By ERWIN CHLANDA
The Iron Boomerang project, which aims at exporting steel instead of iron ore and coal, using an east-west railway running through the NT connecting mills, mines and ports at either end, and which is promoted by former NT luminaries including ex-Minister Roger “Stainless” Steele, has been described by Saul Eslake (pictured) as “a $105 billion nation-building project”.
The prominent independent economist and shareholder in the project, who has worked in the Australian financial markets for more than 25 years, told the Joint Standing Committee, Trade and Investment Growth last month the scheme “has the potential to deliver six significant advantages for Australia as a nation”.
This is part of his submission.
The Iron Boomerang proposal entails the construction of a railway between the iron ore fields of Western Australia’s Pilbara region and the coalfields of Queensland’s Bowen Basin, passing through the Northern Territory and interconnecting with the railway line between Alice Springs and Darwin.
The purpose of this railway is to replace the longstanding arrangements whereby Australia has shipped iron ore from the Pilbara to Asian countries — in the last 20 years or so increasingly to China — and shipped coal from the other side of the country, from Queensland and to a lesser extent New South Wales, to Asian countries, to be used in those countries to make steel, some of which is, of course, returned to Australia by way of imports to Australia of steel, and in many cases exported to other countries in the form of steel products of varying degrees of sophistication.
One of the downsides of that process is that all of the value-adding to Australia’s two most important mineral resources is done outside of Australia and the ships that are used to carry the iron ore and coal to their destinations have no other purpose and return to Australia empty, at a cost that is ultimately borne, I guess, by the Australian exporters of those two products.
First, the project would enhance the value that Australia can add and capture from the use of our two most important mineral resources: iron ore and metallurgical or coking coal.
Second, it would greatly improve the efficiency with which Australia uses the shipping resources that we currently pay for, and in particular provide a way of reducing the cost of bringing containerised imports to Australia.
Third, and I think this is particularly significant in the current and emerging geopolitical environment, it would reduce our dependence on China [on which], at the moment, Australia is more dependent as an export market and as a source of imports than almost any other advanced economy or any other economy in our region, with the exception of Hong Kong.
Moreover, it would also allow Australia to enhance and broaden our trading relationships with other economies, particularly in our region, who are now highly dependent on China as a source of steel for an input into their own manufacturing and export industries.
Fourth, the Iron Boomerang project could potentially create up to 75,000 jobs in its construction phase and around 50,000 permanent jobs.
Fifth, when fully operational, the Iron Boomerang project has the potential to generate an additional $21 billion per annum in tax revenue for the Federal government, state governments and the Territory government.
Finally, the Iron Boomerang project has the potential to reduce global CO2 emissions in steel production by displacing some of the current more-polluting steel production that’s based on the use of outdated technologies in other countries, in particular China.
Of course, none of this comes without a cost. It’s a project with an estimated capital cost of over $100 billion, of which about $70 billion is for the construction of the railway and the acquisition of the rolling stock, and about $35 billion is for the construction of the five steelworks at each end of the proposed railway line.
As I understand it, the proponents of Iron Boomerang envisage that the railway corridor would be owned by the Australian government, or the Australian government in combination with state and territory governments, and perhaps with the traditional owners of some of the land on which the railway is envisaged to pass, and would lease that land for the purpose of operating the railway corridor.
But, beyond that, the investment would largely be funded by foreign and Australian investors, including potential steel mill operators of course. What [the project] is seeking from government at the moment is funding of around US$240m equivalent to undertake a bankable feasibility study, to undertake all of the fine details that are now required to make this project a reality.
Images (supplied): Rail and communications corridor, steel complex, smart city for steel plant personnel, slab steel and container ship.
Yep, sounds good.
Rail across the mid-north of the country would be fantastic.
The most interesting feature of this grand concept is its east-west orientation, as opposed to the usual south-north fixation that has been with us since the colony of South Australia was granted control of the Northern Territory with a view to improved trade relations with the teeming markets of southeast Asia.
Also of note is the conclusion of this article, where “Project Iron Boomerang” is seeking Commonwealth financial support for a feasibility study which suggests it has a very long way to go at this stage.
There seems to be just about any number of schemes for “developing the north”, both historically and contemporary, but I think the weakness in all of these is the failure to take into account the concept of “natural advantage”.
By this I mean that if any of these grand engineering and trade projects were economically viable then surely something along these lines would have long become a reality by now with investors reaping the benefits.
Yet, even on the odd occasion when major infrastructure projects have been completed (the gas pipeline to Darwin, and the long-awaited transcontinental railway), these have so far proven insufficient to attract follow-up investment to capitalise on the supposed economic benefits that were supposed to accrue to such projects.
The Northern Territory remains persistently a mendicant state reliant upon public funding from the Commonwealth for its survival while still in thrall to siren songs of greater things to come with big ticket projects to capitalise on those teeming Asian markets to our north.
I think our visions and priorities are back to front which is why we never get anywhere.
Meanwhile, Saul Eslake has posted a very interesting article about China which also poses a wake-up call about misconceptions we entertain about that nation.
Sounds like a great plan. Australian dependence on China has cost us dearly.
At the end of the Second World War people spoke about the yellow peril, referring to Japan.
Little did we realise is was China. Many of us are guilty of supporting China over Australia, mostly due to our greed. When people understand and care about the long term repercussions of their purchasing decisions, we may have better outcomes for Australia.
What we need though, to make this project successful, is honest commitment from the Federal, State and Territories Governments.
@ Alex Nelson: Alex, you have hit the nail on the head. Governments though have never been very efficient at large projects.
Private enterprise on the other hand has.
If investors had the confidence in a stable government, I’m sure we could attract some great investment. Perhaps even a joint venture with private enterprise and government.
Sadly we will probably never have a stable government and this is partially due to the way the political system is designed.
On the subject of large projects. Since I was a child, I’ve been waiting patiently for someone to build a pipeline from the Ord (Lake Argyle) through the middle to guarantee a safe and plentiful water supply for all of us.
Once we start fracking, we won’t have enough time to build it though.
There is another benefit, namely good quality steel.
I wish we knew the full cost of projects that have had to be abandoned and done again because the promoters thought they could save a few million by using cheap Chinese steel.
If you then don’t get approval to operate the finished structure and have to start again with proper steel it is false economy. The new smelter at Pt Pirie fell for this trap.
A visionary project – yes, but looking in the wrong direction-backwards!
Alex Nelson is right, so many mega project promoters have taken the government money and run away with it, leaving us with expensive facilities which have yet to prove themselves: the Darwin railway and the Ord River scheme being prime examples.
Who knows, had this scheme been put up in the 60s or 70s, it may have led to a successful steelmaking presence in the Pilbara? Or not. The Whyalla steelworks has not fared so well, though it may yet be revived by changing to solar power.
If we look to the future, then making steel using hydrogen in place of coal has to be the way to go to reduce the carbon footprint of steel – the making of which is a huge contributor to global warming.
The Pilbara already has an abundant supply of sunshine as well as iron ore, so no railway would be needed. We do however need a big investment to develop the hydrogen production and hydrogen-iron ore furnace technology.
Here Australia is on a stronger footing, with many examples of successful research and development, though fewer in successful marketing and implementation of technology at scale. Partnership and with and investment by foreign capital may be what would be need to complete this step.
Meanwhile history is repeating itself with the mining and export of lithium ore, when we could be processing it and building batteries.
Meanwhile we need to be looking forward beyond batteries as well, as lithium extraction and industrial use is not a very eco-friendly process.
Hydrogen production and storage (possibly as ammonia) offers enormous potential for the transport industries, and for generating electricity when wind and solar power are not available.
It’s been so obvious for many years that we are at the junction of at least three major transportation routes – north / south and east / west and the emerging food route from the Ord to the markets.
But we refuse to act on that fact for shortsighted political reasons.
The future of the whole district is south of The Gap, not based around the CBD.
We have a n/s rail and road, an east west highway pending, with the shortest distance from Brisbane to Perth being through here, an international air service, and the transportation of coal and iron ore as back load through here being so obvious for many years, all in the same space.
Clive Palmer wanted something similar years ago when he was interested in the coal under the Pedirka basin, but fortunately was thwarted.
The same reasoning applies to gas, yet we have continued to close our eyes for years.
Brewer Estate is the obvious position and in anticipation of this the proposition to re locate industrial land to Arumberra will only make matters worse.
One business has been waiting four years for land at Brewer. The traditional owners want the art and cultural centre south of the gap and the so obvious solution is at DKA with Yirara community using it as a training ground for their oncoming generations of management in what is really their world.
Add to that a new and revitalised visitors centre at the Hall of fame to intercept proactively all that come from the south, either by air or road, along the lines of our interstate rivals (see what Winton has done with theirs) and likewise Mclaren Vale in SA.
Winton in particular encourages caravans to be left on the outskirts of town and shuttles visitors around the out of town attractions in electric solar powered buses.
We don’t need or want caravans in the CBD nor do the caravaners need the problems of parking.
Let’s focus our attention on 20 years from now and plan accordingly.
Focus on Brewer and south of The Gap because that is where the action has to be in the future starting with a national transport hub and industrial centre at Brewer, a tourist hub centred around the cultural centre and Hall of Fame featuring a centre of excellence in tourism and related products, including bush foods and emerging agriculture for the whole of the NT.
Old Joh in Qld wanted to do this with Lang Hancock back in the seventies.
You are right Ralph. Joh and Lang suggested this 50 years ago. The trouble is to get Australians to work.