Failure of William Sandford Limited In December 1907, there was a crisis when the
Commercial Banking Company of Sydney took over the assets of William Sandford Limited, owners of the Eskbank Ironworks at
Lithgow, including its nearly-new modern blast furnace. It was Charles Hoskins, one of
William Sandford's closest friends, one of his largest customers, one of the few outside shareholders of William Sandford Limited, and a fellow protectionist, who stepped in to acquire the assets and keep the works operating.
Taking over from William Sandford G & C Hoskins became the owners of the blast furnace, a colliery, coke ovens, steelmaking furnaces, rolling mills, an iron ore mine at
Coombing Park near
Carcoar, an iron ore lease near
Cadia, and 400 acres of freehold land at Lithgow, as well as Sandford's house on his 2000-acre estate, 'Eskroy Park', near
Bowenfels. By 1914, the combined output of the two pipe plants was over 50,000 tons of pipes and castings, per year, using pig iron from Lithgow as the raw material.
Industrial strife and personal disputes Charles Hoskins' views on industrial relations were very different to those of
William Sandford. Hoskins had a more belligerent personality, not given to compromise. He was also under pressure to turn around a failing enterprise. Any initial goodwill did not last, when Hoskins attempted to move from contract arrangements to day labour wages, in 1908, and to lower the overall wage paid to his workers. He closed the works for five weeks in July 1908, ostensibly to perform repairs, By then, both men felt that they had been deceived by the other; Sandford believed that Hoskins had connived in his downfall and besmirched his reputation and Hoskins believed that Sandford had not disclosed that the Lithgow works had been losing money.
Politics, royal commission and dispute with NSW Government The contract with the NSW Government that Hoskins had inherited from William Sandford provided the underlying economic basis of the Lithgow plant. Hoskins own pipe plants consumed a portion Lithgow's iron, but not enough to justify its existence. Nonetheless, by early 1909, Hoskins was already critical of the contractual arrangements with the NSW Government, his main customer. Hoskins was required to buy the scrap iron originating from the railways and other government entities. He contended that the contract prices for the scrap were significantly higher than he could pay for similar material in the open market. However, the threat to the exclusive contract would not come from the company, but from the NSW Government itself. At the election of October 1910, the first Labor government of NSW came to power, led by
James McGowen. It had been Labor and McGowan, who had triggered the
final collapse of William Sandford Limited, in October 1907, when they joined forces with
George Reid to insist that a critical government loan—intended to keep the cash-strapped company operating—take absolute precedence of security, over the company's existing commercial bank loans. At that time, Labor favoured a policy of
nationalisation of heavy industry and was ambivalent concerning the future of companies such as G. & C. Hoskins. However, in the same year, the NSW Government set up a Royal Commission to "''inquire as to the suitability of New South Wales ores for iron and steel manufacture, the cost of production from local ores, whether the Government's arrangements with Messrs. G. and C. Hoskins for supplies of iron and steel are beneficial to the Government, and the approximate cost of a plant capable of producing the iron and steel to be required in the future by the Commonwealth Government and the Governments of the different States.''" The NSW Government, through the Attorney-General
William Holman, appointed the manager of the Steel Company of Scotland, F.W. Paul, as the Royal Commissioner. His findings were highly critical of the existing arrangements, the quality of the products being supplied, that not all the steel supplied was made from Australian ores (some was German steel), and of Charles Hoskins himself. The last aspect of the findings was unsurprising, given Hoskins combative approach in giving his evidence and that he had clashed with the Royal Commissioner. Hoskins' reaction was to assert that Royal Commission had been intended to justify nationalising the steel industry, which given its
terms of reference is conceivable, but the Premier denied that. In late November 1911, as Hoskins was trying to resolve the lengthy industrial dispute at Lithgow, the NSW Government—citing the stipulation that all the material should be the product of Australian ore—cancelled all its contracts with G. & C. Hoskins; this would have doomed all the Lithgow plant, except the blast furnace, to closure. The company responded in late December 1911, by initiating legal action, against the NSW Government, stating that it was being "
condemned unheard" in an unfair and unjust manner. The company issued a writ in March 1912, and then filed its case in June 1912, claiming £150,000 in damages. In the meantime, other events were favourable to Hoskins; the industrial dispute ended in an uneasy peace, in April 1912, and, later in 1912, the company won a contract to supply rails and fishplates for the new
Trans-Australian Railway—after convincing the
Commonwealth authorities that it could meet the product specification—and a large order of water pipes for the new national capital. The hearing of Hoskins' case was postponed until 1913. As time passed, pending the court hearing, the inadequacies of the plant at Lithgow—ultimately the root cause of the NSW Government's dissatisfaction—were being rectified, as Hoskins rapidly expanded the plant and increased its both its capacity and capability. By April 1913, the parties had reached an agreement, and the matter did not proceed to trial. Under the settlement, the original exclusive contract was not reinstated, but the company was not debarred from tendering to the N.S.W Government, which it did successfully in subsequent years. Labor still held office, when, in June 1913, McGowen was replaced as premier by his deputy, the same William Holman, who had been the Attorney-General and the driving force behind the Royal Commission. The new premier continued to justify the cancellation of the contract, based on the Royal Commissioner's findings but the government was by then faced with the adverse consequences for the workers of Lithgow—now that the industrial disputes were over. The company's relations with the NSW Government seem to have improved by 1915; the company won a tender for rails, and the price paid was significantly lower than previous prices for imported rails. Unfortunately for its new owners, apart from the blast furnace, much the plant was antiquated or otherwise not ready to supply the Government with its needs, particularly steel rails. That was largely due to the failures of the Sandford period, but it was Hoskins who wore the consequences, when the NSW Government cancelled the exclusive contract in late 1911. The long-sought protection of the iron and steel industry was finally introduced, from the first day of 1909, by
Andrew Fisher's Labor government, in the form of bounties to be paid under the ''Manufacturers' Encouragement Act
, which made it a condition that those benefitting from bounties would pay "fair and reasonable wages''". The government paid a bonus of 12
s per ton from 1908 to 1914 and 8s per ton thereafter, until 1917, after which the industry would receive no further payments. The Lithgow plant was in urgent need of expansion; the Hoskins brothers had the financial means to do so and experience of operating a heavy industrial enterprise. The new management immediately closed down marginal operations such as the sheet mill and galvanising plant—and began to renovate and rearrange the existing operations. An early improvement made was to introduce electric lighting; the works had previously relied upon 'slush lamps' for internal lighting. The company had modernised and upgraded the mine at Carcoar, by mid 1909, and opened a second iron ore mine at
Tallawang in 1911. in the roughing mill stand on the right. The man on the left is manipulating a rail that has been rolled in the finishing stand. New reheating furnaces were built to suit rail rolling. It would take until 1911 for Lithgow to produce the first steel rails made in Australia. The works won contracts to supply rails for the new
Trans-Australian Railway. and later, once again, the
New South Wales Government Railways. G & C Hoskins quickly built a second blast furnace—with its parts made at Hoskins' own works at Lithgow and Ultimo—which was almost identical to Sandford's, but slightly larger. This new furnace opened in 1913. They built a short rail line from the blast furnaces to the steel furnaces, allowing the pig iron to transferred in a molten state, using 30-ton capacity ladle cars. They added a new larger open hearth steel furnace that produced larger steel ingots to suit the new 27-inch mill. To match the increased production, more coke ovens were built.
First World War Australia entered the First World War with a small but economically-viable iron and steel industry at Lithgow, It supplied the nearby
Lithgow Small Arms Factory with steel for weapon manufacture. While the war was in progress, he was building a
new branch railway line and an
aerial ropeway to open up a new iron ore quarry at
Cadia, as well as developing a coal mine and coke ovens at
Wongawilli. However, by the time of the war, difficulties associated with the location of his plant at Lithgow had already become apparent to Hoskins, leading him to reconsider its long term future. Consequently, the further expansion of the Lithgow plant effectively ceased by the end of the war. Hoskins had offered to sell the plant to the NSW Government in early 1914 Once blast furnace operation recommenced at Lithgow, in 1907, ore had to be brought from further away, from
Coombing Park—near
Carcoar—(from April 1907 to May 1923),
Tallawang (from 1911 to Feb. 1927), and
Cadia (from 1918). The ore from Carcoar was high in
manganese and needed to be blended with other ore for some grades. The Tallawang ore was largely
magnetite but the grade was only around 42% iron and the deposit relatively small. The ore from Cadia was
hematite with some magnetite but averaging only around 51% iron with a high
silica content; the silica content resulted in relatively large amounts of
slag, when the ore was smelted, and increased the consumption of limestone flux. New South Wales, although it possessed some widely dispersed smaller deposits of iron ore, was not well-endowed with large deposits. With two blast furnaces in operation at Lithgow, after 1913, not only did Hoskins need to rail his complex iron ores a considerable distance but his ore deposits had a limited life. This last aspect became more critical, once it was discovered that the ore deposit at Cadia—to which Lithgow's future was to be inextricably tied—contained a far lesser quantity of good-quality ore than had been estimated by the Government's geological surveyor.—and others were near
Crookwell,
Michelago,
Cumnock,
Picton, Cudgegong near
Mudgee, and even as far from Lithgow as
Tabulam. Through Charles Hoskins' own intransigence—his unwillingness to renew the lease on the existing terms and conditions—the company lost access to its deposit at Carcoar in 1923, after extracting only about a third of its ore. A costly court battle ensued, in which the Mining Warden's Court found that the ore body remained the landowner's private property. It was a pyrrhic victory, as Hoskins did not relent, and that was the end of iron ore mining at Carcoar.
Coking coal Lithgow was a coal mining centre, but only one of the mines, Oakey Park, produced coal that could produce
coke, and even that was of marginal quality. As a temporary measure, coke was purchased, from the
Commonwealth Oil Corporation, which made excellent coke at
Newnes, but the Newnes operations ceased by early 1913. Hoskins opened new mines at Lithgow to obtain more suitable coal. He also began bringing coke from the
Illawarra and mixing it with locally made coke, obtaining improved results. By around 1915, 75% to 80% of the coke being used at Lithgow was coming by rail from cokeworks in the Illawarra, and Hoskins was looking for an opportunity to acquire his own mine and cokeworks there.
Transport , 1920s Lithgow was totally dependent upon rail transport. Until 1921, the
railway west of Lithgow toward the ore mines was single track. Limestone, for use as smelting flux, needed to be carried from
Ben Bullen and
Havilah, and later from Excelsior near
Cullen Bullen. The cost of government-railway freight and sensitivity to increases in freight rates were unavoidable disadvantages of Lithgow's inland site and its distance from the ore and limestone quarries and the locations where most of its coke was made. From 1918, the company also paid the operating costs of a private railway line—
Cadia Mine railway line—that ran from Cadia to exchange sidings at
Spring Hill, from where the iron ore was brought by the government-owned railway to Lithgow. Until 1910, rail traffic from Lithgow to the coast and Sydney was constrained by the single-track
Lithgow Zig Zag. Even after the Zig Zag was replaced by the
Ten Tunnels Deviation (1910) and the line duplicated—including the
Glenbrook Deviation (1913)—the distance from the coast and the gradients of the Western railway remained an issue.
Banking engines were often needed to assist heavy freight trains over the mountains from Lithgow. Although Hoskins sought new sources of iron ore in other states, it would never be feasible to bring iron ore from a coastal port to Lithgow; in the longer term, the blast furnaces could not remain in operation at Lithgow.
Competition and product quality BHP's
Newcastle Steelworks opened in 1915. However, initially, Lithgow was not badly affected by competition, due to buoyant demand for steel and absence of import competition, during the First World War, and the government bonuses paid until 1917. That began to change once the war ended. In the early 1920s, the young iron and steel industry in Australia found itself subject to intense competition from imports; this affected both Lithgow and Newcastle. However, BHP Newcastle works' new general manager,
Essington Lewis, began a revival of that works, with a drive for efficiency and technical excellence; these efforts were successful to such an extent that by the early 1930s, Newcastle's costs and prices were low by global standards. rail reused as a fence post The newer and larger BHP works could produce larger quantities of rolled steel products of a higher quality, at a lower cost of production. Newcastle's seaport location brought access to virtually inexhaustible amounts of very high-grade iron ore from its mine at
Iron Knob; it allowed BHP to ship its products to Sydney and to interstate markets by sea, at lower cost than Lithgow could by rail. BHP had access to more modern American technology and employed more professionals. Consequently, the quality of their steel was higher than Hoskins could make at Lithgow; in 2006 it was stated that, "
rail produced before 1914 and all Hoskins rail are generally regarded as being of dubious metallurgical composition". BHP also had vast cash flows from its
Broken Hill silver-lead mines and smelters and, increasingly, from its profitable steel operations, with which to fund expansion and enhancement of its steelworks. Hoskins' family-owned company could not match BHP's ability to fund new capital works.
Labour Lithgow always had relatively higher labour costs—a legacy of the industrial relations arrangements of William Sandford—and a relatively strong culture of
unionism. Under competitive conditions, labour costs, poor labour relations, and strikes affected the long-term viability of the Lithgow plant. Wage rates at coastal locations were lower and unions perceived as less troublesome there.
Vision for the future and sole control Charles Hoskins began to see that his works at Lithgow had inherent problems that could not be resolved—even more so, after BHP's Newcastle works became a formidable competitor, from 1915 onward. He began to form a vision for a larger, more modern steelworks on the coast, close to a seaport and to the source of most of Lithgow's coke. In 1919, Charles Hoskins bought out his older brother George's share of the company G & C Hoskins, renaming the company Hoskins Iron and Steel Limited in July 1920. George retired, leaving Charles—by then in his late sixties—in sole charge of the destiny of the company. == Plans for Port Kembla ==