News Wrap

IN THIS morning’s News Wrap: Aurizon secures BMA haulage deal; concerns over iron ore index pricing; and commodity exports roaring ahead.

Staff Reporter

Aurizon secures BMA coal haulage deal

Aurizon has assuaged investors’ biggest fear two years after its $4.6 billion float by renewing all of its coal haulage contracts with its largest customer, BHP Billiton Mitsubishi Alliance, according to the Australian Financial Review.

Aurizon did not disclose the terms of the 12-year renewals, which will allow it to continue to haul up to 65 million tonnes annually for the miner in Queensland and maintain a market share of about 80% in Queensland.

But analysts expect the new performance-based contracts to generate an extra $100 million in annual earnings before interest and taxation (EBIT) from fiscal 2017.

The new contracts carry more risk because they contain penalties for under-performance. But they enable the rail operator to profit if it exceeds performance targets.

Concerns over iron ore index pricing

Iron ore buyers believe China’s National Development and Reform Commission has justifiable concerns over the index pricing system being open to manipulation by the big three miners BHP Billiton, Rio Tinto and Brazil’s Vale, as well as traders, according to the Australian Financial Review.

The NDRC, China’s peak planning bureau, caused shockwaves in the industry on Thursday after saying miners and traders had been buying back cargoes from the spot market to help lift prices higher. The government body expressed concerns the volume of ore traded on a purely “spot” basis was too small.

“Major foreign miners . . . will also come up with a small amount of iron ore to tender transactions,” the NDRC said. “In this opaque bidding process, the iron ore price is pushed higher.”

BHP denied claims the spot tendering process was “opaque”

Commodity exports roaring ahead

Exports of iron ore and coal are roaring ahead, but the rest of the economy is being left behind as households and businesses restrain spending, according to The Australian.

The 3.6% growth in GDP recorded last year marked the 21st year of continuous expansion in the Australian economy, with the 0.6% advance in the final three months contrasting with the downturns suffered in more than half the world's advanced countries.