Analysts at influential broking firm UBS have added their weight to industry talk that BHP Billiton will progress a piecemeal development of Port Hedland's outer harbour rather than a one-off big-ticket expansion.
In a note to clients yesterday, analysts led by Glyn Lawcock said they expected BHP to delay a decision on the outer harbour until the middle of next year, at least six months later than planned, and even then announce the go-ahead for a relatively small 50 million tonne a year development.
UBS has placed a $US10 billion ($10 billion) capital cost on the 50mtpa option, which would include the $US4 billion 4km jetty but less dredging and rail duplication than a 100mtpa development.
BHP's initial plan was for an outer harbour capable of handling 200mtpa, which analysts had tipped to cost at least $US20 billion.
The miner then refined the start-up project to 100mtpa and in February committed $US917 million in pre-commitment funding for the project, which will require the jetty, a four-berth wharf and a 32km shipping channel.
Unlike arch rival Rio Tinto which owns the expandable Cape Lambert port, BHP's production capacity is limited to 240mtpa in Port Hedland's inner harbour, unless it develops the outer harbour.
But BHP's subdued outlook on China's economic growth, partly because of the European debt crisis, has prompted it to pull back on the outer harbour mega project.
Although BHP is yet to revise its iron ore production forecast, it appears unlikely the miner will reach its target of 350mtpa by 2020.
It operates at a rate of about 150mtpa and has already approved funding to take its capacity to 240mtpa by 2014.