Mitsubishi has provided several reasons for scaling down its involvement in building the Oakajee port, such as failure in communication with Chinese interests.
Mitsubishi says the recent diplomatic flare up between China and Japan over islands in the South China sea has jeopardised those negotiations.
Correspondent: David Weber
Speakers: Anthony Albanese, Australian Infrastructure Minister; Colin Barnett, Premier of Western Australia; Tony Brun, chief executive, Shire of Greater Geraldton; Peter Strachan, resources analyst
WEBER: The Federal Government allocated $300-million to the project in 2009.
The Infrastructure Minister Anthony Albanese voiced concerns about Oakajee yesterday just before the Premier confirmed Mitsubishi had pulled back.
ALBANESE: We rely upon state governments to actually deliver the construction of these major infrastructure projects.
With regard to Oakajee, I've been concerned and have expressed my concern to the Premier for some time that this project hasn't been proceeded with. Certainly, when we were originally approached the timeframe would have seen construction certainly well underway by now if not just about completed for that project.
WEBER: Mr Albanese did say he wanted to see the port built.
The Premier Colin Barnett suggested on Fairfax Radio this morning that WA didn't necessarily need the federal funding.
BARNETT: Well, I was a bit concerned by the comments that Minister Albanese made in the media. He hasn't spoken to me about the project. My dealings have always been with respective prime ministers.
If they pull out then Western Australia will have to re-jig the project and proceed by ourselves with perhaps an international partner.
WEBER: The intention has always been that the port would be owned by the state.
Mr Barnett has described Mitsubishi's decision as another understandable delay.
BARNETT: It's a huge amount of money. It's building entirely new rail systems, entirely new port and a deep sea port. People might criticise me, I'm not prepared to go out and spend taxpayers' money ahead of firm contracts from the mining companies to construct the railway and to use the port and to pay for the port.
That would be irresponsible to go down that path. I think we've got a way to go. I hope now that maybe out of this there might be a, you know, silver lining and that will be perhaps China will now come forward more strongly in terms of sharing the cost of development.
I'll certainly be talking to the Chinese authorities very shortly.
WEBER: The people of Geraldton have been waiting for the project for years.
The chief executive of the Shire of Greater Geraldton, Tony Brun.
BRUN: The Southern group of mines is effectively up and running, now Karara's had some major expansions. Ultimately they need to be going out of Oakajee. So from what we understand is that the demand is there ultimately and we actually see the long term aspiration of Oakajee is actually a logistics hub connecting right across the rail network across to Kalgoorlie and becoming an integral hub for freight coming in and out of Australia.
WEBER: Mitsubishi's reasons for pegging back its involvement in Oakajee Port and Rail included the volatility in the iron ore price, and a fall in its own profits.
But the surprising factor was the dispute over the islands in the South China Sea.
Resources analyst Peter Strachan.
STRACHAN: These two countries are squabbling over a couple of rocks because of the potential for the petroleum products which lie under the ocean there. But I think you have to look at it in the prism of the change of leadership in China and I think it's quite convenient for the Chinese government to stir up a bit of national rivalry with Japan and after the congress we might see things get back to normal.
WEBER: So any impacts on projects in Australia because of this dispute are probably only temporary?
STRACHAN: Temporary. And I think the Chinese are taking a very long term view, as they do. I mean the Chinese think in centuries whereas unfortunately our political structure goes on a sort of three or four year political cycle and you know we're not really thinking ahead.