China's Ansteel abandons plan for WA mill because of high...

China's Ansteel abandons plan for WA mill because of high manufacturing costs

Andrew Burrell
From: The Australian
September 07, 2011 12:00AM

CHINA's second-biggest steel producer, Ansteel, has abandoned a plan to build a major steel mill in Australia after being deterred by the high costs of manufacturing here.

West Australian Premier Colin Barnett signed an agreement in 2009 with Ansteel president Zhang Xiaoqiang for a joint feasibility study into developing the state's first steel mill near Geraldton, in the emerging Mid-West iron ore region.

At the time, he said the Ansteel plan would be the realisation of a long-held dream in the state for downstream processing of the state's vast iron ore reserves.

But The Australian has been told that Ansteel never seriously pursued the idea of building the integrated iron and steel plant and rolling mill, which would have been fed with magnetite iron ore from Ansteel's half-owned Karara project in the Mid-West.

Industry sources said it would be cheaper for Ansteel to ship iron ore from Karara back to its steel mills in China rather than process it into steel products in Australia.

It is understood the WA Department of State Development has contacted Ansteel numerous times in the past two years to offer its help with the study,

but has never received a positive response.

Sources have suggested that the state-owned Ansteel was deterred by the high construction and labour costs involved in such a project in Australia, along with the difficulties likely to be encountered in gaining access to a relatively cheap gas supply to power the plant.

The company's plans may also have been affected by the lengthy delays and cost blowouts being experienced in building the $6 billion Oakajee port and rail project that is needed to underpin development of the Mid-West's iron ore mines.

The Ansteel steel mill would have been built at an industrial estate being planned at Oakajee. But the future of the Oakajee infrastructure project has been in doubt for several months, with developer Murchison Metals admitting in July it could not fund its share of the development.

Ansteel's reluctance to invest in a steel mill comes amid an intense debate over the future of manufacturing in Australia following BlueScope Steel's decision last month to axe more than 1000 jobs and stop exporting steel.

The Australian Steel Institute, which has called for government to take action to halt the decline of steelmaking in Australia, said yesterday it could not comment on Ansteel's plan.

A spokesman for the WA Department of State Development confirmed it had approached Ansteel to offer its help with the feasibility study.

But he said Ansteel was yet to indicate how it wished to proceed.

It was possible that Ansteel was waiting on further development of the Oakajee port project, the spokesman said.

http://www.theaustralian.com.au/business/economics/chinas-ansteel-abandons-plan-for-wa-mill-because-of-high-manufacturing-costs/story-e6frg926-1226130918388