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Australian Government - Department of Foreign Affairs and Trade

Advancing the interests of Australia and Australians internationally

Australian Government - Department of Foreign Affairs and Trade

Advancing the interests of Australia and Australians internationally

India New Economy Old Economy

India New Economy Old Economy

Breakfast - Brisbane Report Launch, 11 December 2001

Presentation by Chris Hartley, General Manager Metals Marketing, MIM Holdings

Ladies and Gentlemen:

I first went to India in 1986 and have since been 78 times for varying lengths of time on business and 79 if you count the holiday my family and I had there in 1996. This plus my involvement in the Australia Ė India Business Council since 1993 has resulted in my attendance at many functions such as this, many conferences, presentations and discussions. One thing links all of these. One thing is mentioned without fail on every occasion. I was therefore pleased to find when I read the Executive Summary of the report that cricket wasnít mentioned thus proving conclusively that the relationship between India and Australia has broadened.

The Australia-India relationship is more than adequately covered in the report so Iíll tell you why MIM is committed to the Indian market.

Business between India and Australia is facilitated by India having English as the business language, by its the legal system, by its liberalising economy, and by its huge and growing middle class. It is good to be operating against this background but the bottom line is that India demands what we supply and India has supplied what we demand; in the second instance, up to a point, as Iíll explain later.

India wants what MIM produces and we are more than happy to sell it to them at the right price. But getting to this situation hasnít been easy because at one time, we werenít more than happy, we were just more willing than other potential suppliers and even now there are people in our industry who still have India in the too hard basket. For us, however, the numbers are compelling.

Coal, especially coking coal, is our big dollar item in India and will continue to be. Why? Australia has a geographical advantage over our competitors for the supply of coking coal which is used in the steel industry. And we have the best quality. Per capita consumption of steel in India is around 30kg per year. In Korea itís 830 kg per person per year. In China itís 80. India produced 27 million tonnes of steel last year. China produced 127 million tonnes. The latent demand in India for steel and by extension, coking coal is huge. So, some years back we decided to get in on the ground floor and ride the wave, if youíll excuse the mixed metaphor.

MIM produces steaming coal also. The Central Electricity Authority recently projected a short fall in power of 150 000 MW in 15 yearsí time. If coal is used for all of this, thatís 375 million tonnes of coal just to make up the shortfall. To put that in perspective, Australia is the biggest coal exporter in the world. We produced 307 million tonnes last year and exported 86 million tonnes of steaming coal Ė mostly for power generation. But India is the 3rd largest producer of coal in the world, I hear you say. Thatís true but the quality is inherently poor and by blending better quality Australian coal, burning efficiency improves, emissions decrease and waste disposal requirements diminish and the very admirable Indian rail system isnít wasting resources carting more waste material all over the country.

Hereís just one more statistic. If my ability to utilise logarithms is in-tact, I calculate a growth in refined copper consumption in India of 6% per year for the next 10 years using statistics from various sources. We produce copper. Weíre happy about this.

As I said earlier the numbers are compelling and as a consequence biting your tongue and cooling your heels when dealing with an agency or an authority which seems to only ever circulate files, pays off. Patience and perseverance. These are rewarded. We know because we have been and still are.

I mentioned India being in the too hard basket for some, earlier. This was actually said to me once by another coal supplier. He said they couldnít be bothered because it was easier elsewhere. In my capacity as Vice Chairman of the Australia-India Business Council I felt obligated to utilise my years of Indian experience for the common good and explain to him how best to go about taking away some of my hard won market share. In my capacity as MIMís marketing manager, I agreed with him.

As I mentioned before, India is the 3rd largest coal producer in the world. In the early 1990ís we decided that because of this, India must produce a lot of the mining consumables which we use in our various businesses. We identified a number of products which were selected for trialing Ė blast hole drill bits, grinding balls, chemicals and stainless steel to name a few. The stainless steel exercise was particularly interesting. MIM has patented a copper refining process called IsaProcess, now licensed to refine 35% of the worldís copper. As you will read on page 80, two Indian companies use this process. It involves putting stainless steel sheets and unrefined copper into an acidic solution and running an electric current through the solution. The stainless steel sheet becomes coated with refined copper and the waste material falls to the bottom of the tank. So we purchased stainless steel from India, manufactured it into what are called mother plates and sent them back to India to be used in the copper refineries. Initially the stainless steel we purchased wasnít flat enough and then the edges were too rough. We sent our technical people over there to supervise the manufacturing and they got it right. Then they got too enthusiastic and polished the steel too much so the copper wouldnít stick to it. Eventually they got it right again. Then the previous monopoly supplier of stainless steel slashed his price and MIM decided to close the in-house trading company which was managing the Indian businesses because it wasnít a core business for MIM. There was no one to champion the stainless steel and consumable supply businesses in the face of the increased competitive pressures and removal of the trading arrangements, and no short term incentive, and so, you guessed it, it went into the too hard basket.

But the experience was good. We had the enthusiastic support of Austrade at the time. Also we had the vital support of our local agent Ė an honourable man who knows how the system works and knows how to work within the system Ė a perfect combination. In the report you will see reference to employing a reliable agent, not just from MIMís perspective. We would not be in the position we are in now with approximately A$260 million worth of coking coal business this year, without the astute guidance of a local agent working for us. He is employed by a large company but, for all intents and purposes, he works for us. We insist on this, to the extent that he is often required to promote MIMís interests even within his own company.

Finally, I congratulate the producers of this report. I particularly like the style Ė lots of case studies and key bullet points. Thank you for the opportunity to share a few experiences with you.

Department of Foreign Affairs and Trade