William Sandford

The rolling mill at Mittagong proved unsuitable and Sandford relocated his operations, in 1887, to the rolling mills of the Eskbank Ironworks at Lithgow, which he leased for the purpose from James Rutherford.

He bought a 2000 acre property at Bowenfels, to the west of Lithgow, and added a second story to the existing house, creating an 11-room home, which he later named 'Eskroy Park'

In 1892, Sandford purchased the Eskbank Ironworks, using money loaned by the Commercial Banking Company of Sydney, and was given a government contract in railway parts. It was a brave move, at a time when Australia was enduring a serious economic downturn. Moreover, he began expanding the plant, in the expectation that protection against imports would be forthcoming.

Around the time he purchased the Eskbank works, Sandford became a vigorous protectionist, leading the Lithgow National Protection Association.[6] The issue of protection against imports was the principal political division of late 19th-century Australia. In New South Wales, almost alone of the Australian colonies, there was widespread support for free trade. A growing force was the Labor Party; it somewhat favoured protection, as a means to maintain relatively high wages, but also advocated nationalisation of major industries, complicating its policy toward enterprises like Sandford's. However, at the 1891 election, it was the protectionists who won office in New South Wales.

A tariff on imported iron was applied by George Dibb's Protectionist government in New South Wales, between 1893 and when it was abolished by the incoming Free Trade government of George Reid in 1895. The tariff had encouraged Sandford to further expand his plant[7] and its abolition was a crucial blow. It threatened the viability of Sandford's new sheet mill and galvanizing plant, which made galvanized corrugated iron sheets.[8][9][10] Largely as a result of this experience, Sandford became an implacable opponent of Reid, and stood unsuccessfully, in 1896, as the protectionist candidate for the New South Wales Legislative Assembly seat of Hartley.

Free traders were not opposed to a local iron and steel industry; their view was that it could come about, without a protective tariff. The N.S.W Government had offered a large contract for locally made steel rails. A leading free trade businessman and politician, Joseph Mitchell—like Sandford, a strong and tireless advocate for a local iron and steel industry[11]—won the contract, in 1897, but died before he could build his planned large iron and steel works near Wallerawang.[12] Sandford had not tendered; his view was that, without protection, local industry could not compete. Another company G & C Hoskins—owned by brothers George and Charles Hoskins—did tender, unsuccessfully.[13]

In 1899, Sandford attempted to interest his friend Charles Hoskins in buying the Eskbank works but the offer was declined.[14]

With Federation, in 1901, tariffs and duties between the colonies were abolished and the matter of import protection came one for the new Commonwealth of Australia to decide at a national level. With the election of a Protectionist minority government in the new Australian House of Representative, Sandford became optimistic that protection for the iron and steel industry would be forthcoming.

In 1901, he set up William Sandford Limited as a public company[15]—although Sandford himself owned nearly all the shares—and in that same year, Lithgow first produced steel,[16] Although Sandford's Lithgow works was not the first to produce steel in Australia, it was the first to do so in large quantities by using the Siemens-Martin Open Hearth process. The feedstock was either scrap or imported pig iron, since no iron had been smelted in Australia since 1884, when the blast furnace at Lal Lal closed; the original (1875) Lithgow blast furnace had closed in 1882.[17] Also in 1901, he put into operation a new sheet mill.[18]

Sandford, confident that protection—under the Bonus Bill, an act of the new Australian Parliament—was imminent, went to England.[19] He returned in June 1902, with news that he would raise £750,000 of British capital and float a new company, Australasian Iron and Steel Corporation Limited, and hosted an English visitor associated with these plans. He stated that "The intention of the new corporation is to extend the works. Their expansion will materially depend on the confirmation of the Bonus Bill by the Federal Senate, so far as it applies to iron made from Australian ores, and the confirmation of the tariff with respect to iron manufactures."[20][21]

William Sandford - Political advertising, as Protectionist candidate, for 1901 election.(State Library of Victoria)[22]

However, his return to Australia coincided with the effective defeat of the Bonus Bill. Edmund Barton's Protectionist minority government relied upon the Labor Party to pass any legislation. Labor had combined with the opposition Free Trade Party—led by Sandford's Free Trade nemesis, George Reid—to amend the legislation in such a way that caused it to provide less protection than had been expected.[23] Labor wanted a nationalised iron and steel industry and did not want to stimulate the further growth of a privately-owned one.

Although Sandford was feted upon his return to Lithgow, his plan for a new and well-capitalised company to expand the Lithgow works was stymied.[24][25] In 1903, Sandford had to close the sheet mills at Lithgow altogether but continued to make galvanized iron using imported sheets.[26]

Sandford had begun to face financial difficulties due to rising costs, uncertain markets and scarcity of material, and—in his own view—the absence of protection against import competition. He had contested the first federal election as a Protectionist candidate for Parramatta, but was defeated by Joseph Cook. In 1903, he again ran for the federal parliament, this time against Free Trader Sydney Smith in Macquarie, but he was again unsuccessful.

In 1904, William Sandford Limited settled two disputes with its employees in the N.S.W. Arbitration Court.[27][28][29]

The new blast furnace, in May 1907.[30]

As steamships came to replace sailing ships, cheap pig iron, in the form of ballast, was being imported less. On a steamship, pig iron would be carried as paid cargo.[17] With a sizable local market, making iron in Australia was becoming more viable.

Sandford and his manager William Thornley were confident in the future of the Lithgow works—provided it had protection—and in 1905 it was making steel fishplates—but not yet rails—for the NSWGR; it also manufactured corrugated galvanised steel sheet, but struggled to do so profitably.[31]

By 1905, Sandford was a wealthy man, with audited personal assets of £141,000,[32] even if much of this wealth was invested in the ironworks. He lived at an estate known as 'Eskroy Park' near Bowenfels, and his ownership of a colliery and land sales in Lithgow gave him income that was more reliable than that coming from the ironworks.

Premier Joseph Carruthers (a Free Trader) persuaded him to agree to William Sandford Limited contracting to supply all of the New South Wales Government's needs for iron and steel, for a seven year period, in 1905. Most of this steel would be in the form of heavy steel rails for railways. A condition of that contract was that local iron ore, coal and limestone were to be used to produce iron, necessitating the erection of a blast furnace.[31]

Sandford embarked on a major expansion, starting with the construction of a large modern blast furnace. His proudest moment was when it was officially opened on 13 May 1907.[33][34][35] As part of the same expansion, a new 15-ton Open Hearth furnace was added to make steel from the pig-iron[34] and a short rail branch line laid to the iron ore mine at Coombing Park near Carcoar.[36] The Lithgow works had become the first integrated iron and steel works in Australia.

Guests watch the tapping of molten iron at the official opening of the blast furnace, 13 May 1907.[11]

Sandford had built his new blast furnace some distance from the steelmaking furnaces at the Eskbank works, which has been criticised as a poor decision. However, it was intended to be only the first of four such blast furnaces, feeding a new and larger steelmaking facility nearby, which in turn would feed a line of new rolling mills. Sandford had the general layout of this new plant designed by English consulting engineers, J.H. Harrison, based on earlier advice from an English expert, Enoch James.[37] These plans are proof of the grand vision that Sandford had for Lithgow; his problem was how he could fund it.

A proportion of the iron production was destined to be railed to Sydney for use in manufacture of cast iron products, such as pipes, and the location of the furnace near to the main railway line was logical from that standpoint. However, prior to the foreshadowed expansion, any molten iron destined for steel production needed to be cast into pigs, taken in solid form to the steelmaking plant, and then remelted—a thermally inefficient arrangement that increased steelmaking costs, compared to moving the iron in molten form.[38]

Sandford had constructed the new blast furnace seemingly on his own account—later it was reported that he had used a bank loan of £63,500 to fund it, not his own money[39][40]—but it was the company William Sandford Limited that held the contract with the government. During the time between the furnace first being lit and the official opening, the company purchased the new furnace and its site from Sandford, paying him £75,683, in the form of 50,000 shares £1 in the company, with the balance to fall due in May 1914 and attracting interest at 5% in the meantime.[39] That arrangement did not really relieve the enormous financial pressure on Sandford personally; it tied his fate more closely to that of the company bearing his name and its ability to fulfill its government contract.[41]

In debt after such a rapid expansion and under-capitalised, the company was in urgent need of more capital. It needed still more capital to carry out the vision for a larger works. During a visit to England in 1905, Sandford started negotiations with his former employer, John Lysaght Limited, of Bristol, England, with the aim that Lysaghts would take a stake in the Lithgow works and inject capital. These negotiations went on for 20 months, with Lysaghts prepared to provide most of the necessary capital, but finally broke down over Sandford's insistence of remaining in absolute control. His rejection of this financial lifeline, in June 1907, left him and his company in a dire situation.[42]

Beginning around September 1906, Sandford had shown signs of a deteriorating mental state. During this time, his competent and reliable General Manager, William Thornley, was a steadying influence. However, ultimate authority lay with Sandford, who had become increasingly more eccentric and unpredictable. His anxiety was clouding his ability to think clearly, work properly with his managers, and make good decisions.[43] His compulsion to retain personal control is difficult to understand, given his advancing age; he seems to have been hoping that one of his sons could take the helm, if he had more time, or perhaps he was obsessed with delivering his grand vision himself.

The company's board—made up as it was of Sandford (as Chairman), two of his sons, managers and close associates of Sandford[44]— resolved to raise additional capital of £100,000 in the form of new £1 shares in June 1907,[45][42] The company issued a prospectus—making no mention of profit or loss— in late September 1907, with 118,093 new shares on offer[44][46] This would be the only the second raising of capital to be paid in cash; the other being £18,807 raised at the formation of the company in 1901. Most of the existing paid up shares had been issued to William Sandford, in exchange for assets that had been transferred to company ownership.[39][44]

Doubters later pointed to the risk of investing in an under-capitalised company, with a board controlled by Sandford, with the management run by Sandford, and in which the bulk of the already issued shares in the hands of Sandford himself—who stood to benefit greatly if the company obtained new capital—and to Sandford having taken recent decisions to buy assets for the company, from himself, on favourable terms. William Sandford Limited was a public company in name but was run more like a private family company.[39] There was also a view that the raising was intended to get the bank out of its predicament, using money from the public to pay down the company's borrowings.[47]

Charles Hoskins applied for 10,000 of the shares but changed his mind when he saw the books of the company. There had been no real attempt made to interest large investors in taking up shares. Applications closed on 14 October 1907. The raising was a failure, with applications for only 18,599 shares—a significant portion were shares allocated to directors—and the money raised was returned to subscribers.[42][44]

The main commercial banking creditor, Commercial Banking Co. of Sydney, refused to lend more money by overdraft in October 1907. William Sandford Limited needed working capital (£25,000) just to continue operation and cash (£45,000) to complete the enhancements to the plant. It was apparent, by the end of November 1907, that the company was failing to meet deliveries under the Government's seven year iron and steel contract.[48]

Sandford appealed to the N.S.W. Government for assistance. The Premier, Charles Wade, offered an advance of £70,000, as a loan to the company, under stringent conditions, and with the agreement of the bank not to call in its existing loan to Sandford and to reduce the rate of interest on its loan. The nature of the arrangement necessitated that it be ratified by the N.S.W. Parliament.[49] The bank stated that, even if the Government loan went through, it would not lend further money to the company above the existing overdraft limit.[50]

After debating the issue all night, the N.S.W. Parliament passed legislation ratifying the loan, in early hours of 5 December 1907, but a last minute amendment—moved by the Labor Party, leader, James McGowan, who favoured a nationalised steel industry[51]—made the government loan take absolute precedence of security, over existing commercial loans.[52][53]

The final form of the legislation alarmed the bank, which then withdrew its tentative agreement to support Sandford, demanded full repayment of the overdraft amount,[54] and took over the assets on 9 December 1907. Only the new blast furnace was kept in operation, to prevent its destruction if it were to cool. 700 workers became idle.[55]

Sandford's shares became essentially worthless and he faced financial ruin, at the age of 66. After years of great mental stress, he was a broken man.

The Lithgow works was too large an employer and economic asset to be allowed to close down. Sandford met Premier Wade on 11 December 1907,[56] but that would be his last involvement. Other discussions took place, concerning the future of the works, between the bank, the N.S.W Government, and the firm of G & C Hoskins, and a plan was formulated, without Sandford's involvement.[57][58] There was, however, public pressure to ensure that Sandford's pioneering role in the industry was recognised by ensuring he was not ruined financially.[59][58]

Left with little choice, on 19 December 1907, Sandford reluctantly accepted the offer from G & C Hoskins to take over his enterprise. Summing up his position he stated, " I have only the satisfaction of knowing that the object of my life has been attained, and I have demonstrated that good merchantable pig iron can be made from the Australian raw materials".[60]

The Eskbank Ironworks and its near new blast furnace were taken over by the Hoskins Brothers (G & C Hoskins) in 1908.[16] Under the complicated deal, the Hoskins took over the overdraft of £138,00 owing to the bank, paid £14,000 to shareholders of William Sandford Limited in the form of 4 per cent bonds, and paid £50,000 to Sandford himself [61][62]—ensuring Sandford's future financial security. Sandford would lose his home and possessions at 'Eskroy Park'.[60] The Hoskins Brothers had outlaid £202,000 for the assets[63][64] and nobody but Sandford himself had lost any money. He expressed some satisfaction with that outcome, stating that, "I have come down, but I have dragged nobody with me".[60] William Sandford Limited was wound up in early 1908.[65]

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 new Manufacturers' Encouragement Act,[66] which made it a condition that those benefitting from bounties would pay "fair and reasonable wages".[67] The new legislation came too late to save Sandford but the bounties alone probably would not have been enough to turn around the Lithgow operations in the manner Charles Hoskins would do by 1914.

G & C Hoskins had been a large customer of William Sandford Limited—using pig iron in their iron pipe foundry in Sydney—and one of the very few outside shareholders of William Sandford Limited. Charles Hoskins was one of Sandford's closest friends and a fellow protectionist.[14] Despite this relationship and the apparent generosity of Hoskins' settlement with Sandford, unkind and ungracious public remarks—about Sandford and his management of the Lithgow plant— resulted in a bitter public dispute between Sandford and Charles Hoskins during August 1911.[68][40][32][69]

Even after he had left the industry and Lithgow, Sandford continued to be an advocate for the iron and steel industry at Lithgow and to defend his role in it, of which he was proud.[32][70]

Sandford had been popular and widely respected in Lithgow as a relatively benevolent employer, who had the interests of his workers at heart.[24] In 1893, when orders at Lithgow were slack, he obtained work for some of his employees at the Onehunga Ironworks in New Zealand.[71] He provided cheap land for his workers and assistance to build their houses, including providing house designs and guaranteeing their bank loans.[8]

He had engaged his workers by contract with an element of profit sharing;[72][73] an arrangement which he advocated and in which he took some personal pride.[74] When the subsequent owners, G & C Hoskins attempted to change these employment arrangements to day labour, it began a series of bitter and sometimes violent strikes and lock outs lasting almost four years.[75][62]

Sandford expressed frustration that he had been forced to set up an iron and steel industry "without duties or a bonus"—something he himself saw as an impossibility—and he believed himself to have failed.[76] This and the concern he held for his workforce explained much of the mental anguish that characterised his later years at Lithgow.