Port Hedland Engineers Cancel Planned Strike for More Talks

Aug 07, 2014 7:41 am ET

(Updates iron ore prices in fifth paragraph.)

Aug. 7 (Bloomberg) -- Tugboat engineers at Australia’s Port Hedland called off an intended strike that threatened exports from the terminal which ships about a quarter of the world’s seaborne iron ore cargoes.

The Australian Institute of Marine & Power Engineers didn’t serve the action notice within the required period and had to withdraw it, official Andrew Williamson said today. The union will continue talks with Teekay Shipping (Australia) Pty and may ballot to strike again, he said. BHP Billiton Ltd., the world’s biggest mining company, contracts Teekay to tow vessels.

Stoppages would threaten 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 ($93 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 the cargoes go to China, port and government data show.

“There was a technical glitch with the industrial action notices where in fact they should have been served within 30 days,” Williamson said by phone. “It went one extra day to 31 days inadvertently. That requires it to be withdrawn.”

Ore with 62 percent content delivered to Tianjin in China increased 0.1 percent to $96 a dry ton today, data from The Steel Index Ltd. show. The raw material will average $80 in 2015 from $106 this year, Goldman Sachs Group Inc. predicts.

Unlawful Action

The engineers notified Teekay that they intended to stop for four hours each on Aug. 9, Aug. 11 and Aug. 13, the company said yesterday. BHP said it believed that the action was unlawful and Teekay said it would seek an injunction to stop it.

Industrial action would have affected Teekay, its customers and the economy, the company said in an e-mailed statement today. Teekay welcomed the decision to withdraw notices and will continue to “negotiate in good faith” with all three unions. This includes the Maritime Officers Union, which approved work stoppages on May 30 and received a 30-day extension to the period in which it could take action.

A union representing deckhands at Port Hedland approved industrial action on July 23 for a second time at the terminal, which is located 1,300 kilometers (808 miles) north of Perth and handles output mined in the Pilbara, Australia’s biggest producing region. The union has 30 days to notify stoppages.

Record Shipments

Shipments from Port Hedland to China rose to a record 30.6 million tons in July from 29.2 million tons in June, port data show. Australia’s sales will jump 17 percent to a record 680 million tons this year and climb to 764 million tons next year, the Bureau of Resources and Energy Economics estimates.

While the expansion in supply will probably moderate in the second half, an increase in seaborne cargoes which spurred the global glut is set to accelerate, Goldman analysts including Christian Lelong said in a report yesterday. This will extend a price drop through 2015, with upside limited in the absence of loosening by China or supply curbs, they said.

The planned action would not have materially affected the seaborne market or pricing, Morgan Stanley said. The bank estimated yesterday that each four-hour stoppage would affect as much as 500,000 tons, or 1.5 percent of monthly volumes.

--With assistance from Phoebe Sedgman and David Stringer in Melbourne.