Newcastle Coal Port Group To Gauge Interest In Big Expansion

Newcastle port's Coal Infrastructure Group, which links six exporters including BHP Billiton Ltd. (BHP), is about to start a process to gauge interest in further expanding capacity at what is already the world's biggest coal port, a spokesman for the group, Chris Ford, said Tuesday.

Advertisements will appear in newspapers Wednesday seeking expressions of interest in take or pay contracts from exporters that aren't members of NCIG for a A$1 billion Stage 2 expansion that would double capacity at the port's third terminal, he said.

NCIG is 60% into a Stage 1 development of the third terminal that will add 30 million metric tons to capacity in 2010, he said.

NCIG's board hasn't formally decided yet to proceed with Stage 2 but a feasibility study on it has been completed and potential sources of finance are being investigated as part of an ongoing process, he said.

NCIG was formed in 2005 and its members are all significant producers of coal in the Hunter Valley, the port's hinterland. As well as BHP, other members are Centennial Coal Co. (CEY.AU), Donaldson Coal, Peabody Energy, Felix Resources Ltd. (FLX.AU) and Whitehaven Coal Ltd. (WHC.AU).

NCIG's coal terminal was approved by the New South Wales state government in 2007.

Expansion underway at two other terminals at Newcastle Port operated by Port Waratah Coal Services will increase capacity there to 117 million tons. A further opportunity exists for Port Waratah to build a fourth terminal in the port.

The current export capacity of the Hunter Valley coal chain is around 95 million tons a year to service export demand for mostly thermal coal from Japan, South Korea, China, Taiwan and elsewhere in Asia. Australia is the biggest exporter of seaborne coal.

But the port has been dogged by limited capacity since mid 2003 resulting in long queues of vessels. Newcastle Port Corp. said Tuesday that 42 vessels were hove to waiting to load on Monday, with the volume of coal shipped in the seven days ended July 13 jumping 10% on week to 2.05 million tons.

New South Wales Ports Minister Joe Tripodi said NCIG's call for expressions of interest is an important step towards expanding capacity at the port.

"It will help NCIG to make a decision on Stage 2 based on demand requests from Hunter Valley coal producers and potential new players in the industry," he said in a statement.

Under a plan submitted to the competition watchdog, the Australian Competition & Consumer Commission, NCIG is required to offer 12 million tons a year of capacity to producers and new entrants who aren't members, he said.

Non-NCIG members thus will have an opportunity to request capacity as will new producers, such as China's Shen Hua, he said.

 
   -By Ray Brindal, Dow Jones Newswires; 612-6208-0902; [e-mail]