30/07/2009 - 00:00

History lesson in steel mill pledge

30/07/2009 - 00:00

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PREMIER Colin Barnett was understandably chuffed to announce this week that Chinese steel giant AnSteel would spend the next 18 months studying the viability of a potential steel mill, at Oakajee.

PREMIER Colin Barnett was understandably chuffed to announce this week that Chinese steel giant AnSteel would spend the next 18 months studying the viability of a potential steel mill, at Oakajee.

After all, he said, producing steel in WA had been a dream for 50 years but had produced "very mixed" results.

Mr Barnett should know, having presided over two of those mixed results - Kingstream Steel's failed $1.4 billion Oakajee steel venture, and Austeel's integrated pelletising and steelmaking proposal at Cape Preston in the Pilbara.

Cape Preston is now finally going ahead, but Chinese developer Citic Pacific's current WA plans do not extend beyond concentrating and pelletising.

The premier was therefore careful to emphasise that the Ansteel agreement was no certainty to go beyond the study phase. Nonetheless, a change in approach meant there was good cause for optimism this time around.

"The difference now is that AnSteel are one of China's leading steel producers," he told reporters. "Before, what has happened is we have tried to turn iron ore miners into steel makers. That is flawed, and hasn't worked.

"If we can attract the steel companies to come here, they have the expertise ... so it is far more likely to happen than it ever was trying to persuade iron ore miners to turn themselves into manufacturers."

But that might come as a shock to local historians.

Back in 1952, BHP was Australia's only steel producer when it promised to build a steel rolling mill, blast furnace and, ultimately, an integrated steelworks at Kwinana.

To BHP's credit, a small rolling mill and blast furnace were built at Kwinana in the 1960s. But the proposed integrated steelworks never eventuated.

And BHP was still Australia's leading steel maker when it proceeded with the disastrous $4 billion Boodarie Iron hot briquetted iron plant at Port Hedland to meet its remaining downstream processing obligations in 1996.

Similarly, having specialist steel makers Nucor and Shougang Steel as partners was not enough to prevent Rio Tinto from mothballing its $400 million HIsmelt pig iron plant at Kwinana last December.

Kingstream's failed merger with Taiwanese steel group An Feng Steel was also a factor in its own collapse, while European steel giant Corus was a foundation member of the original Austeel consortium.

All of which makes it hard to determine much difference in today's approach.

When AnSteel signed up as the major partner in Gindalbie Metals' $1.8 billion Karara magnetite project in 2006, one of the first decisions taken was to relocate the proposed pellet plant from WA to a site near AnSteel's Chinese steel plants.

Consequently, it is difficult to see how circumstances have changed in favour of local production.

And even if the cost benefits of shipping finished steel over bulk raw materials are appealing, steelmaking in distant Brazil would seem more logical than in WA.

The fact is that such pledges to evaluate steelmaking have been a standard tool in securing access to WA's iron ore resources for decades.

As the major partner behind the $1.8 billion Karara magnetite joint venture with Gindalbie Metals, AnSteel is understandably eager to facilitate conditions conducive to its ultimate ambition of trebling production from Karara to 30 million tonnes a year.

That will require significant goodwill on the part of the state, particularly in terms of approvals and the timely delivery of key supporting infrastructure.

So no-one should be too surprised if a study is all that eventuates.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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