Iron country: Unlocking the Pilbara DAVID LEE A PUBLIC POLICY ANALYSIS PRODUCED FOR 09 THE MINERALS COUNCIL OF AUSTRALIA JUNE 2015 Iron country: Unlocking the Pilbara DAVID LEE MINERALS COUNCIL OF AUSTRALIA June 2015 Dr David Lee is the Director of the Historical Publications and Research Unit, Department of Foreign Affairs and Trade. He is the author of Australia and the World in the Twentieth Century, Melbourne, 2005 and Stanley Melbourne Bruce: Australian Internationalist, London and New York, 2010. He is currently researching Australia’s post-1960 mining booms and a collaborative biography of Sir John Crawford. The Minerals Council of Australia represents Australia’s exploration, mining and minerals processing industry, nationally and internationally, in its contribution to sustainable economic and social development. This publication is part of the overall program of the MCA, as endorsed by its Board of Directors, but does not necessarily reflect the views of individual members of the Board. ISBN 978-0-9925333-4-2 MINERALS COUNCIL OF AUSTRALIA Level 3, 44 Sydney Ave, Forrest ACT 2603 (PO Box 4497, Kingston ACT Australia 2604) P. + 61 2 6233 0600 | F. + 61 2 6233 0699 W. www.minerals.org.au | E. [email protected] Copyright © 2015 Minerals Council of Australia. All rights reserved. Apart from any use permitted under the Copyright Act 1968 and subsequent amendments, no part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher and copyright holders. Contents Section 1 Introduction 7 Section 2 Lifting the embargo 13 Section 3 Prospectors and geologists 23 Section 4 The Pilbara mining companies 33 Section 5 A state in miniature 51 Section 6 Changing fortunes 63 Section 7 The China boom 79 Section 8 Concluding reflections 95 Bibliography 99 Abbreviations 105 Endnotes 107 Charts and maps Charts Chart 1 Iron ore exports: volume and share of global 69 exports (1967–1985) Chart 2 Iron ore exports: volume share by destination 80 (1998–2014) Chart 3 Iron ore exports: value and share of total exports 81 (2000-01–2013-14) Chart 4 Iron ore exports: volume and price (1985–2015) 90 Maps Map 1 Pilbara main mines and railways up to 1980 42 Map 2 Pilbara operating iron ore mines and railways, 2015 91 SECTION 1 Introduction Until a few years ago, Australians had only the sketchiest knowledge of the role of iron ore mining in the nation’s economic life. After all, most Australians live in east coast cities and work in the services industry. The iron ore industry’s epicentre remarkable back-story of Australia’s – in Western Australia’s Pilbara modern iron ore industry, a story region – is a long way away that unearths much more than from the suburbs of Sydney and the inevitable cycles of the Melbourne and can appear remote resources sector. in every possible sense. Ushering in Australia’s modern All that changed dramatically in the iron age was the decision by early twenty-first century. In the the Menzies Government in wake of Australia’s biggest mining 1960 to ease the iron ore export boom in more than 150 years, embargo put in place by the followed more recently by a sharp Lyons Government as World War fall in mineral commodity prices, the II loomed in 1938. Beyond a long iron ore industry is now a fixture of since moribund strategic purpose, our 24/7 news cycle. The companies the embargo survived in the post- and the individuals involved are war years due largely to concerns household names. With its impact that Australia’s known reserves of on everything from national iron ore didn’t amount to much living standards to government and, in any case, were required to budgets to superannuation fund support the local steel industry. earnings, the market for iron ore A few politicians – notably William now receives the sort of attention Spooner, David Brand and Charles once reserved for Australia’s Court – saw something more unemployment or inflation rate. expansive in the prospects of an Yet today’s news, and instant iron ore export industry. The period analysis of it, can only scratch the from 1938 to the early 1960s is surface. This Monograph tells the traced in section 2. IRON COUNTRY: UNLOCKING THE PILBARA 7 The relaxation of the embargo mining operations. Henceforth the paved the way for driving Pilbara iron ore industry developed ambitions of prospectors, in close association with the rise of geologists, business visionaries and, the Japanese steel industry. And not least, the industrial ambitions while American capital and know- of Australia’s former enemy, Japan. how would figure prominently in Lang Hancock’s discoveries in getting the Pilbara projects off the the Hamersley Ranges in the drawing boards, the central role of early 1950s would prove merely a Australian capital and management foretaste of things to come. Along should not be underestimated. with Hancock and his partner Building the infrastructure of an Peter Wright, prospectors Stan iron ore industry in the Pilbara was Hilditch and Garrick Agnew were a colossal challenge, one described instrumental in fostering the as like building a ‘state in miniature’. interest of mining companies In reality, very little was small in in the Pilbara iron ore deposits, scale as outlined in section 5. The while geologists like Haddon Pilbara companies constructed not King and Bruno Campana verified only mines, ports and two of the and extended the efforts of the biggest private railway systems prospectors. Soon, as set out in in the world but also essential section 3, places like Goldsworthy, community infrastructure – from Mount Tom Price, Mount Newman power and water supply to schools, and Robe River moved to the post offices, shopping centres, roads foreground as the Pilbara mining and suburban street lighting. The companies took shape. Snowy Mountains scheme is held Section 4 traces the establishment up as the benchmark of Australian of these companies and their engineering and technological endeavours to get the foundation ambition and prowess in the Pilbara projects off the ground. twentieth century. The foundation Securing business backing and Pilbara projects, constructed by finance for what were some of private enterprise and over a much the biggest mining ventures in shorter time period, are at least a comparable achievement. Australia’s history would not be easy. Among the challenges was Economic volatility and a slowdown securing contracts from Japan for in world economic growth in the the sale of ore over long periods 1970s would undercut the more of time in order to justify financial optimistic hopes and dreams of the institutions lending the capital previous decade. The cresting of required for construction and future the Japanese steel industry below 8 MINERALS COUNCIL OF AUSTRALIA earlier forecasts symbolised the becoming the jewel in the crown more constrained environment of Australia’s mining industry. facing Australia’s iron ore industry. Those eager to fall back on the These changing fortunes extended providential nature of our resource into the 1980s and 1990s with the endowments or mere ‘luck’ obscure Australian industry often working at much more than they explain. below full capacity. A long period In the early years, projects hung in of low prices would have important the balance, whether by virtue of implications for the structure of the political or commercial factors or industry and its labour relations. the sheer scale of the engineering These years of changing fortunes and technological hurdles that are covered in section 6. had to be overcome. The reaction Section 7 focuses on the encountered by one prospector transformation of the iron ore in the early 1960s – that Pilbara industry in the wake of China’s iron ore was a cheap commodity, rapid growth and industrialisation too far from the coast – illustrates in the early twenty-first century. why the temptation to ‘read China’s demand for iron ore to history backwards’ should always feed its surging steel blast furnaces be resisted. Similarly, there was propelled Australia’s biggest mining nothing ordained about the boom in 150 years. In the process, industry’s survival through the long, iron ore became Australia’s largest grinding decades of low prices at export industry. As the living the end of the twentieth century. standards of Australians rose off In his book Mining in World the back of the boom, so too did History, Martin Lynch notes that the political and corporate stakes 60 years before the Pilbara’s surrounding the Pilbara’s red riches. transformation into one of the New players entered the industry. world’s great resource provinces, State and federal governments Herbert Wootton, a government battled over gains. Indigenous geologist, declared it ‘iron country’.1 Australians, a group long excluded Lynch writes that for a long time from the world of mining deals, were nobody cared; the location was far now included for the first time. too distant and the terrain far too difficult to justify further inquiry. The final section offers some concluding reflections. How that changed is one of the great stories of Australia’s modern A theme running through this economic history. Monograph is that there was nothing inevitable about the Pilbara IRON COUNTRY: UNLOCKING THE PILBARA 9 SECTION 02 Lifting the embargo SECTION 2 Lifting the embargo On 22 February 1960 John McEwen, Australia’s Deputy Prime Minister and Minister for Trade, announced that the Australian Government was abolishing the licensing of imports. The Menzies Government had Adding to Menzies’ worries put this regime in place in 1952 were the European Economic to protect Australia’s precarious Community’s (EEC) bid for rural balance of payments.