In­put costs, im­ports keep in­dus­try in bat­tle mode

The Weekend Australian - Review - - Steel -

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

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