FOR MEDIA 23 APRIL 1984
AUSTRALIA-CHINA IRON AND STEEL
I have been surprised by the negative speculation over the
holiday period about the prospects for co-operation between
the iron and steel industries of Australia and China.
The reality is that there has been rapid progress on the
China iron and steel initiative, with commitment and
enthusiasm in China matching that in Australia.
The negative speculation has arisen from the interaction of
widespread misunderstanding of the initiative, with
interpretations of statements last Thursday by Mr Brian Loton
of BHP.
I do not propose to address the weekend. speculation or
Mr Loton' s remarks. I understand that Mr Loton has put
out his own statement.
Given the grotesque distortions that have entered public
discussion of these matters, there is clearly a need to
restate the objectives of the initiative and the steps that
are being taken to implement it.
On 9 February I put to Premier Zhao in Beijing that Australia
wished to become a significant supplier of raw materials to
China's developing iron and steel industry. I also suggested
that, in addition to being such a supplier of raw materials,
we ought to examine the possibility of Australia supplying
raw materials at a more developed stage, to be finally
processed into the required final product in China. I suggested
some apparent mutual economic advantages in looking at
processed iron as well as raw materials.
As I told the press travelling with me, I was very pleased
that Premier Zhao responded positively to the proposal. we
agreed to explore the prospects for multi-faceted co-operation
in iron and steel within a Joint Study Group.
In my public comments, I emphasised that the proposal should
be seen not merely in terms of adding to trade between our
two countries, but also very importantly as adding to the
complementarity of our economic development programs.
I made it clear to the travelling press that Premier Zhao
and I had in mind cooperation in a wide range of activities
in the iron and steel industries: trade in steel-making
raw materials; trade in processed iron; mutual technical.
assistance; and investment in each other' s industries.
In briefing the press, in relation to processed iron, I
referred both to short-term prospects from existing capacity
in Australia, and to very long-term prospects.
On the former, I mentioned the possibility of the proposals
having implications for the moth-balled iron making facilities
at Kwinana. I had had this possibility canvassed explicitl
with BHP's Chief Executive, Mr Brian Loton, prior to my.
discussions with Premier Zhao. On the latter, it is obvious
that long lead times would be involved, requiring new patterns
of investment for Australia and China. My tentative comments
on these matters indicated the long time scales involved. In
my only quantitative reference to long term prospects for
processed iron sales, I said: " I do not want to put figures
on it at this stage except to say that if we only got a
relatively small proportion of the growth in the Chinese
industry, towards the end of this century it could represent
something like a doubling of our capacity of industry in
Australia." I have gone over this old ground at-some length to correct
the grotesque view that seems to have developed in public
discussion, and which reached it~ s most exaggerated heights
in the last few days, that the Flawke-Zhao iron and steel
initiative was all about immediately investing to produce
six million tonnes of processed iron and steel for China.
Progress on the initiative so far lines up well against
what was promised at the time. The mutual efforts of China
and Australia can only be judged an outstanding success.
Soon after my return to Canberra, I met: senior union,
business and State Government representatives to brief
them on the initiative and to discuss coordination of our
efforts in Australia. A parallel meeting at the working
level agreed on administrative arrangements..
At all points the Government made it clear that while the
Joint Study Group had to be Government-to--Government, any
commercial decisions on trade and investment would be left
entirely to the judgment of the private parties. Australian
officials were back in Beijing within a few weeks of my
visit to discuss progress in establishing the Joint Study
Group.
The Joint Study Group met formally in B~ eijing a couple of
weeks ago. The officials involved in t: hat meeting reported
strong Chinese commitment to all aspects of the matters
discussed by Premier Zhao and myself. Some concrete
possibilities were identified and discussed in each of five
areas covered by the Zhao-Hawke understanding: Australian
exports of iron and other steel-making raw materials; Chinese
investment in Australian iron ore mining; mutual technical
assistance; Australian investmetnt in Chinese steel-making;
and Australian provision of iron and crude steel for furthe:--
processing in China.
As I indicated in Beijing, the work of the Joint Study Groupj
is complex, and will take a considerable while to complete.
But simultaneously with the Joint Study Group, Australia's
private corporations are engaged in detailed discussions of
immediate commercial opportunities.
Australia and China have both made it clear that co-operation
will proceed on the basis of equality and mutual benefit.
Under the umbrella of my agreement with Premier Zhao, the CPAI
group under Sir Roderick Carnegie has already discussed
a range of concrete proposals for co-operation in iron and
steel.
More recently, one delegation from BHP's Minerals Division
and one from the Steel Division visited. China, and were
invited to discuss a number of substantial proposals.
The Chinese Minister for Metallurgy will visit Australia
for two weeks from 10 May, to familiarise himself with the
Australian iron and steel industry, to advance discussions
with Australian companies, and to hold further discussions
with the Australian Government.
I am completely satisfied with the progress that is being
made. Nothing that we have learned in discussions over the past
couple of months diminishes our view that there are immense
potential advantages to both countries from co-operation in
the iron and steel industries.
China has successfully embarked on a process of rapid
modernisation. Already this is being reflected in
substantial increases in China's demand for iron and steel,
including imports, after a temporary reduction following
economic policy adjustments a few years ago.
China is not well endowed with high quality iron ore, and
perceives potential economic advantages in supplying this
and other steel-making materials to some locations in
China. Australia's exceptional endowments of steel-making raw
materials are well known. We have some technical capacities
which appear to be useful to China's iron and steel industry.
It has long been understood in Australia that, as part of
a move to a more internationally-oriented manufacturing
sector and economy, Australia has special advantages in the,
export of processed minerals.
Australia and its trading partners in the past have sometimes
missed opportunities for expanded co-operation in minerals
and metals on the basis of mutual benefit.
The Governments of Australia and China are making the most
of opportunities for co-operation in iron and steel.