Port Hedland Engineers to Strike, Risking Iron Shipments

By Phoebe Sedgman  Nov 6, 2014
Bloomberg
Tugboat engineers at Australia’s Port Hedland will strike next week, risking disruption to iron ore shipments through the world’s largest bulk export terminal.

The Australian Institute of Marine & Power Engineers gave notice that workers will stop for four hours on Nov. 12, starting at 6 a.m. local time, according to an e-mailed statement. The action will be taken by members employed as marine engineers by Teekay Shipping (Australia) Pty, it said. Teekay is contracted by BHP Billiton Ltd. (BHP) to run tugboats at the port, located 1,300 kilometers (808 miles) north of Perth.

Stoppages risk disrupting exports by companies including BHP and Fortescue Metals Group Ltd. Iron ore is Australia’s biggest export earner and disruptions could cost suppliers about A$100 million ($86 million) a day, BHP estimated in May. Shipments through Port Hedland represented 55 percent of the country’s iron ore exports last year and more than 80 percent of cargoes go to China, port and government data show.

“It will displace tons, probably permanently, because Port Hedland is always cranking at full capacity,” Joel Crane, an analyst at Morgan Stanley, said by phone from Melbourne. “But it’s tons that the market can afford.”

The seaborne market needs to absorb a surplus of about 110 million tons next year, almost double the estimated 60 million tons in 2014, Goldman Sachs Group Inc. said in an Oct. 23 report. Iron ore shipped from Port Hedland climbed to a record last month, according to data from the Pilbara Ports Authority.

Serving Notice

The union called off an intended strike in August after it didn’t serve the notice within the required period and balloted members again to get fresh approval for industrial action.

Teekay said it’s disappointed that the engineers decided to take this action at a time when the Australian Maritime Officers Union and Maritime Union of Australia have endorsed new enterprise agreements “in substantially the same terms.” The MUA represents tugboat deckhands.

Teekay advises that the officers and deckhands unions recommended to their members that they approve the agreements and voting ends on Nov. 9 after starting on Nov. 4, it said in an e-mailed statement.

“Any industrial action has the potential to negatively impact our business and the local and national economies,” BHP said by e-mail. “The interruption of shipments of iron ore would have a detrimental impact on Australia’s international reputation as a stable and reliable supplier.”

Fortescue Metals condemned the move and said it’ll take all steps to prevent an impact on its business, people, customers and the economy, it said in an e-mailed statement.

Iron ore with 62 percent content delivered to Qingdao lost 2 percent to $76.46 a dry metric ton yesterday, the lowest price since September 2009, according to data from Metal Bulletin Ltd. Prices tumbled 43 percent this year as producers including BHP, Fortescue and Rio Tinto Group expanded supply.

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