More transparency to boost manufacturing

While some Australian manufacturers are riding the present mining industry wave, many are missing out. However that could soon change with more transparent participation rates. Alan Johnson reports. 

MUCH has been said and written about the manufacturing industry’s lack of involvement in our resources boom; however the sector is not going down without a fight with moves for more government involvement and transparency. 

AMWU National Secretary, Dave Oliver, says the mandatory publication of Australian Industry Participation Plans is an obvious move to improve local manufacturers’ involvement in resource projects, and "will help shine a light on the reality of some of the claims about local content or the lack of local capacity to provide it".  

He claims the industry uses statistics to mask how little engineering and fabrication work is performed locally for our major resources projects. 

"Industry lumps expenditure like earthworks, catering, travel and entertainment in with skilled expenditure like engineering and fabrication to arrive at a higher local industry participation percentage," Oliver told Manufacturers’ Monthly. 

"They then add expenditure over the 30-year life of the project to the design and construction expenditure to further inflate the local industry participation percentage.   

"This would presumably include expenditure on items like catering, travel, accommodation and communications expenditure over the full 30 years," Oliver said. 

"Industry and Government appear unable to provide figures that tell us how much engineering and fabrication is being performed locally for WA’s major resources projects now, but appears able to predict how much money the projects will spend feeding workers that are not even born yet, and how much their phone bills will be. 

"This is like someone not knowing how much it was costing to design and build their house, yet being able to predict how much it was going to cost to mow the lawn and clean the gutters over the next 30 years. 

"So far the AIIP’s companies have filled out haven’t had much transparency or accountability. The decision by the Prime Minister late last year, to make them mandatory and public is a good step forward. It will allow the local industry to scrutinise them and contest them," Oliver said. 

However, the AMWU is calling for governments to do more, pointing to the Skilled Local Jobs Bill 2011 proposed by the WA Labor opposition. 

In part, the Bill calls for any firm engaging in an Australian resources project to do the following: 

  • Detail procurement practices that will provide a fair opportunity for WA industry to participate; 
  • Detail information on methods by which WA businesses will become part of the supply chain of the mine developer; 
  • Detail how local suppliers will be given equal opportunity to participate as existing interstate and overseas suppliers; 
  • Provide information on the expected percentage of local content; 
  • Explain why local manufacturers are being overlooked for work not done here that could be done in WA; and 
  • Detail which region of WA will benefit from participation. 

According to Oliver, the Bill is an option that the Barnett Government should take.  

"Experience shows that major resources companies always comply with the laws of the land in which they operate.   

"This is true in the case of environmental regulation and industrial relations law and it is also true in the case of local content requirements.   

"There are many examples around the world of governments who take a tough position on local content, which major resources companies like Chevron comply with.   

"In Western Australia however, the government has demanded very little and we are increasingly getting very little in return. 

"The Bill does not propose mandating an arbitrary one-size-fits-all percentage for local content on major resources projects, and nor should it.   

"Mandated levels of local content are unworkable and could actually sell the State short.   

"For example, if there were only one or two large projects under development, the mandated level of local content may leave many local engineering and fabrication businesses without work," Oliver said. 

Riding the mining wave 

One WA manufacturer taking advantage of the boom in the oil and gas sector is Matrix Composites and Engineering who recently opened a 20,000m2 manufacturing plant in Henderson, said to be the largest and most technically advanced composites syntactic plant in the world.   

The facility which cost $80m also houses a hydrostatic pressure testing facility, capable of qualifying and testing buoyancy systems to a depth of 17,500 feet.  

Employing close to 400 workers, the plant operates three shifts per day, six days a week, and produces a range of buoyancy systems and related equipment for off-shore operations. 

According to Matrix’s CEO Aaron Begley, the new plant will provide the company with a significant competitive advantage in the marketplace. 

"By doubling the production capacity of the old plant we can deliver a greater number and type of product. Plus with the increased automation, we now have shorter production timeframes and cost savings, and with superior technology we have even better quality products which closer meet clients’ needs," Begley told Manufacturers’ Monthly.  

"We also now have the ability to manufacture other composite products for different markets, increasing revenue and reducing risk  

"This, along with our competitive pricing made possible through our many efficiencies has allowed us to compete effectively on a global scale," he said. 

To overcome the problems with the booming Australian dollar, Matrix’s export contracts are in USD.  

"We also purchases most of our raw materials in USD which provides a natural hedge. We also hedge using a combination of forward exchange and options contracts. 

Regarding Australian manufacturers being locked out of many tenders for resource sector construction projects, Begley says the issue needs to be addressed via legislation.  

"There should be a minimum level of Australian content, but we do need to build local capacity at the same time in high value goods.  

"A minimum level of local content shouldn’t be across the board, it should be in specific areas where we can sustain an ongoing competitive advantage," Begley said. 

On the other side of the country, Queensland’s Minister for Manufacturing and Small Business, Jan Jarratt, says the Mackay area is fast becoming an industry hub for the Queensland state.  

"The whole region with the Bowen Basin, the Galilee Basin, is just booming and the potential employment generation and wealth generation out of this area of Queensland is huge," Jarratt said. 

Earlier this year, Nepean Mining announced a new massive mining equipment facility will be built at the port of Mackay for the coal mining industry  

Nepean’s Scott Munro says the new $50m manufacturing plant is expected to generate 400 new full-time jobs, and will produce a range of equipment, including above-ground conveyors and in-pit crushing and conveying systems. 

The 5.8-hectare facility will have dedicated lines set up to manufacture conveyors, transfer stations and other mining related infrastructure and will include an R&D division that will focus on developing new mining technologies. 

Andrew Kisten from AGi Engineering in Wollongong says his company is also taking advantage of the coal mining boom on the East coast of Australia.  

"Today the mining industry is over 80% of our business, while five years ago it was probably less than 30%," Kisten told Manufacturers’ Monthly. 

"We presently do a lot of work for Joy Mining Machinery in Mossvale; mainly fabrication and machining work." 

Like most engineering companies in the region, AGi used to do a lot of work for BlueScope Steel however he says that has slowed considerably. 

"Where most of the work for the steel industry was more maintenance, breakdowns and replacement parts, for the mining industry we are making new components for relay bars and longwalls and far more heavy duty. 

However Kisten explained that the turnaround requirements are much shorter for the mining industry, with some parts required within three days or a week.  

"Lead times are much shorter, which sometimes creates a bit of pressure as companies can often be penalised if the part is late. 

"However, to meet these deadlines we have an afternoon shift, plus we often work on the weekends. If the customer says it’s urgent, then we will work to make the part on time," he said. 

Despite the mining industry booming, Kisten says price still plays a big part in getting the business, especially in the past couple of years. 

"Now we have a lot more competitors, with more manufacturers tendering for the same job.  

"Before it was quite a niche market, with only a few people involved, but today we often have 10 to 15 competitors tendering for the same job. Everyone wants to get on the mining industry bandwagon." 

However Kisten warns lead times are critical. "We are able to meet the deadlines so we have plenty of work at the moment. But if it wasn’t for the mining industry, things would be pretty tough."