PERTH, April 4 (Reuters) - Two major iron ore infrastructure projects in Western Australia hit by escalating costs and volatile commodity prices in the last year could still be pushed through, the premier of the resource-rich state Colin Barnett said on Thursday.
Economic growth in China, the world’s top buyer of iron ore, is expected to slow to a rate of around 7 percent a year for the rest of the decade, but its demand for resources will continue to fuel growth in Western Australia, Barnett said in an interview.
Even so, a number of iron ore infrastructure projects backed by the premier’s government have been frozen.
Aquila Resources Ltd put its A$7.4 billion ($7.8 billion) West Pilbara Iron Ore project on ice in February due to funding difficulties after it failed to agree on a budget with its partners.
Japan’s Mitsubishi also put on hold plans to develop the A$5.9 billion Oakajee port and rail project in the state’s Midwest region as it had not been able to line up a partner to help fund the project.
“The view that Oakajee is not happening is not correct,” Barnett said, pointing out that a mine in the Midwest region, Gindalbie Metals Ltd’s A$3 billion Karara mine, had already started production, and that others would follow.
The state government is still working closely with China’s National Development Reform Commission, as well as individual steel mills in China to smooth the way for investment in Western Australia, Barnett said.
“I‘m confident we’ll get there,” he said, adding that the West Pilbara Iron Ore project’s Anketell port would be next in line after the ports used by Rio Tinto and BHP Billiton run out of capacity.
“Once the existing facilities, even with their expansions, reach capacity, (Anketell) is the next port,” Barnett said.
The state accounts for 73 percent of Australia’s exports to China, and receives 80 percent of Chinese investment in Australia, Barnett said.
“While everyone talks about the Asian century, from a West Australian perspective, it’s really the Asian decade. This is the decade of greatest opportunity,” Barnett said, adding that the state will likely double its production of iron ore by the end of the decade.
“There’s enough investment that’s going to take this state through this decade.”
Western Australia has a land area about the size of India with a population equal to that of Paris, and is home to the largest iron ore deposit on earth.
The state has led Australia’s resources boom, with its No. 1 export earner, iron ore, raking in $62 billion in 2011.
As of late last year, the state had A$167 billion of resource projects under construction or committed and a further A$151 billion under consideration.
Barnett said China’s growth - and thus hundreds of billions in dollars of investment in Western Australia - would likely taper off after 2020, but still saw ample opportunities even in the face of a Chinese slowdown.
“If China settles down in the 2020s and grows at five or six percent, that’ll do me. That’s going to be absorbing a huge amount of natural resources from Western Australia,” the Premier said.
“There will be volatility. Commodity prices always bounce around - West Australia has had a 100 years of that, we understand that,” Barnett said.
At around $135 .IO62-CNI=SI a tonne currently, iron ore has rebounded more than 50 percent from three-year lows seen late last year, but prices are still shy of the $200 per tonne record price seen in early 2011.
More global supply coming through and slower Chinese demand may pressure prices again from the second half of 2013 and beyond, with some analysts looking at an average price of below $100 a tonne by 2015.($1 = 0.9536 Australian dollars) (Additonal reporting by Manolo Serapio in SINGAPORE; Editing by Ed Davies)