Reports emerged earlier in the week of a warning by the Australian Industry Group that major, Australian-based mining companies, under arrangements explicitly or implicitly linked to raw materials supply contracts with China, were required to give preference to Chinese-produced capital equipment.

The warning was contained in a submission by the Ai Group responding to Gillard government moves to increase local participation in major projects.

The submission prompted Prime Minister Julia Gillard to reportedly say that she would take any companies with such arrangements to the World Trade Organisation and called for more evidence.

Yesterday the MCA, with the support of the Chamber of Minerals and Energy of Western Australia, the Queensland Resources Council, the New South Wales Minerals Council and the South Australian Chamber of Mines and Energy, said mining projects already generated large benefits for Australian industry.

The MCA said in 2009, 53.3% of iron and steel, 64.6% of structural metal products and 71.7% of sheet metal products used by the mining industry were locally supplied.

According to the MCA, more recent data further highlights the benefits for local business and the broader economy.

“For example, in 2010-11 the Queensland resources sector purchased $A20.5 billion in goods and services from employing Queensland businesses, up from $18.8 billion in 2009-10,” the MCA said.

“Around 80% of Queensland postcodes benefited directly from this expenditure.”

The MCA said a recent internal study for Western Australia’s resources industry showed a continuing high level of local industry participation in mining sector supply chains with 86% of spending sourced domestically in the construction phase and 95% in the operations phase of WA projects.

“With the large expansion of WA mining projects, operations expenditure has increased substantially providing sustained opportunities for local suppliers,” the MCA said.

One of the largest resources projects in WA is Fortescue Metals Group’s $US8.4 billion ($A8.1 billion) iron ore expansion.

On Tuesday FMG chief executive officer Nev Power said the company had a preference towards local and state-based contractors and suppliers.

He said prospective suppliers, contractors and manufacturers were judged on cost, time and expertise.

“We’re finding that local firms are able to meet our needs,” Power said.

Power admitted equipment was one area the company looked overseas as it was near impossible to source the sort of equipment required locally.

“The reality is that most of the equipment couldn’t be built here anyway,” he said.

Yesterday The Australian reported the $A6 billion Oakajee port and rail project was specifically seeking Chinese equipment and services, citing its development agreement with the Western Australian government.

WA Premier Colin Barnett has been pushing for Chinese involvement in the troubled project.

Despite the claims, OPR is a sponsor of the Mid West procurement officer, whose purpose is to help local businesses gain economic benefit and secure work from the current and emerging mining and development projects across the Mid West.

OPR is also being assisted by the Industry Capability Network WA, which links WA projects with WA contractors and manufacturers.

This story first appeared on ILN's sister publication MiningNews.net.