murchison Metals Ltd. earlier this year, is doing a complete review of Jack Hills that will determine when its other mines in the region will also start, Langoulant said. The review is expected to be completed in the second half, he said.
Prices of iron ore delivered to the Chinese port of Tianjin have fallen 20 percent in the past year, according to data compiled by The Steel Index Ltd.
Prices of the metal fell on concern that slower economic growth in China, the biggest buyer, is curbing demand from steel mills.
“In the short term, it’s probably fair to say that demand for iron ore might not be as strong as it has been over the last five or six years but China has indicated that it’s prepared to stimulate its economy and it continues to have high demand,” Langoulant said. “Over the medium to longer term, if you look at the demand-and-supply equation, that looks pretty much in favor for the supply side.”
Oakajee port and rail development was designed to open Western Australia’s midwest region for iron ore exports to Asia, Langoulant said.
Mitsubishi shares fell 0.9 percent to 1,522 yen by the close of trading in Tokyo today.