(Updates to add closing shares in 15th paragraph.)
Aug. 19 (Bloomberg) -- Tugboat crews, including deckhands paid more than some New York bankers, are threatening to disrupt shipments from the world’s biggest iron ore port as they negotiate for increased wages and improved conditions.
Australian iron ore miners may collectively lose about A$100 million ($93 million) a day as a result of stoppages at Port Hedland, according to BHP Billiton Ltd., the world’s largest mining company. The port exports about half of the nation’s shipments, forecast to reach A$76.5 billion in the year through June 2015, according to government forecasts.
“Any tightening of supply, particularly at current levels, could see an iron ore price reaction that might offset any short-term revenue losses,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “It’s not an overwhelming negative.”
Iron ore sank last week to the lowest level in almost two months as a credit gauge in China plunged, adding to risks that demand will slow from the world’s biggest buyer of the raw material. BHP said in May that its mining operations may start winding down after two days of any strike action because stocks at the port were reasonably high.
The deckhands’ union has approval for unlimited stoppages for periods between two hours and 12 hours, while two other unions will ballot engineers and tug masters to enable strikes for as much as two-days and one day respectively. Unions have discussed possible industrial action since March and, depending on the results of voting, rolling stoppages could stretch to November.
The deckhands earn at least A$137,000 a year, which can rise to about A$211,000 with benefits and allowances, according to BHP. A junior banker on Wall Street typically makes a base salary in a range of $70,000 to $90,000, with bonuses bringing total pay to as much as $140,000, according to New York-based compensation consultant Johnson Associates Inc.
At the top end, Goldman Sachs Group Inc. awarded Chief Executive Officer Lloyd C. Blankfein at least $23 million in 2013 compensation, according to an April filing.
“A threat to strike has been seen by others across the community as extraordinarily unreasonable,” Deidre Willmott, chief executive officer of the Western Australia Chamber of Commerce and Industry said by phone from Perth. “The fact that most of these disputes are ultimately resolved through negotiations is cold comfort.”
Any strike action would likely have a short-term share market impact, said CMC’s McCarthy, though he rates the chance of a strike as extremely low.
Deckhands typically work for at least 12 hours-a-day and spend four week stretches away from their families, said Will Tracey, the assistant secretary of the Western Australia branch of the Maritime Union of Australia.
“They deserve to be paid well,” Tracey said in a Aug. 14 e-mailed response to questions. “They also deserve to have annual leave, which they don’t currently receive.”
Iron ore exports from Port Hedland advanced to a record 364.3 million tons in fiscal 2014, according to the Pilbara Ports Authority. Rio Tinto Group, the biggest iron-ore exporter after Brazil’s Vale SA, makes shipments through Western Australia’s Cape Lambert and Dampier ports.
Rio “may be a potential beneficiary if the strikes concerns were to escalate and have an impact on iron ore pricing” as it isn’t directly affected by the Port Hedland disputes, Michael Bush, Melbourne-based head of credit research at National Australia Bank Ltd., said in an Aug. 7 note.
Fortescue Metals Group Ltd., which also exports from Port Hedland, has said jobs among its 8,000-strong work force could be put in jeopardy as a result of any strikes.
BHP advanced 1.4 percent to A$39.68 at the close of trade in Sydney. Fortescue rose 2.2 percent to A$4.62.
Tugboat engineers at Port Hedland earn a basic salary of A$220,000 a year, and with allowances can command a total annual package of as much as A$390,000, according to Teekay Shipping (Australia) Pty, which operates 14 tugs crewed by 166 staff under a contract with BHP. Masters, who pilot the tugs, are paid between A$220,000 and about A$322,000, BHP said.
Talks between Teekay with all three unions over the disputes are progressing, BHP said today in an e-mailed statement. “We remain hopeful that new agreements will soon be reached,” the producer said in the statement.
Engineers will accept a wage increase in line with the consumer price index and are seeking changes to working patterns they say leave crews dangerously fatigued, said Henning Christiansen, the Australian Institute of Marine and Power Engineers’ federal secretary. The union’s intention is to “shine a spotlight on the dangerous hours of work that BHP” and Teekay require of tug crews, he said in an e-mail.
The Australian Maritime Officers Union, which represents the tugboat masters, didn’t respond to three phone calls seeking comment.
“Labor in that region has been able to price itself, more or less, given tight labor market conditions over the past few years,” Tim Schroeders, a Melbourne-based portfolio manager who helps manage $1 billion in equities, including BHP shares, at Pengana Capital Ltd., said today in an interview with Angie Lau on Bloomberg Television’s “First Up.” “It is a difficult environment. There’s room to move for both parties.”
--With assistance from Rebecca Keenan in Perth, Phoebe Sedgman in Melbourne and Angie Lau in Hong Kong.