A prefabricated six-storey hotel, once destined to house BHP Billiton workers, is sitting in 126 boxes stranded on the Melbourne city docks. The stalled project is a sign of the deepening global slowdown in mining.
The contents were to have been assembled at Port Hedland in Western Australia, where BHP planned to use the hotel as temporary housing for its estimated $21 billion harbour expansion to export more iron ore. That was before the world’s biggest mining company scrapped its plan, and the hotel developer went bust.
Global capital spending by mining companies is set to drop by a third next year to $US96 billion ($93 billion), from a record $US141 billion last year, according to UBS estimates. Producers have slowed expansions and delayed projects on expectations that commodities prices have passed their highs, after economic growth began slowing in China, the biggest buyer of metals.
“Clearly the rate of new approvals has almost dried up” for mining projects, Michael Elliott, sector leader for Ernst & Young’s global mining practice, said in an interview from Sydney. “A lot of that has been rethinking what rates of return companies now require from these new investments.”
Salvaging hotel project
Hickory Group, the building contractor, is in talks with various groups, including in Port Hedland, to buy the completed first stage of the steel, aluminium and glass hotel, Michael Argyrou, managing director of the Melbourne-based company, said. The parties were “serious” and Hickory is hoping to complete a deal within the next few months, he said.
“The plan was to have Hickory send our people up there to put together the parts like in Lego to create the hotel,” Argyrou said. “They’re still sitting at the docks.” Megan Ball, a spokeswoman for Ernst & Young, declined to comment on Port Village Accommodation as the company is still in receivership.
(Source: Bloomberg, 13 March 2013)