Breakfast - Brisbane Report Launch
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 – 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 wasn't
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 I'll 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 I'll 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 hasn't been easy because
at one time, we weren't 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 it's 830 kg per person per year. In China it's 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 you'll 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 years' time. If coal is
used for all of this, that's 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 – mostly for power generation. But India is the 3rd largest producer of coal in the world, I hear you say. That's 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 isn't wasting resources
carting more waste material all over the country.
Here's 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.
We're 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 couldn't 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 MIM's
marketing manager, I agreed with him.
As I mentioned before, India is the 3rd largest coal producer
in the world. In the early 1990's 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 – 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 world's 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 wasn't 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 wouldn't 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 wasn't 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 – an honourable
man who knows how the system works and knows how to work within the system
– a perfect combination. In the report you will see reference to employing
a reliable agent, not just from MIM's 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 MIM's interests even within his own company.
Finally, I congratulate the producers of this report. I particularly like
the style – lots of case studies and key bullet points. Thank you for the
opportunity to share a few experiences with you.