Sydney, 3 October (Argus) — The New South Wales (NSW) state government has put Australia's Port Kembla up for sale, potentially speeding up development of a 24mn t/yr outer harbour and increasing exports of thermal and coking coal.
Potential bidders have until 22 October to file expressions of interest in a 99-year lease for the port. The 17mn t/yr capacity Port Kembla is NSW's second-largest coal export terminal after the 140mn t/yr Newcastle port, with its exports split about 50:50 between high-grade coking coal and thermal coal. But it is plagued by a congested rail system that has kept its growth plans in check.
Port Kembla shipped 15.31mn t of coal in the year to 30 June 2012, up from 14.33mn t the previous year, with rail capacity constraints keeping shipments below port capacity. It is expanding to 22mn t/yr by next year and is targeting 30mn t/yr by 2016, although this second-phase expansion is under threat as miners re-examine expansion plans in the face of rising costs and falling coal prices.
The existing 14mn t/yr Port Kembla coal terminal is already leased to a consortium of coal miners including UK-Australian firm BHP Billiton, Switzerland-based Xstrata and US firm Peabody Energy, and is not part of the sale. But privatisation of the rest of the port will allow the large outer harbour expansion to be bought forward, according to NSW treasurer Mike Baird.
The expansion was put on hold in August after asbestos was found in material being used as fill for the harbour wall. Work has since restarted.
Plans to sell a long-term lease for Port Kembla are similar to last year's sale of the Abbot Point coal terminal to Indian conglomerate Adani. The Indian firm paid A$1.83bn ($1.89bn) to the Queensland government for a 99-year lease on the Abbot Point coal terminal in May 2011, when the 25mn t/yr capacity port was expanding to 50mn t/yr. But the outlook for Australian coal demand has fallen since then, with several miners cutting production and shelving growth plans in an attempt to cut costs.
The NSW government has promised to spend A$100mn from the sale of Port Kembla and the Port Botany cargo terminal on infrastructure in the Illawarra region, which is where many of the mines feeding Port Kembla are situated.
There is only one ship waiting to access Port Kembla as ship queues dwindle along Australia's east coast because of lower demand. Coal stocks are at 379,618t today. The port has shipped 3.82mn t of coal since 1 July.
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