A Night In The Pilbara, And Other Chinese Tales: Frugality Is The New Watchword For Fortescue As The Australian Boom Rolls On

By Our Man in Oz

If you’re sitting in London still somewhat bemused by the revival of the resources boom and the strength of the Australia economy, then an overnight stay in Western Australia’s Pilbara iron ore region might provide all the answers you’re looking for. In fact, it was at around 10pm on Sunday night, in preparation for a full day tour of the operations of Fortescue Metals Group (FMG), that the penny dropped for Minesite’s Man in Oz. There he was sleeping in Chinese-made “donga” - a fully-equipped flat, complete with washing machine and satellite television - in an Australian port city, getting ready to look at a Chinese ship being loaded with Australian iron ore. But wait, there’s more. The ore from FMG’s Cloudbreak mine had been delivered to Port Hedland in a Chinese-made railway wagon, riding on Chinese steel rails, and loaded via a Chinese-built shiploader, driven by an Australian crew.

The integration of the economies of these two radically different countries does not come more complete than that. A close parallel to the relationship between Australia (the quarry) and China (the factory) might be found in nature where remora (sucker fish) attach themselves to sharks to feed off the leftovers. In the case of Australia and China, it is China playing the role of shark, as it carves off a large helping of global economic growth, at the expense of the US and Europe, while Australia cruises along selling it the raw materials to do its job.

Minesite’s visit to Pilbara, which included a half-hour private chat with FMG’s founder and chief executive, Andrew Forrest, in the back-end of an ancient Fokker 100 commuter jet, confirmed what has been coming through in the numbers. Rather than decline, like other western economies, Australia has continued to grow throughout the global downturn, not by much, but grow nevertheless. Unemployment, tipped to soar by the boffins working in the cloistered silence of Canberra’s economic ministries, has not moved to within a bull’s roar of the forecast 8.5 per cent. It is holding at 5.7 per cent, and while job creation is always last in a rebound, that official number now looks silly, with accelerating growth triggering an uptick in interest rates, and with more rises expected before Christmas.

Forrest, effervescent as ever, and looking forward to a quiet night with his wife on their 18th wedding anniversary on Monday evening, is in no doubt that demand for resources from China will not slow for decades to come. Always a man with a tendency for hyperbole, he is now glowing in the spotlight of success. A 30-man (and woman) media pack hang off every word when he holds an impromptu press briefing on the edge of one of seven pits being worked at Cloudbreak, as his “surface miners” scrape away in the background as they hasten to meet his forecast of 40 million tonnes of ore shipped this financial year.

Rivals and critics, of which there remain many in Australia and overseas, are simply being overpowered by the force of Forrest’s personality. His absolute confidence in his own decisions is the stuff normally seen in rhino-hided politicians justifying outrageous expenses, or indeed, outrageous policies. But Forrest has put his own money into FMG (and been well rewarded with the title of Australia’s richest man and a fortune of some A$4 billion), and he has used the funds of willing shareholders and New York dentists via bonds issued in the US.

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