No incentive to expand

Press, Volume CXV, Issue 33815, 11 April 1975, Page 12

No incentive to expand

<Neu> Zealand Press Association —Copyright) MELBOURNE. Present prices for Australian iron ore were too low to justify the development of major new capacity, the chairman of Hamersley Holdings, Ltd (Mr R. T. Hadigan) said at the annua] meeting.

However, recent rises, and more frequent price reviews could soon give Hamersley adequate real return on assets employed, he said. The price rises negotiated with the Japanese steel mills from September 1 last year, and the September devaluation of the Australian dollar offset seme of the effects of cost rises since the last contract was negotiated in 1969. “But it has to be remembered that earnings calculated on today’s generally accepted accounting principles do not recognise the incidence of inflation,” Mr Madigan said. The problem of properly accounting for the effects of inflation on a continuing business enterprise was the subject of a great deal of study in the world today. . An early solution was that acceptable to Government, particularly as it related to tax. and to business was of major importance to the health, and continued progress of Australia's private sector, Mr Madigan said. The recession in the world economy adversely affected the immediate prospects for increased iron ore shipments. Crude steel production in Japan started to decline last

September, and it had not yet shown an upturn" Western European production was also lower. It is hoped that measures being taken by the United States and other major industrialised countries would bring a recovery in world steel demand in the second half of this year. If there is no worsening of the recession, Hamersley should ship marginally more tonnage in the current year than the 32.750,000 tonnes shipped in 1974. Mr Madigan said that although immediate prospects were clouded, the longer term outlook for existing iron ore producers was more favourable. When steel-industry growth resumed, the in- , creased iron ore capacity i created in a number of I countries in the late 1960 s i should soon be fully ; extended to- meet world deI mand. Existing mines with facilities not fully used had the lability to create further caipacity at lower capital costs Than new mines. ■ Hamersley is in a sound position to take advantage ■of these opportunities when i they arise, said Mr Madigan.