End of Australia’s mining boom threatens Pilbara Cities plan – by Jamie Smyth (Financial Times – August 20, 2014)



Port Hedland, Australia – In a dusty industrial estate next to the world’s biggest iron ore port in Western Australia’s remote Pilbara region, business has never been so bad.

“The rents got so high in the town that when the boom ended, businesses began to die off everywhere,” says Jo Woodward, owner of Jems, a ramshackle building with an eviction notice stuck to its padlocked gate that was recently Port Hedland’s only legal brothel. “Nothing is selling here now.”

The demise of Jems, and of many other Pilbara businesses that have closed their doors following the end of the country’s mining investment boom, suggests Australia may struggle to realise one of its flagship projects.

Port Hedland and neighbouring Karratha grew rapidly during a decade-long boom as workers flooded into the Pilbara to construct the iron ore mines, railways and ports needed to feed Chinese demand for steel. The fast-growing towns were chosen as a testbed for a key state initiative: creating two sustainable cities of 50,000 people by 2035 in a remote region prone to resource booms and busts.

Western Australia’s “Pilbara Cities” plan was launched in 2010, at the height of a boom driven by iron ore and the discovery of natural gas off the coast. Several billion dollars have been spent on hospitals, roads and housing to transform the dusty mining towns of about 15,000 people each into living spaces that attract families.

But fears are growing that the drop in mining construction and a recent slide in iron ore prices threaten the future of the flagship project.

A lack of alternative sources of employment is likely to continue – businesses find it difficult to locate to the remote cities given the high cost of electricity, transport and water. And although such infrastructure exists, it has been built by the three major mining companies active in the region – BHP Billiton, Rio Tinto and Fortescue Metals – and they guard it jealously.

BHP and Rio own and control thousands of kilometres of railway track across the Pilbara and have successfully defeated legal attempts by other miners to open access to this infrastructure. All three miners have built their own generators to power their operations.

“History shows this classic mine and boom phase is either followed by an evolution into multiple but related industries, or a decline into ghost towns and tumbleweed,” says Jemma Green, a researcher at Australia’s Curtin University.

A report co-authored by Ms Green, Pilbara 2050, notes there are at least 87 ghost towns across Western Australia, most of them former mining districts. It warns that the region must diversify beyond iron ore and gas, and embrace sectors such as tourism and agriculture, to ensure Port Hedland and Karratha do not suffer a similar fate.

Attracting workers to put down roots in the Pilbara has never been easy. It is remote – a two-hour flight from Perth – and has a harsh climate, with summer temperatures topping 40C. Poor living conditions and the high cost of accommodation has created a fly-in, flyout culture, whereby workers live on temporary campsites and trailer parks on the edge of town.

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