CEDA Speech - October 2019

…second time I've spoken at CEDA, and you do a great job at progressing and supporting policy debate across this country. It’s a great privilege to be back here again. Thank you Tasmin(*) for that kind introduction before, I thought it was the real introduction. It was still a good one. Thank you. Good to be up here.

Now, today, I wanted to start in Northern Australia and actually before I do, I forgot too to recognise people. Paul Scarr I think is here, my colleague from the Senate, a great champion in front of the resources sector; and Ian Macfarlane, as a former Resources Minister. Good to have you here Ian.

Now, I want to start up in Northern Australia at a town called Mount Isa, which I'm sure you're all familiar with. I was trying to reflect and think about when the first time I kind of, as a child, knew or found about Mount Isa, and I do remember as a child in the 1980s, as we grew up in the 1980s, I remember sort of first hearing about Mount Isa in connection with the company Mount Isa Mines, which for a period in the 1980s was the biggest Australian company, biggest Australian company in the stock market, bigger than BHP and CSR and all these other iconic Australian names. It was the biggest company at the time. And I always thought, well, that's because it was a really successful mining company and it did really well up there. So, that's how it became the biggest company in the world. It wasn't actually until I became the Resources Minister a few years ago and I was reading a few of the histories of the resources sector, which I love to do – such a rich and diverse history – that I realised or found out that it actually wasn't mining that made Mount Isa Mines the biggest company in Australia – it was technology. Its intellectual property, in particular. And I’ll go through the details of that later, but my central point here today is that there is so much to Australian mining beyond just the mine, and that it does so much to support a more diverse Australian economy and in particular, it helps to support thousands of manufacturing jobs through Australia, advanced manufacturing, and also specifically in Northern Australia. And I- but I fear that we are losing our potential to take advantage of that natural advantage, of that comparative advantage we should have in using our natural resources, like our mineral wealth, and converting those into manufacturing jobs that I want to keep here in Australia.

Now, that's not just something I want to do, it's something we're planning to do. It’s key part of the Resources 2030 Taskforce that the Government issued last year to try and capture more of the value adding in our country, in our economy, in manufacturing and create those jobs. It's a key reason why we keep banging on about the need to support and develop reliable, baseload, dispatchable, whatever you want to call it, power to help support those jobs in the manufacturing industry. I'll come to that a bit later too. And it’s why, I think, we absolutely should still be a country that makes things. There’s an unfortunate narrative, I think, that's been allowed to develop that somehow we can't be a manufacturing country anymore. Well, I think that's rubbish. I want to take you through why I think that today.

Now, before I get to all that, I'm going to go back Mount Isa and that story- finish that story. So, apparently, before I was born in the 1970s, Mount Isa had been refining copper in the same way that has been done since the 1860s; the technology involved in the use of a copper cathode. A cathode plate, a copper plate would be made and be put next to a nano and the smiths from the smelter would be put in between electric charge, through it, and the copper would be attracted to that copper cathode plate, that’s how you’d get the more refined copper. Now, the problem with that, the difficulty with that, was those copper plates couldn't be reused and had to be remade. At the time, it was a very labour intensive process for a country with a high-wage costs, otherwise high costs, this was a challenge for Mount Isa Mines to remain competitive.

So 1970s, some Mount Isa Mines engineers were tasked to try and solve this problem and they found out that in zinc refining- for refining, there was different methods they used, and they adopted some of those and eventually came up with stainless steel plates rather than copper cathodes for the cathodes and to do that process. That cut their costs enormously, allowed the stainless steel plates to be reused, helped save them money and then helped Mount Isa Mines make a fortune, selling that technology to the rest of the world. Today, this process which is called the IsaKidd refining process- the IsaKidd process is a technique used in over 60 per cent of copper refineries in the world. All invented here in Australia, with Australian know-how, Australian manufacturing, supporting Australian jobs. Now, that's just one story. Just one story of our great mining and metallurgy industry that I think we should continue to support, grow, develop.

Now, I am concerned that that's a little bit at risk. Now, I was made aware there would be some slides, is there- I think. [Indistinct] PowerPoint. There we go.

So, I wanted to go through a little bit of why people might think that - not so great for the manufacturing sector. So this is a change in economic output since [indistinct]. So this basically [indistinct] in real terms since the year 2000. And as you can see, the manufacturing industry has barely grown over 20 years – this is total growth, not analysed growth, the total growth over nearly 20 years now. Manufacturing industries barely got to 3 per cent growth in that 20-year period. GDP is going up since- you know, a lot. We’ve had a very strong period of economic growth for the last 29 years really, but particularly in the 2000s, and we’re up 72 per cent but the manufacturing industry has not quite done. Now, the two industries though that have grown, two manufacturing industries- all the other ones are on the bottom there manufacturing except for GDP. The two manufacturing industries that have grown, subsets manufacturing, are food and metals. And I don't think it's any coincidence that those two industries where we have natural advantages in at the resource level, natural resource level, rich agricultural soils and of course, we have world class minerals. And I'll concentrate a bit more on that today.

That's a bit more detail than just that story in the last 20 years. It's really a tale of two halves, the last 20 years, for particularly the metals manufacturing industry. In the first seven years of this century, from 2000 to 2007, growth in our metals manufacturing industry actually outstripped GDP, went up by about a third, while GDP only grew by about a quarter. And the other manufacturing sectors did pretty well too. We were selling actually a lot of cars back then. We don't do too much of that anymore, we still made some good cars, we were doing well then. But then in the last 10 years or so, the last 12 years, it's all been reversed. And particularly, for metals manufacturing, which I’ll come back to in a second, it's fallen by six per cent over that period. And of course, some of our other manufacturing industries have fallen as well.

So that's a challenge for us, that something seemed to happen in 2007. And we have lost manufacturing jobs now. We're down about 175,000 jobs in manufacturing since the start of the century, since 2000. I'm very concerned about where our great Australian sectors for [indistinct] at the moment. You've probably seen the media, that Rio Tinto and Alcoa are calling into question the viability of aluminium smelting in most of Australia and New Zealand as well. That sector is facing some challenges. But one of the key things that it’s facing here in Australia is that the higher electricity prices that prevailed, really, since the year 2007 - I think the next graph shows this. So, this is three lines here, this is in the aluminium space, three commodities: bauxite, alumina and aluminium. [Indistinct] But you got bauxite, it gets refined into alumina, which then then gets smelted into aluminium, so it's a supply chain. I've got that graph set to 2007 equals 100.

So, before 2007, you can sort of see that the growth in alumina, aluminium, bauxite, kind of tracked each other as we mined more bauxite, it got turned into alumina; some of the alumina got turned into aluminium; and that was pretty consistent growth across those three commodities. We’re the world's largest exporter of bauxite and alumina and a big producer of aluminium. Aluminium in China, I think, we’re the big producer.

But something happened in the year 2007, obviously, and we’ve had strong investments in our bauxite industry, to an extent that the last 12 years, bauxite exports have grown [indistinct] six times, six times in the space of 12 years. Yet our alumina productions [inaudible]… I should say, but our alumina productions only grown by 20 per cent, a sixth fairway of six times. And our aluminium(*) production has actually fallen over that period. So this is a microcosm for the whole sector at the moment, that we’re capturing less of the value add these industries, fewer of the jobs that could otherwise exist in Australia. Because clearly something changed in 2007.

Now, what changed then? Well, you know, I think- I didn't bother putting up the electricity price graph here, but basically in 2007, that's when electricity prices shifted and changed. Before that time, before that time various reforms and changes in the electricity sector here in this country actually led to power prices falling. So from 1990 to 2005, in real terms, power prices in Australia fell by about 20 per cent, about 20 per cent. And to help drive economic growth and economic activity - in the last 12 years, that more than doubled. And they’ve really gone up the last few years with the shutting of Hazelwood in Northern- in South Australia.

And the cost of those decisions, the cost of those outcomes is the fewer jobs in the manufacturing sector in particular. So, I don’t want to give up though. I want to return to that period before 2007 when we would expand our [indistinct] manufacturing sectors, alongside our great mining industry, and keep jobs here in Australia too, not just send everything overseas. I think there are opportunities to continue to do that in new industries as well here in Australia. As was said earlier, the government has a real agenda to expand production into what's broadly termed a critical mineral space. It covers a lot of different - sometimes unrelated – commodities, but basically talking about the essential components that go in to a modern economy.

So for example, some of you- who’s here heard the mineral neodymium? [Inaudible]… there’s a couple, there’s a couple. So not many people heard of neodymium? You’ve probably got- all got neodymium on your table because who here has a phone? Everyone probably has a phone, and every phone has a mineral called neodymium in it. It’s a rare earth metal, it was only discovered in 1885, so it hasn't been around all that long in geological time. And it's pretty much now in every phone, headphones, and speakers. It helps small speakers not sound tinny. It’s one of the things it does, neodymium, and it’s a rare earth metal.

And these commodities like rare earths, like lithium- some of the old [indistinct] like nickel and cobalt, central for lithium batteries, are going through a step change in their demand across the world, and it's often spoken about- well, we've got a great opportunity to invest in that mining industry and expand the mining activity in lithium, in cobalt and nickel, and we have all these commodities right across Australia, particularly in northern Australia. But what we should also, right now at this point in time, as production expands, we should as a country be trying to lock in the value chain as well. Trying to do what we did with the bauxite industry when it was built into Cape York, and get refineries and smelters and other things here as well.

So that's our strategy. We've released a critical mineral strategy early this year, where we’re investing $25 million in innovation to help the supply chain, mineral supply chain come here. We've got our first lithium hydroxide plant up and running in Kwinana over in West Australia. The lithium ore, which we are now the world’s largest producer of, it sells for about a thousand dollars a tonne – it’s come down a bit last year, but it’s about a thousand dollars a tonne. The next step in the process is to create hydroxide, a concentrated form of lithium - that sells for $17,500 a tonne. So that's what we're trying to achieve with that investment in the future with battery mineral CRC, with a $25 million investment.

We're investing in infrastructure too. We’re building roads, like Mount Tom Price Karratha road in Northern West Australia, which is about opening up some of those rare earth mineral and metal opportunities. As well as the Tanami Road in Northern Australia, and Savannah Way in North Queensland as well. There's lots of opportunities to expand all of this type of production across Northern Australia, and to capture those opportunities.

And a final arm to our strategy is to attract investment as well, particularly from overseas. A lot of these commodities are in thin- relatively thin markets, they’re very concentrated. So both the cobalt and rare earth markets are dominated by- about 80 per cent being the dominant player. And if we're going to unlock those markets and commodities, we're probably going to need some support of governments around the world to help get those investments, and what otherwise hard markets for commercial entities alone to crack. And so that's why we’ve been talking to the US Government for about two years about this. I first spoke to my counterpart Ryan Zinke the Interior Secretary in March last year about new opportunities we have to partner in Critical Minerals. We signed a letter of intent then, and we’ve got cooperation ongoing between the Geological Survey of the US and Geoscience Australia. And just two months ago the Prime Minister and the President, when they met, agreed to develop a joint action plan on critical commitments to try unlock this investment between the two countries. And so I’ll be going to the US soon to try and finalise that, and bring those opportunities into Australia too.

Now, I think we can do that in those markets, I think we can do that even with relatively high urgent costs given the small nature of those markets and their high value. But to get back to the broader issue of keeping manufacturing jobs and metals industry here, we must have affordable power. We must have a diverse power system that doesn't put all its eggs in one basket. And too often a debate on energy at the moment, is that in Australia you've either got to have all ore renewables or all nuclear or all coal – [indistinct] people say that. But just to be very clear, I'm a big supporter of coal. But we've got to have all different types of energy to have a diverse, successful, strong growing economy. And there are different horses for different courses. Renewables earned by other types of power can work for certain circumstance, for certain load types. But for a heavy large scale 24/7 manufacturing, like the aluminium sector, if we don't have a liable [indistinct] power, we won’t continue to produce this type of material, the jobs will go overseas.

So that's why I back proposals like the Collinsville] coal-fired power station, which I think Ashley Dodd [indistinct] here somewhere, I’ve seen him going around the room- there he is. Ashley is a proud Aboriginal man from North Queensland who wants to get jobs for his community, and he’s driving a proposal up there that bring- the first, really, proper base load power station in North Queensland, and helped support jobs in these manufacturing industries. We should back proposals like that against those who will say: no, no, we can’t have any coal [indistinct] – because let’s be clear, if they get their way, the- we’ve got to be clear about the consequences of that. The consequence of that is our manufacturing industry will be much, much smaller than it would otherwise be. And for cities and where I represent in Northern Australia, the Gladstone, the Townsville, the Darwin, their opportunities with gas, they’re going to be much, much weaker for it.

Now, I think we’re incredibly resourceful and innovative people, as Australians. And that was demonstrated in my opening story [inaudible]… in challenging circumstances across the world. I was reflecting last week at another event, for another company I was at, saying: we are very resourceful people, but we’re not all that creative often with the way we name things. You know, we sort of came up with four or so states here in Eastern Australia which have some sort of [indistinct], and then we got to Adelaide and just thought: we couldn’t be bothered, we’re in Southern Australia so let’s call it South Australia, [inaudible]… call it Northern Territory [indistinct].

And it’s great to see the resources sector often follows that great Australian naming tradition, because we don't think too hard often, the Broken Hill Project Company, Mount Isa Mines, Santos in South Australia, Northern Territory oil search. Rio Tinto’s sort of getting a little bit on the edge there, because they’ve named it after some evocative river in Spain, which was the source of Roman minerals at the time. But it's all pretty simple names, right? We’re all simple in how we name things, but god are we creative in how we do things. Particularly in this resources sector, especially in remote environments like Northern Australia. But if we don’t back that resourcefulness with the use of our minerals, by actually using them here, not just sending them overseas - we'll have a smaller economy in Northern Australia, we’ll have a weaker manufacturing sector. Our whole - hundreds of thousands of Australians won’t have the same job opportunities that past generations had.

So we need to get common sense back in the energy debate to keep jobs in manufacturing, to keep that resourcefulness in our sector, and to keep our country strong.

Thank you very much ladies and gentlemen, god bless.

Be the first to comment

Please check your e-mail for a link to activate your account.



get updates