The dusty road out of this sun-drenched mining town snakes past ocher-tinted mountains of iron. It winds through acres of arid scrubland capped with pincushions of golden spinifex grass, and moves into the heart of one of the world's most productive iron ore mines.
Mount Tom Price in northwestern Australia.
Here smudge-faced miners, jostling to and fro behind the wheels of 120-ton dump trucks, haul the ore that helps stoke the world's blast furnaces. Yet these days the Brobdingnagian trucks are kicking up fewer clouds of dust.
A slump in the world steel industry has put a crimp in the demand for Australian iron ore, spawning gloomy forecasts among some of the nation's six major iron-ore producers.
Hamersley Iron Pty. Ltd., operators of the mine at Mount Tom Price and nearby Paraburdoo, expect production to be off some 15 per cent this year compared with last. Projected output is 33 million metric tons, down from a record from 39 million tons a year ago. In some cases Japanese steelmakers, the country's biggest customers, are taking only 60 percent of their contracted tonnage.
The glum outlook comes after a buoyant year in 1980 for the world's largest exporter and second largest producer of iron ore (after the Soviet Union). Australia's largest producers -- Hamersley, Mount Newman Mining Company Pty. Ltd., cliffs Robe River Iron Associates, Goldsworthy Mining Ltd., Savage River, and Broken hill Proprietary Company -- scooped out some 95 million metric tons compared with 92.2 million tons in 1979.
Last year's exports approached 81 million dry long tons, up four million tons from the year before. About 80 percent of the country's ore is exported. The lion's share (70 percent) went to Japan.Europe took 13 percent, and the rest mainly went to other Far Eastern countries (China, South Korea, and Taiwan).
Should the world's blast furnaces growl for more, Australia can certainly satisfy them. Most of its reserves lie in the Pilbara region -- an arid mineral-rich expanse in northwestern Australia. Enough high- and medium- grade ore is laced through these outcroppings to meet world demand well into the next century -- an estimated 35 billion metric tons.
The region's two biggest producers are hamersley and Mount Newman, both with a capacity of about 48 million metric tons a year.Goldsworthy's reserves are expected to be exhausted in about three years. But the Japanese are believed to be scouting around for another supplier, and Goldsworthy is one of the firms poised to open another mine.
Just as important as the size of the Pilbara's reserves, however, is the quality. Much of the ore has up to 70 percent iron content, well above the grades in the United States. Pilbara enthusiasts talk about their ore the way farmers in Idaho talk about their spuds. Local folklore has it that if you touch an arc welder to two chunks of Pilbara rock, they will bond together like slabs of steel.
Hamersley employs about 4,000 people in the Pilbara. At its Mount Tom Price site, workers blast the ore loose, load in into huge trucks, and haul it off for processing. It is crushed, screened, washed, and then loaded for rail shipment to Dampier on the coast.
If the ore patriarchs of the Pilbara are pessimistic about the short-term outlook, they can probably take some solace in the longer run. After all, Australia sits astride an awakening giant, Asia. Studies show that world steel production will continue to grow over the next few decades, particularly in some of the fast-developing Asian-Pacific countries.
Yet not everyone is so optimistic. T. Barlow, managing director of Hamersley Iron, sees the real growth areas in steel production coming in Eastern Europe and Latin America (Brazil, Mexico, and Argentina). In an interview in his expansive Melbourne office, the white-thatched executive pointed out that Brazil's fast expanding ore idustry is better suited to meet those markets. Its closeness cuts down on soaring shipping costs.
Already, Mr. Barlow says, The Australians are finding it hard to compete in Europe, where shipping costs are double what they are to Japan. "For us to expand further, the market has to develop in Southeast Asia and the Middle East, " he says.
Yet feeding those markets will require some changes among the ore producers. Many of the steel facilities sprouting in the region require high-grade lump ore and pellets -- feedstocks that Australia can provide but which requires energy-intensive processors to produce. For the Pilbara operators, some of this energy could come from the North West Shelf natural gas project.
There are other limitations, however. The hard-nosed Japanese -- likely to remain Australia's chief customers for years to come -- will no doubt continue to play Brazilian prices against Australian. A recent Japanese contract with the Brazilians for several million tons of ore, signed at a time when Australian stockpiles are swelling, did not do anything to assuage Pilbara producers.
Even word from the Japanese of possible bigger Australian contracts in the future doesn't ease all jitters here.
"The Japanese have followed a deliberate strategy of oversupply so they could drive the price down," says Barlow. "I think they have squeezed all they can out of the lemon."
For now, however, the vagaries of the world market aren't completely stifling the growl of the Wabco 120 dump trucks lumbering around the open-pit mines of the Pilbara.