Wagerup wake-up call looming
Opposition to the planned $2.2 billion expansion of three bauxite mines and alumina refineries in Western Australia has, until now, seemed to be a local affair involving the usual not-in-my-backyard suspects. A closer look shows market forces and a dash of mismanagement may also be starting to hurt the biggest of the projects.
Alcoa’s $1.5 billion proposal to effectively double the size of its Wagerup refinery has been so long in the planning and government approvals stage that it is in danger of being swamped by alternative overseas opportunities, some of them involving Alcoa itself.
In other words, if Wagerup remains frozen in a perpetual round of environmental and health inquiries, Alcoa will simply allocate the capital to a fall-back proposal and get the alumina it requires to make aluminium elsewhere.
The company has briefly flashed this trump card in the Wagerup debate with senior executives saying Alcoa cannot wait forever to win government approval. Until now, that threat has been interpreted by the government as a variation on the theme of ‘give me what I want or I’ll take my ball and go home’.
A closer look at the gathering crowd of alumina expansion proposals around the world shows that Alcoa is not fooling about and if WA wants the 1,000 construction jobs and 3,000 permanent direct and indirect jobs which go with the Wagerup expansion from 2.3 million tonnes of alumina a year to around 4.5 million tonnes then it better get its skates on because other parts of the world are lining up for Alcoa’s cash.
A recent survey of the world aluminium and alumina industry revealed that there were more than 20 alumina projects wanting to catch the wave of demand for aluminium created by the boom in China. The collective capacity of those proposals is around 30 million tonnes, more than enough to satisfy the market and drive down the current sky-high alumina price of around $US450 a tonne.
In Australia, there are already expansion projects under way at BHP Billiton’s Worsley refinery ($250 million for an extra 250,000 tonnes of alumina), and Alcoa’s Pinjarra refinery ($440 million for an extra 600,000 tonnes). There are also a number of projects on the east coast. Overseas there is a list that features alumina proposals in Russia, India, Brazil, China, Jamaica, and Vietnam.
It is Brazil that is the most interesting from a Western Australian perspective because it is there that Alcoa has a number of irons in the fire. It is already participating in the $US700 million expansion of its 54 per cent-owned Alumar refinery at Sao Luis and is planning to develop a new bauxite mine in the State of Para, and possibly a new alumina refinery nearby.
For the WA Government pressure is mounting to give Alcoa the approvals needed for Wagerup. It has been listening to claims of health and pollution problems at Wagerup for at least the past three years with very little substantive evidence to back up the claims, just assertions of bad smells and allegations of higher than normal cancer rates.
Alcoa has not helped its case by flying in outside medical experts to placate the natives, a move which simply served to insult everyone because it came over as the wise men from America telling Australians how to live – dumb in the extreme.
The WA Government is also guilty of dithering at a time when it should be telling Alcoa to get its act together, understand local sensitivities, stop behaving like a 400 kilogram gorilla and get on with its expansion because bauxite mining and alumina refining has been a perfectly acceptable industry in WA for 40 years and Alcoa has (until it jetted in the medical experts) been a sensible corporate citizen.
As a final word on Wagerup, there are few old-timers nodding wisely as that name looms as an issue in the next State election – because it’s not a new phenomena.
Way back in 1977 then Premier, Sir Charles Court, faced an almost identical dilemma over Wagerup. Should he, or shouldn’t he grant approval for the original development. He faced a similar bunch of Nimbys (the not-in-my-backyard-rent-a-crowd) and Alcoa was uncertain about the strength of opposition.
Charlie got fed up with the procrastination and late one night told his Minister for Resources, the late Andrew Mensaros, to simply announce the go ahead of Wagerup, even if Alcoa was uncertain. A press release was duly drafted, approved by Charlie who was visiting Halls Creek at the time and Andrew in Perth and, hey presto, Wagerup was given a government (if not Alcoa) green light.
Oddly enough, this was also in the middle of a state election with a juicy, new, resource project just what doctor ordered – the election was won though it did take another few years after Charlie’s go-ahead that Wagerup was actually built, something to do with supply and demand in the market – just like now.
THIRD place against tough competition in an Olympic year is enough to claim a bronze medal for Australia – which is precisely what we appear to have done in a world house price contest.
Our score of an average 110 per cent increase in house prices since 1997 is pipped only by Spain, which takes gold at 123 per cent, and Britain at 116 per cent. Well done us – or is it?
Briefcase, forever the pessimist, has this premonition that what goes up fastest nearly always comes down fastest, a variation on the bigger-they-are theory of life.
In keeping with last week’s gloomy assessment of which direction for house prices, much to the consternation of real estate agents who keep blowing hot air into the bubble, the world survey just confirms the argument that Australian house prices have been grossly inflated by a cocktail of low interest rates and pure speculation on the part of amateur investors who think it is grand to brag about the number of properties they own.
Rising interest rates and a shortage of quality tenants were the first warning bells that the decline (we can’t yet call it a collapse) has started, and last week’s residential ‘for sale’ columns just added to the evidence. In Cottesloe alone, a market which the local agents say is still rising (pull the other one, chaps) there were no less than five properties carrying a "reduced price" sticker, one by a cool $100,000.
You didn’t read about that in media that relies on property advertisements to pay the rent!
"Few rich men own their property: their property owns them." Robert Ingersoll.
