25/11/2010 - 00:00

Slow going for South West heavy hitters

25/11/2010 - 00:00

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The South West is a land of opportunity, but some locals worry the chance to develop is being missed.

Slow going for South West heavy hitters

ON a concrete barricade deep in the heart of Simcoa’s Kemerton operation there is a stencilled bit of graffiti which reveals how different things are in the South West compared to either Perth or the Pilbara.

“Jim lies, jarrah dies” is the environmental protest slogan spray-painted near units that process forestry waste as feedstock for the Japanese-owned Simcoa’s silicon metal production.

Simcoa Operations vice-president Jim Brosnan laughs off the mischievous message as part of the regular hurly burly of being involved in large-scale industry in the state’s South West.

Like a lot of other businesses operating in the region, he sees environmental issues as a big constraint on his current operation and its expansion plans, even though he is doing what every politician claims they want – value adding.

While acknowledging that Simcoa’s past practice of using jarrah from native forestry had reached its use-by date when it was phased out, Mr Brosnan believes the current practice of using waste material, such as wood left over from the overburden removal by bauxite miners, is sustainable and appropriate, despite what local campaigners think.

“It is a perceived environmental issue,” he said.

“Therefore it is a community issue rather than an environmental issue.”

It is just one of dozens of examples where big business in the South West faces dilemmas that its peers in the Pilbara, and even in the more mature industrial sites such as Kwinana, manage to avoid.

Mr Brosnan’s real environmental battle is not so much with the occasional protest over Simcoa’s feedstock, but with the state government’s failure to seize the opportunity to make the most of the region – a place where value-adding industry already exists side by side with raw materials and a strong residential workforce.

Simcoa is expanding its footprint from two furnaces to three, with a fourth on the cards; but its real ambition is to get into silicones production. That would require a $500 million spend and use up a large amount of the company’s Kemerton site, bought around two decades ago as an early mover into the state’s then newest industrial park.

But Simcoa is frustrated by the fact that it is struggling to get environmental approval to clear trees that have grown since it bought the former grazing land.

“We would like to do downstream processing here too but unless we have the land there is no point in talking to my board,” Mr Brosnan told WA Business News.

There are other issues that make the long-serving South West business leader wonder if Kemerton can meet the state’s demand for industrial land now Kwinana is virtually full.

Water, waste treatment and rail infrastructure issues loom as large as the need for environmental approval.

Infrastructure

Kemerton’s challenges are writ large across the region. Representing a mixture of businesses, councils and utilities, the Bunbury Wellington Economic Alliance estimates that about $620 million in road, rail and port infrastructure is required in the short term to take advantage of the region’s opportunities.

Those opportunities lie in production, export and processing of various commodities.

But business leaders acknowledge that getting heard over the noise created by the Pilbara, Oakajee and the Northbridge Link is difficult, especially when local politicians of any political persuasion seem less than excited by development prospects.

Devereaux Holdings chief executive government relations, Noel Ashcroft, suggests the South West isn’t sexy enough to get to the top of the queue when it comes to federal and state infrastructure dollars.

“The state has come good for the first stage of some of these projects but the whole future of this part of the world focuses on the port of Bunbury and the ability to get things in and out of that,” Mr Ashcroft said.

“We have lobbied the state government but it is difficult to get traction.”

Devereaux is part of the Griffin Group, a mining and energy giant in the region. Parts of Griffin are struggling with debt and in the hands of external administrators, but the group’s coal mines and power station plans are still integral to the South West’s future.

The state government has funded a new access road for the port but a bypass road is sorely needed and the inner harbour is feeling the strain of rising throughput, coupled with a distinctly short life for the original outer harbour.

Urban encroachment

Iluka Resources is a big user of the port. It exports, imports and processes there. Iuka southwest operations manager Simon Hay said the company was watching developments carefully, especially as urban encroachment around its traditional outer harbour operations had put its operational needs in conflict with the new residential population.

“We are just seeing a gradual winding back of our freedom, there are new regulations and rules, noise in particular is an issue,” Mr Hay said.

“We still have 24-hour operations but there is community pressure to reduce that.”

Saudi Arabian company Cristal Global operates facilities at Kemerton and Australind, producing and exporting pigments based on local and imported mineral sands.

It has also encountered the problem of urban development in the region, notably at Dalyellup near the beach south of Bunbury, where a new subdivision has sprung up next to a waste disposal site where Cristal has been dumping mud that results from its production.

“That was a sewage plant,” said Cristal acting site director Simon Morten, who is one of several operators in the region that note the increasing green tinge of councils and the very active community interest in their sites.

“Now we have 3,000 neighbours and we are being kicked out, basically.

“We need somewhere to put our waste.”

Lifestyle

Of course, the irony of the reasons for his waste management problems is not lost on Mr Morten. The attraction of the South West has made life relatively easy for businesses in the area to attract and retain skilled workers.

The secret, though, was never going to last and developers have slowly crept the urban population closer to business.

Mr Morten said construction on projects such as Worsley had prompted turnover at his business to nearly double to around 8 per cent. Such a low turnover number would be the envy of anyone in the Pilbara and plenty of companies in Perth, but for Cristal it is usually 4-5 per cent.

Mr Morten said the longevity of the workforce was a big strength of the region and many of those leaving his business were recent arrivals rather than the long termers who formed the core of the employment base of about 350.

Alcoa Wagerup refinery manager Eugenio Azevedo agrees with the strength of the retention rates.

About 60 per cent of his staff have been with the business for more than 10 years.

Mr Azevedo’s concerns, like those at his Booragoon-based headquarters, are more focused on state issues such as domestic gas supplies and federal matters like the cost of carbon and mining taxes, which create uncertainties for industry.

He said those big issues, coupled with the local infrastructure needs, made it tough for Alcoa to make the business case for development, even though the Western Australian operation has a history of low-cost production. It is worth noting that both Cristal and Simcoa, which are part of global operations, have also been at the lowest point of their group’s cost curves.

The big picture matter of carbon might scare investors, but there is also opportunity.

Premier Coal general manager Patrick Warrand said developments such as the federal government’s Carbon Capture and Storage flagship project based in the region provided potential opportunities.

“That has a way to go but it is very promising,” he said.

Mr Warrand said Premier, owned by Wesfarmers, was closely watching Perdamin’s plans to turn Collie coal into urea via gasification.

“That (gasification) is a huge opportunity for Collie coal,” he said.

 

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