$114B Infrastructure Work Makes Australia World’s Fastest-Growing Construction Market

While slowdown and recession are the buzzwords in many parts of the world because of the threat of another global financial crisis over European debt, in Australia the key words are expansion and boom.

Cautious optimism continues to pervade the land down under because of the mining boom that has fueled an infrastructure boom as well. With $114 billion worth of infrastructure projects across the country under way, Australia is now considered the world's fastest-growing construction market.

This will create economic ripples in several key areas such as employment and supplies.

The construction of new port terminals and railways are in support of $232 billion of mineral and energy projects under way throughout the country. The new projects, in turn, are mainly geared to supply China and India with coal and iron core as the two hot Asian economies rapidly move toward urbanisation and economic expansion.

Among the Australian companies that have won bids to build the infrastructure are Leighton Holdings, the Bechtel Group and General Electric.

The contractors would build port terminals with capacity of about 1.5 billion metric tonnes annually by 2022 and put in place up to 3,700 kilometres of rail track.

Queensland aims to boost capacity of its port by 28 times to 385 million tonnes from the current 15 million metric tonnes through the expansion beginning in 2014 of the Abbot Point coal port. Located between a salt marsh and a lagoon of the Great Barrier Reef, the planned expansion would mean the new port would exceed by about 40 per cent the current volume being handled by the Qinhuangdao port in China, which is the world's largest dry-bulk harbour.

For iron ore production, the operator of Port Hedland, Pilbara's biggest harbour, plans to add about 390 million tonnes of yearly capacity by 2015 to support BHP Billiton ( BHP ) and Rio Tinto's ( RIO ) plans to increase ore exports by 538 million tonnes spread over the next five years. The port handled 199 million metric tonnes of cargo for the fiscal year that ended in June.

Bechtel won the bid to construct the $2.5-billion coal port expansion for BHP on the Barrier Reef coast and extend four mines of the company in Bowen Basin. For BHP's $3.9 billion expansion of its iron ore terminal at Port Hedland, the mining giant awarded the contract to Fluor of Texas.

Because of the planned expansion of rail tracks, GE, which has supplied 70 per cent of the coaches for mines in Pilbara and Bowen Basin coal district in Queensland, aims to double its total business in Australia by 2014.

Since some of the winning bidders are overseas companies and it may lack in-depth knowledge of Australian geography, a reliable pool of local manpower and supply chain, experts said it may be necessary for these foreign firms to enter into partnerships with local contractors.

In the past 12 months, $176.5 billion was spent on construction across Australia which is a 50 per cent hike since June 2006. In contrast, new construction spending in the U.S. dipped 34 per cent in November from 2006 level, while it went down by 21 per cent in the European Union.

Australia also plans to dredge more than 112 million cubic metres from the Great Barrier Reef area. The federal government has so far approved the dredging of 52 million cubic metres.

The dredging operation and even the planned expansion of the ports are, however, being opposed by several groups including the fishing and tourism industries as well as environmental activists.

Senator Larissa Waters called on the Gillard government to inform Australians of its dredging plans which she warned would transform the Great Barrier Reef into a superhighway for coal and gas tankers.

She pointed out that the dredging activities are endangering the World Heritage site and UNESCO is sending a delegation to the Reef in March to check on the impact of the dredging on the area.

The senator said the Gladstone harbour dredging should be a warning because although only 2 million cubic metres have been dredged so far, there has been alleged widespread fish contamination, rising number of turtle and dugong deaths and financial ruin for fishers and tourist operators.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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