By Jamie Smyth in Port Hedland, Australia August 20, 2014 1:44 pm
In a dusty industrial estate next to the world’s biggest iron ore port in Western Australia’s remote Pilbara region, business has never been so bad.
“The rents got so high in the town that when the boom ended, businesses began to die off everywhere,” says Jo Woodward, owner of Jems, a ramshackle building with an eviction notice stuck to its padlocked gate that was recently Port Hedland’s only legal brothel. “Nothing is selling here now.”
The demise of Jems, and of many other Pilbara businesses that have closed their doors following the end of the country’s mining investment boom, suggests Australia may struggle to realise one of its flagship projects.
Port Hedland and neighbouring Karratha grew rapidly during a decade-long boom as workers flooded into the Pilbara to construct the iron ore mines, railways and ports needed to feed Chinese demand for steel. The fast-growing towns were chosen as a testbed for a key state initiative: creating two sustainable cities of 50,000 people by 2035 in a remote region prone to resource booms and busts.
Western Australia’s “Pilbara Cities” plan was launched in 2010, at the height of a boom driven by iron ore and the discovery of natural gas off the coast. Several billion dollars have been spent on hospitals, roads and housing to transform the dusty mining towns of about 15,000 people each into living spaces that attract families.
But fears are growing that the drop in mining construction and a recent slide in iron ore prices threaten the future of the flagship project.
A lack of alternative sources of employment is likely to continue – businesses find it difficult to locate to the remote cities given the high cost of electricity, transport and water. And although such infrastructure exists, it has been built by the three major mining companies active in the region – BHP Billiton, Rio Tinto and Fortescue Metals – and they guard it jealously.
BHP and Rio own and control thousands of kilometres of railway track across the Pilbara and have successfully defeated legal attempts by other miners to open access to this infrastructure. All three miners have built their own generators to power their operations.
“History shows this classic mine and boom phase is either followed by an evolution into multiple but related industries, or a decline into ghost towns and tumbleweed,” says Jemma Green, a researcher at Australia’s Curtin University.
A report co-authored by Ms Green, Pilbara 2050, notes there are at least 87 ghost towns across Western Australia, most of them former mining districts. It warns that the region must diversify beyond iron ore and gas, and embrace sectors such as tourism and agriculture, to ensure Port Hedland and Karratha do not suffer a similar fate.
Attracting workers to put down roots in the Pilbara has never been easy. It is remote – a two-hour flight from Perth – and has a harsh climate, with summer temperatures topping 40C. Poor living conditions and the high cost of accommodation has created a fly-in, flyout culture, whereby workers live on temporary campsites and trailer parks on the edge of town.
“People today point the finger at the mining companies and say you have all these people living in camps but when you go back five or six years there was no alternative,” says Morag Lowe, owner of First National, an estate agent.
She says decades of political neglect, a failure to invest in infrastructure and an initial reluctance by local government to free up development land has almost squandered the boom.
Public investment under Pilbara Cities and private investment by the big miners is beginning to have an impact. A sports stadium has been built, an art gallery has opened and luxury houses have been constructed in Port Hedland to attract doctors to relocate to the town.
“We are focusing our efforts on the type of ‘city-building’ amenities and services such as parks and cafés, which will ensure families want to come and live here,” says Kelly Howlett, mayor of Port Hedland.
“A population of 50,000 is a realistic target. About 1,000 people make Western Australia their home every week and they can’t all go to Perth,” she says. iron ore price
But locals warn a cooling economy is putting this at risk. Rents have halved in Karratha, record numbers of properties are listed for sale in both towns and some new housing developments lie empty.
Alan Richardson, who recently closed the Pilbara Echo newspaper he founded in Karratha, says things are difficult.
“If you talk to any small business that’s not mining-related you’ll see how hard it is,” he says.
Ms Green says creating a publicly controlled energy grid and electrifying the miners’ railways would dramatically reduce operating costs for all businesses, including the miners.
“At the moment if any business wants to set up in the Pilbara they need to build their own generator, which is hugely costly. But if the existing infrastructure built by the miners could be pooled and shared it would be a game-changer for the region,” she says.
But the big miners, which make tens of billions of dollars in profit every year from the region’s iron ore reserves, say such moves could disrupt their businesses.
As the economy sours, some question whether there will be enough political commitment to deliver the Pilbara Cities vision.
“This part of Western Australia, really, economically it may be very important but politically it is not so,” says Ms Lowe. “Over the decades it has been totally ignored.”
Just watch the dumb money rush out of WA and plow into Sydney over the next year - one final assault of epic proportions.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
“History shows this classic mine and boom phase is either followed by an evolution into multiple but related industries, or a decline into ghost towns and tumbleweed,” says Jemma Green, a researcher at Australia’s Curtin University.
A report co-authored by Ms Green, Pilbara 2050, notes there are at least 87 ghost towns across Western Australia, most of them former mining districts. It warns that the region must diversify beyond iron ore and gas, and embrace sectors such as tourism and agriculture, to ensure Port Hedland and Karratha do not suffer a similar fate.
Where's our researcher to prove to us that this is not a fact and that mining investment booms always merge seamlessly into a never-ending glorious production phase that delivers even more benefits to us, forever?
Where's our researcher to prove to us that this is not a fact and that mining investment booms always merge seamlessly into a never-ending glorious production phase that delivers even more benefits to us, forever?
I think she's waiting on data.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
Where's our researcher to prove to us that this is not a fact and that mining investment booms always merge seamlessly into a never-ending glorious production phase that delivers even more benefits to us, forever?
I think she's waiting on data.
Yes, well I'm sure there's at least something to be dug up demonstrating that today is just another day in a boom that will unquestionably stretch throught infinity.
I could have suggested the Kouk but he doesn't seem to know which way he's pointing these days.
I could have suggested the Kouk but he doesn't seem to know which way he's pointing these days.
That's definitely true.
Although I've kind of grown to respect the guy - he may be a bit blinkered but once you're aware of his prejudices he can be a pretty insightful and entertaining guy, and his twitter account is great for getting realtime updates on important economic events.
And unlike some of the touchier ones he doesn't rise to the troll bait, nor block anyone who responds to his tweets with contrarian opinions.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
Both Blondie and Timmy out of a job then. Sad day.
Looking for the like button but I can't find it?
anyway, Like
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
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