Fortescue told to re-price Pilbara rail

Andrew Forrest's Fortescue Metals Group has been told to change the way it charges for access to its Pilbara railway, as regulators grapple with the ambitions of iron ore junior Brockman Mining.

Western Australia's Economic Regulation Authority has ordered Fortescue to supply a new pricing structure for the railway by Monday, following last week's dramatic application by Brockman to use the railway to transport its iron ore.

Fortescue's railway is vulnerable to such requests because it was built after a third-party access law was introduced in WA in 2000, and Brockman launched the application after talks with Fortescue failed to produce a transport deal.

Under the existing structure, Fortescue's railway is broken up into three sections for pricing purposes.

No other company currently pays to use the railway, but the structure was set up in anticipation of third parties buying their way onto the railway. The ERA has now asked Fortescue to split the railway into six pricing sections.

The changes could help Brockman keep down the costs of accessing the railway, given it only plans to use a portion of the track. Dividing the track into a larger number of pricing sections will help Brockman to pay only for the sections of track it plans to use.

Fortescue on Sunday declined to comment on the request to divide the railway into six pricing sections.

Submission of the new pricing plan on Monday is just the start of a busy week for Fortescue, with the company required to nominate both "floor" and "ceiling" prices for the upcoming negotiations with Brockman by Wednesday. If the two companies cannot agree on a price, the ERA can appoint a panel to set one.

The saga has emerged as Fortescue enters the final stages of a sale process for a stake in its rail assets, which are held in a wholly owned subsidiary called "The Pilbara Infrastructure".

Fortescue previously insisted it was happy to allow other companies onto its railway, so long as the deals reflected the massive investment taken by Fortescue to build its own railway.

BC Iron's exports have been hauled on the Fortescue railway for the past 27 months, but under a joint-venture agreement whereby Fortescue hauls, exports and sells BC Iron's product alongside its own.

Brockman's proposal is different because it envisages rival iron ore hauled on the railway by a different haulage company and shipped from berths controlled by Brockman.