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For the Newbold company the years following the financial disasters of the 1922- 1923 period was one of increasing economic prosperity. The resumption of work at the steelworks and the improvement in the economy in general resulted in Newbold's posting large profits. In the financial year of 1923/1924 the company posted a profit of over £9000, a remarkable recovery from the previous years £517 loss. In the next t hree financial years the company continued to post a profit of at least £7000 per annum.
However, the recovery was not without its problems. During 1926 one of the company' works was closed for a period of approximately three months, due to a general drop in the demand for gas and coke oven bricks1. This drop in demand, as well as a lower selling price generally, led to lower profits for the year. Although the company then showed a large profit for the year ending in 1927, by 1928 Newbold's was again faced with financial problems in the form of a £2118 loss. This loss was much greater than the one experienced in 1923. Again, however, this loss does not appeared to have caused undue panic within the company.
The year 1929 again saw Newbold's post a modest profit of just over £4000 but it saw the company planning a complete reorganisation of its Waratah plant. This involved the installation of a large quantity of up-to-date equipment2, presumably imported from the United States or the United Kingdom. It was anticipated that this development would aid the company in its continuing strategy of diversifying the nature of the companies business. This diversification was probably a response to the dangers of being over reliant on one, very large consumer. However, by the end of the year, the plans of Newbolds and, indeed, the world would be thrown into chaos. The disasters of the 'Great Depression' would change many plans.
When the Wall Street Stock Exchange in New York collapsed the ramifications were felt around the world. The interdependence of the world's post-War economies meant that the downturn in the United States economy affected most others in the world. Australia, because of its continuing dependence on overseas markets for primary exports, and because of the importance of foreign investment in the 1920's, was particularly vulnerable. With the world-wide economic collapse, many markets either disappeared or were closed in the rush of isolationist protectionism that resulted from the disaster.
In the Newcastle region the onset of the Depression further aggravated an already serious situation. Although the major industrial employer, the B.H.P steelworks, had re-opened in 1923, it was on the company's terms of lower wages and a longer working week3. By the mid-1920's because of improvements in productivity, the actual workforce of the steelworks had been much reduced from previous levels.
Thus in the general regional outlook, there was a continuing high level of unemployment, especially amongst unskilled workers. In 1928, the year that produced the dramatic decrease in the Newbold company profit, unemployment in the region increased again. Many characteristics associated with the so-called coming Great Depression - unemployment, rabbit hunting for food and large 'towns' of humpy's on the outskirts of the city- were already present by 19284, only worsening in the Depression.
Every sector of the economy was hit in the Depression, including steel. On the world scene by 1932 production levels had fallen to almost 1901 levels, with the industry running at 20 per cent capacity5. In the United Kingdom, the heavy financial losses this caused drove many outmoded producers bankrupt, precipitating a wave of rationalisation, and the domination of the industry by a few large companies6.
In Australia the B.H.P was, to a certain extent prepared deal with the deepening economic downturn. It had already been striving to improve its cost-efficiency through the 1920's and pursued a conservative dividend policy. In the Depression, it was able to fight for and receive freight concessions from the New South Wales railways and to gain lower nominal wage rates. These concessions resulted in a general reduction in the cost structure of the company7, much to its benefit.
Further, the relatively good financial position of the B.H.P Co Ltd allowed it to pursue a policy of rationalisation to great effect. It was able acquire less fortunate firms at low costs. In 1930 it bought additional shares in Vickers Commonwealth Steel Co, an interest in the Structural Steel Company of Western Australia8 and a controlling interest in Lysaght Brothers Ltd of Sydney. This gave the B.H.P Co Ltd complete control over the wire and wire netting market in Australia9. These acquisitions were followed by complete control of the Titan Nail and Wire Co Ltd and the purchase of two collieries10.
Overall the B.H.P Co Ltd used the economic situation created by the Depression to further consolidate its control over further aspects of its production structure. Its dedication to a strong policy of vertical integration was amply demonstrated.
Australia's other steel producer, Hoskins Iron and Steel at Lithgow did not fare as well. After his first ten years at Lithgow, Charles Hoskins had realised that Lithgow was not a viable location for a modern iron and steel works. The increasing costs of rail freight coupled with the poor quality coal and iron ore reserves11 increasingly made Lithgow unattractive as a production site. Port Kembla, with its deep sea port, coal supplies and close vicinity to the main market of Sydney was chosen as the new location. In 1924 400 acres of land were purchased in the area, however, it was not until 1927 that major construction of the plant commenced.
In order to fund the huge financial undertaking of building a modern iron and steel plant, Hoskins took on three partners in the venture, resulting in the formation of the new company, Australian Iron and Steel Co. Ltd. This company had an authorised capital of £5,000,00012. However, in the midst of the eight year construction of the plant, the Depression hit. The cessation of the urban building and construction boom centred in Sydney destroyed the Hoskins' traditional market of heavy structural steel, foundry iron and pipes13. As a result A.I and S was unable to compete against the B.H.P Co Ltd. By 1935 , after years of financial problems resulting from the construction of the new plant at Port Kembla, Australian Iron and Steel became a subsidiary of the B.H.P Co Ltd.
The B.H.P Co Ltd thus became the monopoly supplier in Australia of iron and steel and also of many of the products made from these materials. For Newbolds' this increased its dependence on the B.H.P Co. Some of its strategies in the period can perhaps be explained by the need for it to lessen this dependency by the diversification of its consumer base.
In 1930 Newbolds' recorded a modest loss of £436, its only financial loss in the Depression period. Although some operations were curtailed for a period there was not the complete cessation of production experienced in 1922-1923. Theexpense of plans for expansion made before the Depression, which the company continued to carry out appear to be responsible for the loss.
At Waratah a new plant was installed and paid for without requiring extra capital. This was a significant feat considering the expenditure of £40,000 involved. An important part of the overall improvement to the plants production capabilities was the importation of not only new machinery but also an expert in the manufacture of silica and other refractory bricks14. Even as these additions were being completed a new fire clay plant was in the planning stages with initial costs estimated as being between £15,000 and £20,00015.
The evident motivation for this major financial expenditure appears to be the pursuit of the ongoing policy of product expansion and therefore, market diversification. That his was consciously designed to reduce dependence on the B.H.P, was explicitly declared in a statement reported by the Sydney Morning Herald in August, 1930. A company representative stated that its products would find "...an outlet in industrial fields other than the steel industries..."16.
A further part of the rationalisation process that allowed for the extensions at Waratah was the gradual phasing out and final closure of the original Lithgow plant. In 1930 the most useful pieces of equipment were moved from Lithgow to Newcastle while planning for the Lithgow plant closure was set in motion. Thus as Lithgow lost its iron and steel industry, its also lost its refractory industry, a modest employer of about thirty men, but an employer nonetheless.
Closing the Lithgow plant might seem to have accentuated Newbold's dependence on the B.H.P steelworks. However, and well before B.H.P became the monopoly steel supplier, as a further part of its strategy, Newbold's was involved in two major purchases of alreadyestablished refractory firms. These plants were located on the South Coast of New South Wales in the vicinity of Wollongong. Both companies, the Vulcan Firebrick Co and the Ulladulla Silica Co had been in existence for over a decade before their purchase.
The breadth of the market that existed in New South Wales in this period is evident in the customer list of the Bulli Brick and Tile Company.This included the Sydney Electric Light Co., the North Shore and Newcastle Gas Co., the Cockle Creek Sulphide Corporation and the Dapto Smelting Company17. This list covers enterprises in many parts of the state, including Newcastle.
The first of the plants purchased by Newbold's on the South Coast was that located at Port Kembla. This plant was purchased in 1931 from the Ulladulla Silica Co. The Port Kembla plant was engaged in the production of silica refractories and would have complemented the existing operations within the Newbold group.
It would appear that the major motivation for the purchase was the move to Port Kembla of the Hoskins iron and steel plant. Once again the need to be close to a customer played a role in determining location of a plant, while the economic situation provided a good opportunity to expand. Newbold's also appears to have had some interest in the company in the past. References are made in letters written in 1922 which make mention of a visit by Arthur Newbold to see the works manager of the Ulladulla Silica Co. However, the manager was absent and Arthur Newbold thought it unwise to visit the plant in his absence18.
The second of the plants purchased was located at Thirroul, again on the outskirts of Wollongong. The Vulcan Firebrick Co., established its Thirroul plant in 1919. It was located on a very large fireclay deposit. In its early years it employed about 30 men19 and was a supplier of high and medium grade fireclay refractories to local industry. This purchase seems to have stretched Newbold's financial resources; it required the raising of £20,000 additional capital20.
Again the purchase of the Thirroul plant appears to be linked to the arrival of Australian Iron and Steel. For decades the Thirroul plant supplied A.I & S and later B.H.P with millions of coke oven checker bricks, blast furnace stove walling and many other types of fireclay refractory. The Thirroul plant had the advantage of close proximity to its major customer and to its supply of raw materials. The fireclay deposits that supplied the plant for over fifty years were located literally in the backyard of the plant, less than one hundred metres away - as can be clearly seen in the 1940 photograph of the Thirroul plant.
Thus it was that the Newbold Silica and Firebrick Co., consolidated its position throughout the Depression. By the end of the Depression, with plants at Newcastle, Thirroul and Port Kembla, the core of the Newbold's refractory operation for the next fifty years were in place. The Depression appears to have aided what would have been a likely course of events in any case. These events were in part dictated by the actions of the two steel producers in Australia, Hoskins with Australian Iron and Steel and the B.H.P Co. The Depression played a positive role for Newbold's in that it allowed the company to take over ongoing concerns, with both plant and trained men, rather than start from nothing.
Not only did Newbold's survive the Depression but it expanded to a position that allowed it to be at the forefront of its industry for the next fifty years. Expansion continued throughout the rest of the 1930's, with tens of thousands of pounds being spent on new plant and equipment. By the end of the decade the Newbold company's holdings were extensive - three refractory plants in Newcastle, Port Kembla and Thirroul, a common brick plant at Coniston, and mines and quarries at Coonabarabran, Ulladulla, Cooma, Marrangaroo, Thirroul, Red Head and Wollongong. These extensive holding reflected an attitude within the company, an attitude shared with the B.H.P Co., that horizontal integration was the best way for a company to succeed.
It was the strong financial position of Newbold's in this period that in part answers the question of why B.H.P did not attempt to gain control of Newbold's. Newbold's in the Depression, by successfully pursuing many of the same business strategies of B.H.P, such as technical advancement, cost reductions and diversification of markets, was able to survive the Depression conditions very effectively. As such, with Newbold's in a strong financial and business position, there was no impetus for B.H.P to take the company over. It had been the weak financial positions of the companies acquired by B.H.P in this period that had prompted there acquistion.
1 SMH 21/8/1926
2 SMH 22/8/1929
3 J. Docherty, Newcastle: The Making of an Australian City (Sydney: Hale & Iremonger, 1983) p.70
4 ibid., p.74
5 Hughes, p.109
18 A.R Newbold to Mr Parkes, 2nd of December, 1922
© Copyright - Michelle Watson, 1996
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