Chapter 4Conclusions and recommendations
4.1This inquiry has reinforced the committee’s view regarding the importance of the resources and steel industries to Australia’s national economy and industrial capacity. The committee supports these industries’ roles in underpinning Australia’s exports, providing employment opportunities in regional and rural areas, contributing to the development of infrastructure and social life in underserved communities, and improving Australia’s supply chain resilience and strategic influence in our region and beyond.
4.2The committee also supports efforts to identify, large-scale infrastructure and industrial projects that have the potential to develop Australia’s interior areas and connect them with cities and ports on each coast. Such ‘nation-building’ projects, from the previous construction of transcontinental rail links to the Snowy Hydro Scheme, have been and will continue to be the backbone of a more dynamic and productive Australia.
4.3If implemented as proposed, Project Iron Boomerang would add value to Australia’s reserves of iron ore and metallurgical coal and boost Australia’s domestic steel production and export capacities. The committee endorses the principle of strengthening Australia’s domestic steel industry, and commends the project proponent for contributing to the national focus on this important issue.
4.4The Australian Parliament and the Australian Government play important roles in large-scale projects, ranging from feasibility assessments, regulatory approvals, legislative changes, funding agreements, parliamentary scrutiny and oversight, and, in some cases, partial or full ownership. Many of the support measures sought by the project proponent are within the power of the Australian Government or other governments to provide.
4.5It is unusual for this committee to conduct a project inquiry at such an early stage. Using the committee’s recent Inland Rail inquiry as a basis for comparison, by the time the inquiry commenced in September 2019, Inland Rail had already had a business case developed, an Infrastructure Australia (IA) evaluation, two signed bilateral funding agreements between the Australian Government and state governments, one section of the track approved and others in development, and billions in equity investment in the 2017–18 Budget. Similarly, the committee’s inquiry and report into the management of the Murray-Darling Basin, referred in October 2010 and tabled in March 2013, followed the introduction and coming into force of the Water Act 2007 and intergovernmental reform work dating from the 1990s.
4.6The committee considers there are significant implementation issues and risks to Project Iron Boomerang (PIB). The requested $370 million for a feasibility study far exceeds recent government support for other feasibility studies, including:
$1.3 million to study an expansion of the National Institute for Forest Products Innovation;
$2.4 million for a feasibility study of Whaleback Energy Park in Tasmania;
$2.1 million to support a feasibility study to replace the coal-fired boiler at the Norske Skog Boyer mill in Tasmania; and
$0.5 million for a water security feasibility study in the remote community of Scotdesco, South Australia.
4.7Private financing is a matter for the project proponent to secure. However, the committee has been unable to substantiate the claim that the project is fully privately financed. The committee notes the proponent’s statement that the project ‘would be fully privately financed’ subsequent to a publicly-funded feasibility study, but has not yet seen evidence that such financing has been secured or would be secured.
4.8Similarly, while the committee welcomes opportunities to boost employment in rail construction and operation, steelmaking and shipping, the committee considers there are substantial uncertainties with the proponent’s claim of creating up to half a million new jobs within a decade, and the number, longevity and security of these jobs would be subject to many domestic and international economic factors.
4.9While the Northern Australia Infrastructure Facility (NAIF) cannot fund feasibility studies, it can provide financing products for projects whose proponents can show a capacity for repayment or a return on equity. The NAIF’s guidelines, and evidence provided at the second hearing, make clear that the NAIF’s role is contingent on a feasibility study being funded by other parties, and the committee encourages East West Line Parks to meet the NAIF’s guidelines.
4.10Given the uncertainties identified, the committee does not consider that the project is sufficiently advanced at this stage, with mature costings and risk assessment, to recommend the Australian Government provides the support requested by the applicants. Further, as with other major projects, the Australian Government is best placed to consider requests for support, informed by assessments from Infrastructure Australia and the Department of Infrastructure, Transport, Regional Development, Communications and the Arts.
4.11Should the project proponent begin PIB, or a comparable project in the future, the committee has been well-informed from this inquiry to continue its oversight.
4.12Answers to questions on notice from the inquiry’s first hearing outline that PIB was submitted to Infrastructure Australia for the Infrastructure Priority List in December 2013 and January 2014, but the submission did not contain a cost benefit analysis. The committee recommends EWLP resume engagement with Infrastructure Australia to have the project assessed for inclusion on the Infrastructure Priority List.
4.13The committee recommends that East West Line Parks resumes engagement with Infrastructure Australia and provide it with the information that it requires to complete an assessment of Project Iron Boomerang.
4.14The committee recognises the importance of Australia’s iron ore exports to the national economy and the contribution of companies operating in the Pilbara region. Increasing domestic steelmaking capacity would add value to Australia’s iron ore reserves and further secure the supply of a key construction, manufacturing and defence industry material. A steel plant in the Pilbara would align with the priority funding areas of the Australian Government’s National Reconstruction Fund, a potential funding mechanism which is prioritising both value-add in resources and defence capability.
4.15The committee recommends the Australian Government commissions and publishes a scoping study on the establishment of a steel plant/s located in Northern Australia. The study should consider:
the most suitable location/s including economic viability and financing arrangements of such a plant/s, taking into account trends in and affecting the global iron ore and steel markets;
the use of metallurgical coal and/or hydrogen as potential reductants;
the capacity of the Australian Government to provide potential guarantees, loans, grants, and/or equity arrangements;
legislative or regulatory approvals;
exposure to risk;
employment, environmental and social impacts, and land acquisition;
engagement with Indigenous communities and local communities; and
the national security implications of increasing the domestic steel supply.
4.16The committee notes the importance of steel to Australia’s defence industry, including to the national shipbuilding program and, in the future, to support the decision to acquire and build nuclear-powered submarines under the AUKUS agreement. In recognition of this, the Department of Defence should assess and publish information about the importance of reliable steelmaking capacity and supply to Australia’s current and future defence industry and related manufacturing projects.
4.17The committee recommends the Department of Defence details the use of steel in, and the value of steel to, Australia’s defence industry in the Defence Industry Policy Strategy, covering:
steel use and demand in current defence projects;
projected future supply and demand requirements;
the strategic value of any excess capacity arising from a capacity increase, such as from a new steel plant; and
the risks to, and impact from, any disruption or shortfall in both the domestic and global steel markets.
Senator the Hon Matthew Canavan
Chair