Excessive expenditure on port infrastructure by the Australian coal industry was a form of “irrational exuberance”, according to Xtrata Coal CEO Peter Coates.
Coates, who is also chair of the Minerals Council of Australia, told the recent Coaltrans Conference in Brisbane that unless some of the more strident demands for export infrastructure investment were reigned in there were real dangers that billions of dollars would be wasted on superfluous facilities.
Coates said the $3bn of planned investment on Queensland ports and rail infrastructure was potentially excessive.
Estimates of future requirements must be based on demand driven forecasts, not on supply driven idealism, nor should infrastructure be undertaken on assumed “just in case” premises, he said.
“We need to work out exactly what we need and get it done in a reasonable timeframe,” Coates said.
He told the 300 coal conference delegates that greenfield development must be based on long-term market fundamentals. Because of high NVP, initially lower rate of return and the long-term payback horizon it was “essential that these projects be armour-plated, ideally in the lowest quartile of the cost spectrum”.
Coates said government cannot and should not be expected to provide significant new infrastructure and impose the cost burden across all users.
“The viability of existing operations cannot be jeopardized by being saddled with infrastructure costs to satisfy new projects, or even the desire of existing players for greater flexibility. The user must pay,” Coates said.