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The Queensland government has withdrawn its support for a 9 billion Australian dollar (US$8.86 billion) coal port expansion in the northern part of the state, in a sign the country's resources boom is losing steam.
Plans to expand the existing Abbot Point port with two terminals will proceed, but the state government will no longer move forward with plans to build six more terminals to accommodate additional exports from the coal-rich state, John Wiseman, spokesman for the deputy premier of Queensland said Saturday.
"It was pie in the sky," he said of the plan for six new terminals, blaming the ambitious proposal on the previous state government, which was voted out of office in late March.
Within the past few weeks, mining giant Rio Tinto PLC (RIO) said it was withdrawing from the port expansion project amid a lengthy approval process for the project.
Rio and fellow mining giant BHP Billiton Ltd. (BHP.AU, BHP) have been complaining about the challenges and cost of doing business in Australia lately. The federal government has recently passed new mining and carbon taxes that will add to miners' tax burdens. Labor shortages have driven up wages and labor disputes are hurting production at BHP Billiton's Mitsubishi Alliance Queensland coal mines.
The expansion of Abbot Point, the state's northernmost port, was intended to create nine separate terminals with an overall capacity of 385 million metric tons, predominantly of thermal coal which is used in power generation. Australia currently exports 150 million tons of thermal coal a year and is the world's second biggest exporter of the commodity.
The price of Australian thermal coal has fallen recently, to around US$98 a ton, down 21% from its average price in the first quarter of 2011. Concerns about slowing demand from China have weighed on the price. A glut of natural gas in the U.S. has also pushed some U.S. coal into export markets while other major global thermal coal suppliers like Colombia and Russia are sending coal that would have normally sold in Europe into Asian markets.
Mining costs for thermal coal have risen substantially in Australia. According to Wood Mackenzie, the average cost of producing coal has risen 140% since 2006.
-By Cynthia Koons, Dow Jones Newswires; +61 2 8272 4691; email@example.com