Closing Down Steel Works

Article excerpt

On 29 April 1997 the executive general manager and chief executive officer of BHP Steel, R J (Ron) McNeilly, announced that the production of steel at the Newcastle works would end in 1999. (1) This decision brought to an end an association between Newcastle and steel manufacture that dates back over eighty years. Newcastle is not the first centre in Australia to be dominated by steel manufacture and then see the closure of the main works. In 1931 the Lithgow iron and steel works in New South Wales was closed, the company that owned it moving its operations to a new works constructed at Port Kembla, ending the town's fifty year association with iron smelting.

The two main works examining the industry are by Neville Wills and Helen Hughes and were published respectively forty-five and thirty-one years ago. (2) Because of the scarcity of company records, Wills, Hughes and Forster concentrate their studies on the operations of the BHP steel works rather than the Lithgow works. Nonetheless the Lithgow steel works was a sizeable enterprise and employed between 2,500 and 3,000 men and producing on average 92,000 tons of pig iron per annum during the 1920s (of an annual Australian average of 370,000 tons). (3) Additional archival material concerning the Hoskins company has now been released by the BHP archives and the Australian government and National Australia Bank archives. Making use of these resources the main purpose of this paper is to investigate the decision to close the Lithgow steel works. In particular the effect of government support is quantified by calculating an estimate of the hypothetical subsidy equivalent of all types of government assistance to the Lithgow works, and then comparing it to the work's profitability, or lack of it. In the first section a general background account of the Lithgow steel works is given. In the following section the types of assistance are examined. The next section comments on the effects of the combined effective subsidy on the long-term survival of the works and the final section looks at the decision to shift to Port Kembla. The evidence presented in this paper of the profitability of the works and government assistance shows that the Lithgow industry was unprofitable without government assistance and the move to Port Kembla was sensible but ill-timed.

The Lithgow industry traces its origins to the founding in 1874 of the Eskbank Iron Works Company. Two years later the company opened a blast furnace at Lithgow, which between 1876 and 1882, produced 8,844 tons of pig iron. (4) The NSW government rejected the company's request for tariff protection and the company found it difficult to compete with imported iron. (5) The Lithgow furnace was primitive and small by British standards, producing 90 tons per week in 1883, its peak year of production. This was far less than the British average of the 1880s which was 200 tons of pig iron per week. (6) The difficulties competing with imported iron forced the blast furnace to close in 1882, the remaining plant only being used to roll scrap iron and later imported steel blooms. (7)

In the early years of the twentieth century the Australian market for steel expanded, raising again the possibility of establishing an iron and steel works in Australia. The federation of the six Australian colonies into a single nation in 1901 promoted industrial expansion by eliminating the tariff barriers between the states, therefore helping to eliminate the fragmented nature of the Australian market, and promoting the specialisation and the concentration of industry. Steel was used at this time primarily to manufacture steel rails, galvanised sheet and wire fencing for rural industries. At this time the basic infrastructure, social overhead capital and agricultural industries were still being established. This meant that there was strong demand for steel products. Iron and steel consumption per capita in Australia--although not as large as in the United Kingdom and the United States--was considerable. …