Nick Collins, outgoing Chief Executive, Metals New Zealand, says with COVID-19 revealing the fragility of supply chains and as the shift to a low-emission economy gathers pace, the government should back and incentivise local product procurement.
THE COVID-19 PANDEMIC has thrown curve balls at the New Zealand building sector with international supply chain disruptions, vulnerability to shipping delays and resulting cost increases.
The sector is booming
This is happening as our sector operates at capacity with record housing stats showing residential building consents in the 40,000s per annum. This is forecast to continue at a similar level for the next 4 years, peaking at 47,000 in 2023.
At the same time, we have a significant infrastructure deficit – quantified by Infracom with its recent Infrastructure Quarterly identifying $64 billion of projects.
We’re also heavily reliant on global supply. Respondents to the recent Eboss Construction Supply Chain Survey, funded by the Building Research Levy, stated that 90% of all products sold in New Zealand are either imported or contain imported components not easily replaced domestically.
I was initially surprised by this, but looking back to the 1990s when I first started to work in the sector, New Zealand has lost significant local manufacturing capacity and capability.
Manufacturing moved to Asia
Manufacturing supply over the last 30 years has been dominated by globalisation and particularly the rise of Asia as a low-cost manufacturer and supplier of building components to New Zealand.
Local component suppliers struggling to compete looked to Asia to source their components and often took equipment there in joint-venture initiatives. Most did not survive – control was lost, yet those products continued to be produced in Asia.
Now, COVID-19 has changed the rules, and meeting the housing, health, education and infrastructure deficits seems increasingly unlikely. Or is it?
Local success stories
New Zealand’s building sector still has some iconic local manufacturers – like Resene who have led the way with sustainable coating systems, product and container recycling.
New Zealand Steel continues manufacturing steel from ironsand – a process unique to New Zealand – and, along with Pacific Coil Coaters, continues manufacturing roofing and cladding. Winstone Wallboards’ investment in a new manufacturing facility in the Bay of Plenty is encouraging.
We have innovative metals manufacturers that supply products to global markets. For example, Mercury outboard motors have brass componentry from AW Fraser in Christchurch, and Buckley Systems dominates the global supply of industrial magnets – evidence that New Zealand manufacturers can foot it on the world stage.
We are well positioned to grow capacity and develop new capabilities as our sector transitions to a low-emission circular economy.
Government should step in
As government procurement is approximately 20% of GDP ($51.5 billion in 2019), could it help provide certainty for local businesses to invest in additional capacity to meet demand and reduce reliance on fragile international supply chains? Could it incentivise new technologies and capabilities to enable the transition to a low-emission circular economy?
Potential pathways for government procurement include seeking opportunities to include New Zealand businesses, undertaking initiatives to contribute to a low-emission economy, looking for new and innovative solutions and promoting inclusive economic development. These aren’t my suggestions – they are from the Government procurement rules (page 13).
Government should look to its own procurement to address failing international supply chains and to deliver on its housing, health, schools and infrastructure priorities. This would provide businesses with the confidence to invest in additional capacity to meet demand and provide support for R&D investments that will address the challenges of our transition to a low-emission economy.
Articles are correct at the time of publication but may have since become outdated.