Newcastle Port Operator Delays New Terminal; May Scrap Plans - Fox Business

The operator of the world's largest coal-export facility, at Newcastle, Australia, has delayed plans to build a coal terminal that would expand its shipping capacity by more than 80% and may decide to scrap the project altogether, reflecting continued deterioration in the once-booming coal-shipping industry.

Australian coal producers including BHP Billiton Ltd. (BHP.AU) and Xstrata PLC (XTA.LN), the world's largest thermal coal exporter by volume, have shut pits and delayed investments, as low prices and weak Asian demand have made many of the country's mines unprofitable.

Coal prices plunged to multiyear lows last year in tandem with reduced appetites in countries such as China, Australia's biggest trade partner. While prices have since recovered slightly, thermal coal, used for producing electricity, is still worth about a third less than it was two years ago. The price of coking coal, used to make steel, is 50% lower over the same period.

Port Waratah Coal Services is being forced to reconsider whether it needs another terminal at Newcastle, Chief Executive Hennie du Plooy said. Coal mining customers that use the company's terminals are shipping about 20% less than they were contracted to ship, he said.

Port Waratah, which operates the Carrington and Kooragang coal terminals at the port, had hoped to build new coal stockyards, rail facilities, marine infrastructure and shiploading facilities capable of handling up to 120 million metric tons of coal shipments a year. Following the unexpected slowdown in demand, however, the company will look into whether it can instead upgrade its existing Kooragang loader, which is used to move coal onto ships destined for Asian buyers.

"I haven't made a judgment about which one is more likely," Mr. du Plooy said. "As we get clarity on what the real capacity shortfall is--and, importantly, when any additional capacity can actually get through the coal chain--we will make a call."

If executives decide a new terminal is needed, it still won't be open until 2018--two years behind a revised deadline announced last year, and three years behind its original development plan released in 2010.

Newcastle's port is located on the New South Wales coast, north of Sydney. Port Waratah's existing terminals there have an annual capacity of 145 million tons a year.

Plans for expansion of another coal port, in the northern part of neighbouring Queensland state, moved forward Wednesday however, with the state government short listing two groups for development of new export infrastructure--mining company Anglo American PLC (AAL.LN) and an alliance of Aurizon Holdings Ltd. (AZJ.AU) and Lend Lease Group (LLC.AU).

The two candidates are vying to expand Abbot Point port, Queensland's deputy premier and infrastructure minister, Jeff Seeney, said in a statement.

The government will work with the candidates in coming weeks to prepare potential development proposals for the port, Mr. Seeney said.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

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