Input costs, imports keep industry in battle mode
T HE Australian steel industry is fighting on two major fronts — against cheaper imported steel and escalating input costs forcing up steel prices globally.
The local industry is concerned over the increasing flood of prefabricated steel structures entering the country, especially for infrastructure development supporting the resources boom.
Figures from the local industry’s peak body, the Australian Steel Institute ( ASI) for the March 2008 quarter report steel fabricators working with an average of one quarter of spare production capacity with the lowest utilisation in Western Australia.
The local industry is confronting increased competition in a number of ways through significant investment in new technologies and processes.
These technologies encompass computer numerical control ( CNC) machinery that readily utilise engineering design data and through building information modelling ( BIM) allow better integration and management of steel in development projects.
For example, it is now possible to custom design and manufacture large industrial and commercial buildings using less steel and with twice the speed of traditional construction practices in Australia. This can result in cost saving, faster construction times and early occupancy. These buildings will also have a lower impact on the environment by reducing the carbon footprint.
So despite contrary perceptions, the local steel industry has plenty of capacity and capability to supply structural steel for big projects, especially in sensitive sites.
For instance, Australian steel fabricators helped build major mining facilities, including Comalco’s Alumna Refinery in Gladstone and for Woodside’s Liquid Natural Gas ( LNG4) project expansion. And facing global competition, Fremantle Ports recently awarded substantial project work to local fabricators.
Australian steel also alleviates problems from imported fabricated steel, such as low quality of fabrication and finishing ( coating), poor welds, design difficulties with unknown steel origins and grades and inflexibility inflating costs with changes and reworking of faulty sections.
So while the Australian industry appreciates the need to minimise costs upfront on development projects, other important considerations impede foreign fabricated steel from being the most economic solution in the long run.
Savings on cheap overseas steelwork get shaved away with unscheduled add- ons and completions required after arrival, rework and corrections, negotiations and extra inspection costs and more administration to move the steelwork down the supply channel.
In contrast, the flow of delivery from local industry is likely to be smooth with the supply chain working as an integrated unit, reducing project time and minimising wastage. This is apart from the positive flow- on to local communities through greater employment.
The engineer or contractor of record needs to be sure that all fabricated steelwork conforms to AS4100 or equivalents and associated material specifications.
Case in point is the controversy associated with a significant number of guard rail posts of imported steel for Melbourne’s new Eastlink road link being found non- compliant in independent tests.
Many companies rely simply on the test and compliance certificates supplied from overseas for the materials they receive, a practice fraught with danger. The Shanghai Daily newspaper reported that the Shanghai Industrial and Commercial Administrative Bureau, during its inspection of 52 batches of steel material at three markets and 15 construction sites in seven districts, found 27 batches with quality problems. Some of the products were five times lighter than the required weight and about 22 per cent of the tested products failed tension tests.
It’s ironic that while the Australian steel industry is currently being hammered about substantial price rises, Asian steel prices are generally ballooning more. Steel products globally are under immense cost pressures from substantial price rises being experienced for all feed materials, including metallurgical coal, scrap steel, iron ore and a range of other inputs.
The approximate global cost of metallurgical coal has increased by 300 per cent, scrap by 100 per cent and iron ore by more than 100 per cent in the past 12 months.
These increases have ultimately forced steelmakers worldwide to increase steel prices and the international steel monitors reflect substantial increases. But steel’s intrinsic properties still make it a very attractive option from a fuller perspective.
Steel is lighter than alternative building materials so saves costs on foundation development, is more flexible in postconstruction, allowing for lower cost alterations. The ability to fabricate offsite saves significant time and disruption on construction sites, minimising builder risk.
The efficiency of Australian steel will ensure it still plays a significant role in this country’s manufacturing and construction industries whether for domestic housing, industrial warehouses, resource or engineering projects or multilevel buildings. Stefan Ahrens is chairman, Australian Steel Institute