Pilbara pop

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As usual, we must go offshore to find any decent Australian media and it’s at the FT today that a great story is playing about the raging bust gripping Pilbara towns:

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, suggestsAustralia 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.

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

That’s an understatement. Check out the video:

68 Responses to “ “Pilbara pop”

  1. Andy! says:

    Well done specufestors – you’ve priced yourselves into massive loss and caused economic devastation on the town.

    This story represents a shortened duration of what is going on in the rest of Australia, especially Sydney/Melbourne.

    • reusachtige says:

      Nahhh, it’s not true. Only foreigners say this stuff about our great nation. Property investment is the best wealth strategy in this country because we are very different due to the government backing housing by parliamentarians investing heavily themselves. They will never let anything other than profit growth come from their housing. Stop whining, it’s old!

  2. StatSailor says:

    Staggeringly Quixotic but still sad to see it fail.

  3. migtronix says:

    It’ll turn around any.minute.now.

    China’s housing market is plunging—and dragging Macau’s casino revenue with it

    Or not…

    http://qz.com/252689/chinas-housing-market-is-plunging-and-dragging-macaus-casino-revenue-with-it/

    • Ortega says:

      Good find. Cheers. Australians have their head in the sand.

      And that video above nicely showcases the ‘fruits’ of what has been the greatest economic boom in ‘Strayan history.

    • The Lorax says:

      The smart money is selling Chinese real estate and buying Aussie real estate … but the Chinese aren’t buying in the Pilbara, they’re buying in Sydney or Melbourne, or anywhere with a casino.

      Chosen people.

      • StatSailor says:

        That was what the smart money was doing a year ago. Anyone selling Chinese property right now missed the top and isn’t all that smart.

  4. 3d1k says:

    I’ve always argued money needs be spent in the NorthWest – a region of national economic importance but as the woman says, little political importance – particularly ignored by East Coast focused politicians and media.

    • migtronix says:

      Why bother? What national economic importance????

      Robots will populate the NW…

      • 3d1k says:

        Exports.

      • StatSailor says:

        I think mig is suggesting that those exports will proceed from their current subterranean location to the holds of various capesized bulkers untouched by human hands – just a series of robots controlled by code most likely written in the cheapest possible offshore location.

      • migtronix says:

        Robots.

      • StatSailor says:

        And robot maintenance personnel? Or robot maintenance robots?

      • migtronix says:

        FIFO

      • StatSailor says:

        Ah… robot transportation drones.

      • Jason says:

        Do you want to know how many people it takes to run a port exporting 50 million tonnes of bulk material per annum these days? About 20-30. A handful of operators, handful of tugs, and a bunch of all-round caretaker types to hose off the sensors and driveshafts when they get covered in shit. Sometimes an upgrade or maintenance period might require an additional 20-30 contractors, unless it’s a major expansion, which then balloons out massively as the EPCM comes in and latches onto the host like a parasite. Automation of an open cut mine, as being undertaken by Rio, will slash personnel (currently around 200-300 odd) at least 50%.

      • Mining Bogan says:

        Yes Jason, but the dinner table conversation becomes much more animated.

      • bendy wire says:

        and some other robots for the robot maintenance robots….

      • migtronix says:

        @jason precisely my point, why bother investing in an place that will require fewer and fewer people not more?

        HMV probably has land there he wants to rentseek

    • The Patrician says:

      The local councils/WA Govt could help themselves by releasing more land for residential use.
      In the hundreds of thousands of empty hectares of the Pilbara, the average price of a vacant 20mx40m house block is still over $300k.

      It is insane.

    • Acme says:

      “I’ve always argued money needs be spent in the NorthWest”

      Then speak to the Western Australian government. They get the royalties from the iron ore. It’s their job to make sure the economic and social infrastructure in the Pilbara is in place.

    • The Lorax says:

      I’ve always argued money needs be spent in the NorthWest

      No-one lives there 3d, which means no votes.

      As Mig says the entire operation will be automated soon, and the profits siphoned off overseas.

      Is this what you fought so hard for?

      • reusachtige says:

        People are unpredictable and reduce profits. Robots will help maximise profits which will, in turn, help those great corporations who are brave enough to mine stuff. I just hope they are getting all their robots and development code done in a country that appreciates cheap labour.

      • China-Bob says:

        just hope they are getting all their robots and development code done in a country that appreciates cheap labour.

        Yea it’ll be interesting. Its one thing to code a TV remote controller and entirely a different thing to automate a whole port where miss communicated code/instructions can destroy multi $M machines in seconds.

        From my own experience most Asian coders aren’t good at writing real time code which often requires an understanding of what will happen if everything does not work perfectly for what ever reason. I’ve been real impressed with some of the highly structured real time coding we had done in St Petersburg just beautiful work skilfully coded with very clear safety fallback.

        This is part of the reason that I often bang on about application level robotics being such a perfect business for Australians. Today’s crane operators understands the consequences of banging the boom into the side of the coal loader, so hopefully that;ll never happen in their code. Unfortunately its very difficult to get remote developers (esp Asian coders) to properly understand system failure mechanisms and code around them.

      • StatSailor says:

        Interest to read about the quality of code from Petersburg.

        I have been told that irrespective of the quality of the code in and of itself, poor or non-existent commenting in code from Russia makes it very difficult to maintain or integrate into any larger system (perspective is from games development)

        Comments about Asian coders are broadly in line with experience of working with offshore Asian design engineers. Work is correct in a black letter sense, but hopelessly impractical, especially when intended for conditions found, to pick a completely random example, in the Browse Basin, although often still impractical for the conditions found at the front door of the Asian engineering company.

      • migtronix says:

        @cb really? Jexux I’ve got up times of over 9 9s on some of my stuff.

      • China-Bob says:

        @Stat
        Personally I’m not a fan of overly commented code so that wouldn’t worry me, I’m much more interested in seeing code that shows a clear understanding of whats critical for the project. I also like to be able to see the structuring of the Real time (must do) tasks split out from the general programming task. This is all to avoid nasty surprises when bursts of asynchronous “interrupt” like sources occur together (often a burst of interrupt errors is the first sign that something major has gone wrong so the last thing you need is for the code to crash at this point). Over the years I’ve seen way to many complex systems fail not because they didn’t work most of the time but rather because they didnt properly handle unlikely events like mechanical failure.

        I have no idea how you get your average IT code monkey to think about these issues and code accordingly.

      • StatSailor says:

        @CB,

        Fair enough.

        wrt code monkeys: from bitter personal experience I would say that if your project depends on at least part of the team having a visceral understanding of a real world situation, it is easier to teach someone who already has that understanding how to code than it is to teach an existing code monkey how to understand the real world system.

      • migtronix says:

        F#ck me who are you people hanging out with?!?!

        I’ve coded in the fin space, in the cloud space, in the med space, in the auto space, in the libraries space, in the frameworks/API space and in the OS space — who are you hiring????

      • China-Bob says:

        @Mig seriously 9-9s ???

        I’ve worked on 5 9′s systems which is not easy, we looked at some 7-9′s stuff but the business/financial risks for failing to achieve the 7-9′s performance were just absurd (its 3 seconds downtime/year)

        As for nine-nines really!

      • Jason says:

        The code is still being done here, mostly. There are pretty robust processes in place for functional machine design – it’s similar to O&G. It begins with SIL selection and analysis and a lot of HAZOPs with operators before you even get anywhere close to building a specification and then cutting code. It’s definitely not the same as IT app programming – I’ve done both.

        It’s still not that big of an industry sector though, I work in it. Most of the money in mining is around civil and structural, instrumentation and control is a tiny portion in comparison.

      • migtronix says:

        Absolutely really, its exceptionally contained in term of scope but yes. A lot of the cloud stuff out there easily does 7 9s…

      • migtronix says:

        Oh BTW that measured across several processor cores, you got that right?

        EDIT: 5-9s 6-9s was over a decade ago in the first dotbubble…

    • The Lorax says:

      Maybe when the construction boom is over and the robots take over, the local aboriginals can move into all the empty houses?

      • The Claw says:

        No need to build more housing then. There is no shortage remember. You’ve just proved it.

      • StatSailor says:

        Port Hedland residential tenancy vacancy rate has oscillated just under 6% since at least the beginning of the year. Karratha is at about 5% in a larger town.

        More job losses are distinctly possible – do they really need more houses?

      • The Patrician says:

        If supply is adequate why is vacant land still over $300k a block and houses averaging over $700k?

      • StatSailor says:

        If there was a shortage, prices wouldn’t have dropped at all, yet they have fallen >10% in nominal terms since the 2012 peak.

        People bought those $700k houses for $950 only two years ago.

        They aren’t going flog them off for $500k until someone holds a gun to their head. In the mean time they’re listening to the RE agents telling them they’re in the box seat for the next boom. Send mig up there with a laptop for two weeks, and from an employment perspective that boom will never ever come, even if iron ore goes to $500/tonne.

      • joeflood says:

        Take a look at Meekatharra – that’s exactly what happened when the mine closed. Well – no point in wasting all that infrastructure.

    • 3d1k says:

      The major area for spending is roads. And harbours.

    • Explorer says:

      Politicians only focus on easily accessible marginal seats.

      If they are not marginal they are not in play/at risk/wninnable.

      If they are not accessible it costs (time/money/opportunity) too much to deploy resources to them.

  5. AlbyMangles says:

    wasn’t china building another Europe some time soon

  6. enviro_drew says:

    Hot tip for accessing FT articles. If you click the link it’ll firewall you out and want you to sign up.

    google “ft + pilbara” and click the link to the article. It allows you to read the full thing.

  7. Wiley Wolf says:

    Well guys. if it wasnt for Twiggy, there would be many more more blackfellahs living like that. Go to any mining town in Australia, from Walgett to Wave hill, Pine Creek To Parkes and you will find the native Australians living like that.
    Pick out Tennant Creek in particular.
    Despite millions being spent the efforts to adjust the blackfellahs into the whitemans life style have failed, and will continue to fail until they all go the way of Trugganini. WW

    • 3d1k says:

      Yes, a deeper problem than the presenter understood.

    • reusachtige says:

      Yes, true. Development aid for the blackfellahs should be limited to providing better hunting and construction tools (so they can make a half decent humpy). Some good quality paints wouldn’t go ashtray either.

      • migtronix says:

        Ashtray? Interesting

      • StatSailor says:

        Smoking rates among indigenous people are higher than in the rest of the population, so ashtrays are needed in far greater numbers.

      • migtronix says:

        Find me one ashtray out there stat, one!

      • The Claw says:

        providing better hunting and construction tools (so they can make a half decent humpy).

        You’re slipping. Why not choke the supply of humpies so that decent hardworking investors can instead invest in them with borrowed funds. This method keeps bankers, realtors and accountants in work in addition to supplying valuable shelter for the inferior class (renters that is – not blacks!)

    • Ortega says:

      DISGUSTING comment WW.

      Endorsing genocide?

      You must be a proud Australian.

      Just astonishing.

    • migtronix says:

      Funny how it works when you throw money at whiteman.

      The word I’m looking for is devolution and you’re leading the pack, with Brush and HMV close behind.

      Well done champ WW

  8. Wing Nut says:

    Wonder what Darwin will look like when the Inpex construction phase ends in 18 months?

  9. The Claw says:

    Quote from the video property owners gained as prices and rents skyrocketed due to a shortage of housing due to poor planning by local government
    This is what I have been trying to explain to the shortage-deniers. It is simple. If you have a bunch of extra people come in, you need a bunch of extra houses. If not then shortage results and prices and rents are much higher than would otherwise be the case.
    The least these government idiots could have done would have been to allow a few extra caravan parks to be setup to handle the sudden and temporary need for extra shelter. I bet the owner of the existing caravan park was a mate/crony.