Bloomberg News

Vale Seeks to Build Coal Port in Australia as Output Gains

June 23, 2011

June 23 (Bloomberg) -- Vale SA, the world’s biggest exporter of iron ore, is seeking to build its own coal terminal in Queensland state as it expands production from three to nine mines in Australia.

Vale plans to apply to build one of the four new export terminals being planned as part of a A$6.2 billion ($6.5 billion) expansion at the Abbot Point coal port, Steve Badenhorst, Vale’s director of operations for Australia, said today in Sydney.

Vale is spending $24 billion globally this year on resources investments, including developing coal mines in Colombia and Mozambique. The deadline to lodge expressions of interest to build the Abbot Point terminals closes on Aug. 1, the North Queensland Bulk Ports Corp. said on its website.

“We want coal to be the third-biggest revenue stream at Vale, behind iron ore and fertilizer,” Badenhorst said in an interview at a conference. “Much of our investment is in infrastructure.”

Morgan Stanley last month forecast a “buoyant pricing environment” for coal for most of the next five years as economic growth in Asia boosts demand and rail and port bottlenecks keep supply tight.

Aquila Dispute

Vale’s coal output in Australia this year may be less than the planned 8 million metric tons of coal because of flooding earlier this year and a dispute over shipping with joint venture partner Aquila Resources Ltd., Badenhorst said. Vale is also in a dispute with Aquila over the development of the jointly owned Eagle Downs project.

“We would love to have control” of these assets, Badenhorst said. “However, this isn’t part of our discussions right now. We need to find a legal framework.”

Australia’s planned carbon tax is “a risk” for Vale’s investment plans, he said. “It largely depends on the type of coal the tax applies to. Thermal coal cannot live with any tax and it would kill many operations.”

Prime Minister Julia Gillard’s proposed emissions trading system is due to start July 1, 2012, with a fixed price for the first three to five years before full trading begins. The Australian Coal Association says the plan may force the closure of 18 mines in the next decade.

--Editors: Keith Gosman, Indranil Ghosh

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

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net


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