Gemco to build rail cars in Karratha

Efforts to revive manufacturing in Western Australia have been boosted by a $150 million deal between Gemco Rail and Rio Tinto to build 100 iron ore wagons and certain components locally.

The first 40 ore cars will be built at Gemco’s existing facility in Forrestfield, while the company establishes an additional facility in Karratha.

Gemco is expected to build an average of 10 ore cars per year over six years at its Karratha facility, which will also support the ongoing supply of new and reconditioned ore car bearings.

The state government has provided a $6.9 million grant, from its local manufacturing investment fund, to support an upgrade at Forrestfield and the new facility at Karratha.

Today’s announcement has been a long time coming. Rio made the commitment to support iron ore rail car manufacturing in WA in October 2021.

In the meantime, rival iron ore miner BHP has beaten Rio to the punch.

It has already taken delivery of 20 rail cars, assembled locally by contractor UGL, and is currently progressing a tender for the next 30 ore cars to be built in WA.

BHP’s overall commitment is to build 140 iron ore wagons in WA over four years.

The Rio and BHP deals both involve Chinese manufacturer Qiqihar Railway Rolling Stock, which supplies the rail car components in a ‘flat pack’ format for assembly in WA.

The new orders are a very small proportion of the big miners' rail fleets.

Rio, for instance, operates about 14,000 rail wagons in the Pilbara but said today that only about 10 per year were retired from the fleet.

That typically occurs when there is an accident or major damage to a wagon rather than normal wear and tear.

The Rio deal provides a significant boost for Gemco and its parent company, ASX-listed Engenco.

Engenco said the contracts with Rio, for the new rail cars (over six years) and the existing bearing maintenance services (over 10 years) were expected to be worth $150 million collectively.

Chief executive Dean Draper said the contracts would create between 15 and 20 jobs.

The Rio deal comes six months after Gemco won a contract with Arc Infrastructure to build 20 specialised rail wagons at Forrestfield.

The wagons will be used to transport ballast for rail track construction and maintenance works across Arc’s freight rail network in WA.

Rio said the first WA-built iron ore rail cars are expected to be delivered in 2024 and the Karratha-based facility is expected to be established by the end of 2024, subject to the availability of a suitable property.

The Karratha facility will reduce the need to transport iron ore cars and bearings between the Pilbara and Perth, removing an estimated 150 truck journeys from WA roads.

Gemco’s proposed Karratha facility is the second new workshop in the city spurred by a Rio Tinto contract.

Rio awarded two contracts last year, to Camco Engineering and PROK Conveyor Equipment, worth a combined $61 million, for the supply of new conveyor pulleys and pulley rebuilds.

Camco managing director Jonathan Wigley said his company’s 5-year contract with Rio provided the stimulus to invest in the Pilbara.

He told Business News the construction of a 16,000m² heavy engineering facility at the Gap Ridge industrial estate was well progressed and due to be operational in September this year.

Under the two contracts, Rio expects to purchase approximately 30 new conveyor pulleys and carry out 300 off-site repairs every year for five years.

Iron ore chief executive Simon Trott said Rio was aiming to create enduring partnerships.

“We’ve taken our original scope to build iron ore cars in WA and enhanced it to see the construction of ore cars in the same region as our operations,” he said.

“This will bring a new industry to the Pilbara, creating jobs and providing more opportunities for local and Indigenous businesses.”

Premier Roger Cook said his government was committed to rebuilding local manufacturing.

Last week, he unveiled the first locally assembled passenger rail car, built at a new facility in Perth.