Hunter Valley rides a $7 billion investment wave
Newcastle, Australia — The surfers riding the big waves here have a unique view: Out to sea are 30 freighters waiting to load up with coal, while on shore at the harbor's edge the stackers -- giant cranes with huge revolving bucket arms -- are piling up coal like so many black sand dunes.
This is the Hunter Valley, regarded as the vanguard of the new wave of resource development in Australia. Some $7 billion of investment is expected to funnel into the area over the next five years.
The Hunter, as it is known locally, is only 100 miles from Sydney and dominated by a grimy BHP (Broken Hill Proprietary) steelworks. The valley's future, however, lies in the Permian coal seams, buried in the Sydney Basin some 250 million years ago, and in aluminum, which will use electricity generated from burning the coal.
In the shadow of the steelworks is a major coal-loading facility, called Port Waratah. Some 13 million tons of coal a year is dumped on its conveyor belts.According to Peter Fawcett, a spokesman for the privately run company operating one of the coal loaders, plans are to at least double the size of the port's capacity, and possibly quadruple it to handle 50 million tons a year.
Like so much of what happens in Australia, union agreements are necessary before any actual new construction can begin. This year the unions struck over the question of who was to own the new coal loading facility planned for the port.
The unions wanted the state to manage it -- not a private company. The state , which operates a coal loading facility next to the privately owned loader, employs nearly double the number of workers to load a smaller amount of coal.
New South Wales recently announced the BHP, which is in the process of expanding its coal operations, will act as manager of the new coal leader, which will cost $230 million. The unions have indicated some unhappiness over this decision. The earlier strike backed up 42 ships, and when the Japanese negotiated new coal contracts this year, they got the coal companies to agree to pay any future demurrage charges.
The new supply of coal, mined farther up the Hunter Valley, will come from any one of 36 new mines that are on the drawing boards. According to a government official in Canberra, Australia could be mining up to 200 million tons of coal by the turn of the century, of which half will be steam coal.
"Initial development," the official says, "will be in the Hunter Valley, and later development will be in Queensland."
Seventy-five percent of the coal mined today from the Hunter is shipped to Japan. The rest goes to Europe, South Korea, and Taiwan. Coking coal makes up 64 percent of the shipments, but this is expected to shift to steaming coal rather quickly.
Not all of the coal will be shipped out to foreign ports. A significant percentage of it will be burned right in the Hunter Valley at power plants not far from the mine mouths. One new power plant costing $850 million is under construction and will be ready by 1984. Another, costing $900 million, is planned to start generating electricity in 1987. Four plants already supply power to the area. The electricity from these will be sold to make aluminum at a proposed smelter at Tomago and an expanded existing smelter at Kurri Kurri.
Another new smelter, at Lochinvar, has been delayed since the Alumax Group, based in the United States, decided to pull out of it. In the meantime, BHP, the Australian partner, is negotiating with some potential Japanese partners.
Australia is already the world's largest producer of bauxite, the raw material used to make the shiny but lightweight metal. The state government hopes the aluminum smelters will attract downstream users of the metal, such as fabricators, perhaps stamping out hubcaps for Ford autos assembled in Mexico.
The initial impact of the construction phase of the projects has given the area a jolt. At G. Hawkins & Sons Proprietary Ltd., a supplier of concrete and asphalt, employment has doubled, from 230 to 500 employees, in the past 12 months, while at R. A. Gilford Proprietary Ltd., a heavy-equipment contractor, Cec Villa says the work force has expanded from 80 to 120 in the past year. The same is true up and down the valley, where some 5,100 construction jobs are expected to be filled when the boom hits its peak.
Despite the new jobs, Newcastle ironically has a 6 to 7 percent unemployment rate. Brian Cogan of the Hunter Development Board says the jobless are predominantly women.
"Newcastle," he explains, with all its heavy industry, "is a man's town." Even so, the community is beginning to try to get women who are trained in vocational school accepted as apprentices in some of the trades.
"We're expecting a shortage of 3,000 skilled jobs in the area," says Michael de Largy Healy, marketing manager with the board, "and it would be nice to fill some of them with girls." In an initial move, BHP has agreed to train female apprentices, and state planners are confident women will work in the aluminum industry, since it won't require hard manual labor.
Housing and land prices have soared as well-paid miners and truckers search for lodging. For example, at Lemon Tree Passage, a housing development 20 kilometers (12 1/2 miles) from the mouth of the Hunter River, some 400 blocks of land went on sale last September for $9,000 each. Today, hardly any lots are available at more than double the price. The crunch should only worsen, since the Hunter regional plan forecasts a population increase to 527,900 from 440,000 , by the end of the century.
Roads are beginning to crumble under the weight of trucks loaded with coal. At Port Waratah some 200 truckloads of coal a day are moving to the port. This could expand to 400 a day as the port grows. Mr. Cogan says that even though the state has traditionally paid for the development of the infrastructure, the board is asking new companies to help build them.
"We need housing and roads the most," he says.
Environmental groups and the wine growers lining the valley have tried to hold off the deluge. The growers claim that fluoride emissions from the aluminum smelters could affect the grapes, and they were glad when Alumax stepped away from its plans.
Conservationists point to the pollution from the coal-fired power plants and the effects of open-cut coal mining in what used to be an agricultural setting. But for the most part, Australians want the new development in the Hunter Valley.