Dredging Delays May Jeopardize Australia's Abbot Point Coal Terminal Expansion, but Rail Projects Persist

Researched by Industrial Info Resources Australia (Perth, Australia)--India's Adani Group (BSE:512599) (Gujarat, India) recently told Australia's Queensland government that its plan to expand the coal terminal at Abbot Point may be scrapped if dredging activities cannot be completed next year. The Indian conglomerate said it will face losses of up to $1 billion annually from export delays if the dredging fails to occur between March 1 and June 30 of 2015.

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Major investments have been made in mine, rail and port infrastructure by the Indian group to develop the Carmichael coal mine in the Galilee Basin, so that coal can be exported to India through Abbot Point by 2017. Up to 60 million metric tons of coal is expected to be sent annually by rail to the port, which also will be accessible to other miners in the region.

However, if the project is ultimately cancelled as a result of heavy losses to the Adani Group, Australia will still possess the internal exporting capabilities to continue its ongoing trade with Asia.

The combined AU$9 billion (US$8.4 billion) being spent on more than seven active rail projects, including more than 1,799 kilometers of railway line throughout Australia, will give greater access to both planned and operational mine sites. The assembly of these rail lines will allow established mining giants to transport millions of metric tons of processed commodities to ports throughout Australia, and will provide greater opportunities for planned sites to export their products faster, more effectively, and more cheaply. This is a particularly attractive prospect when considering the current economic climate for the global commodity market.

The AU$1.78 billion (US$1.67 billion), 344-kilometer rail line addition in Newman is just one example of a project that aims to transform Australia's capability to rapidly transport millions of tonnes of export commodities from its regional center to the country's periphery. The heavy haul rail line is due to be completed in 2015 and will connect the Roy Hill Iron Ore Mine to a new dedicated iron ore terminal based in Port Hedland, known as Stanley Point.

The project soon will be followed by the 282-kilometer West Pilbara rail line addition, scheduled for 2017, that will connect multiple iron ore pits to the new Anketell Point Terminal at a cost of AU$1.6 billion (US$1.5 billion). Assuming the Abbot Point terminal goes ahead, 2017 also will see the addition of the 390-kilometer rail line addition in Alpha, Queensland, that will connect the Galilee Basin to the Abbot Point Terminal.

The ongoing development of major rail lines throughout the country would effectively unlock the continent's commodity-rich centers, drive down costs for other mining companies to kick off, and allow Australia to remain globally competitive.

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