Fortescue rail access threatens BHP iron ore

BHP has claimed that Fortescue's access to its railways will result in substantial losses for its iron ore.

BHP Billiton has stated that it would face an $8.5 billion loss if Fortescue gained access to its private Western Australian railways.

BHP iron ore and coal chief executive Marcus Randolph told the Australian Competition Tribunal that BHP foresaw the projected loss in value on its iron ore if third-party access is granted.

Any third-party access would negate a substantial part of the benefit projected from BHP and Rio’s planned US$116 billion iron ore joint venture.

To circumvent this potential loss, BHP has considered alternatives such as the construction of new rail lines for hauling smaller miners’ iron ore to port, or undercutting potential operators on its lines by offering lower-cost haulage.

The total figure for the potential $8.5 billion loss is calculated on estimated loss of capacity as well as increased operating costs.

“We could build a new railway for less than that,” Randolph said.

BHP is also against being forced to transport iron ore for third parties on its rail lines, but Randolph said that would be “slightly better” than allowing third-party access.

He said WA Premier Colin Barnett was making progress in his attempts to include a third-party haulage obligation in BHP and Rio’s iron ore merger agreements.

“Don’t assume that as Premier, I am going to drop the Government’s entire legislative program to facilitate BHP and Rio’s corporate plans,” Barnett said in response.

While the hearings at the Australian Competition Tribunal are expected to conclude by the end of the year, a ruling is not anticipated until mid-2010.

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