Martin maintains chemicals focus

GORDON Martin may preside over one of Western Australia's leading private businesses, but it was his recent experiences in the public sphere that shaped his understanding of the current economic crisis.

Mr Martin recently sold his flagship petroleum group Coogee Resources to Thailand's national petroleum exploration and production company, PTT Exploration and Production Public Company, after his financially troubled business partner Babcock & Brown sought to sell its 35 per cent stake.

Babcock & Brown had come on board in early 2008 after an attempt to float Coogee Resources failed.

Mr Martin said the freeze in international banking had caused big difficulties for Coogee Resources.

Babcock & Brown was one of Australia's biggest infrastructure investors but its business model is in tatters as the company has struggled to service and refinance the mountain of debt it accumulated.

"The experience over the past four to five months gave me a little insight into the issues in banking and lending which are particularly relevant going forward," Mr Martin said.

He said things would remain difficult until businesses gained confidence in the system again and started to reinvest.

"I think we are in for considerable pain for some time, over a year or two years, however China and India will not be going away," Mr Martin said.

"They have a taste for wealth.

"WA is so well located geographically with the right minerals and the technical expertise, I think we'll be fine, but there will be real pain.

"We'll end up with a single focus, we'll dig holes.

"Manufacturing is dead - supporting the car industry is just dumb.

"If we are smarter as a country we'll start encouraging further onshore processing of the sorts of things where we have a competitive advantage."

Mr Martin's views on manufacturing do not discount his own operations with regard to his very successful company, Coogee Chemicals.

He said Coogee operated where it was internationally competitive or there were barriers to entry, such as restrictions on the transportation of dangerous chemicals.

But despite Coogee's success, it had to regularly rethink its business model in the face of relatively high operating costs.

"We have shut three plants in the past three years due to competition from China," he said.

In the current downturn, some of the global forces at play had worked in Coogee Chemicals' favour.

For instance, its clients in the South West focused on processing mineral sands for value-added production had benefitted from the falling Australian dollar.

Similarly its cyanide joint venture with Wesfarmers was also becoming more competitive due to the strong US dollar.

Mr Martin said Coogee Chemicals' terminal business was something of a winner no matter which way the market went because exporters, importers and import replacement producers used the facility for handling and storage - supplementing each other depending on what economic forces were at play.

"Some of the things we have found that are good in good times or bad are infrastructure businesses," he said.

"Once you have infrastructure it is very hard for someone to come and push you out."

Coogee Chemicals is currently expanding its Kwinana tank terminal with a more than $20 million investment, though it is slowing down a tank terminal development in Townsville, Queensland.

"Wherever capital expenditure was not needed to finish something we have slowed down," Mr Martin told WA Business News.

One area to have slowed was sales to mining companies, traditionally a reasonable slice of Coogee Chemicals' business, he said.

That sector had clearly slowed down and some bad debts had arisen.

One of Mr Martin's concerns about future development is the price is gas.

Market observations suggest the price of domestic gas has more than tripled since around 2005, much higher than those on the east coast and making energy a real issue for business investment.

"Gas prices are ridiculous," Mr Martin said.

"The state government has to do something about the supply of gas south of Onslow."