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Metal Casting Technologies : September 2006
www.metals.rala.com.au NEW ZEALAND New Zealand's Vision for the Niche Market by Mike Alston It still seems peculiar for New Zealand to be included in an Asian Overview because we have traditionally associated our identity with the UK, Europe and the USA. Yet our location globally means we are now inextricably influenced by Asia, and Asia will continue to play a greater part in our future. We don't hear much about competition from the developed economies in the Northern Hemisphere any more. Unfortunately for our foundry industry this currently presents more threats than opportunities. Ten years ago we would say "These castings from South East Asia are incredibly cheap but the quality is just awful. As soon as they learn how to make quality castings their costs will rise dramatically and they won't be so competitive". Now we are saying, "These castings from China/India are incredibly cheap and the quality is comparable with ours. They have overcome the language barrier, their marketing is professional and they're very keen to do business with us". I recently spent time with some NZ industry colleagues at the Metal + Metallurgy 2006 Trade Show in Beijing. Although not quite on the same scale as GIFA it was still very impressive and buzzing with real business intensity. There have been a number of our bigger foundries that have closed in recent times due mainly to global market forces at work through our open borders. Poor corporate governance and management have accelerated their demise. The closure of ION alloy wheel plant has halved our national casting tonnage to around 20,000 tpa. This makes our industry about 1000 times smaller than that of China! The New Zealand industry is now stabilising again and a viable foundry industry will remain essential to maintaining our country's infrastructure. However forced by a number of economic challenges New Zealand businesses are undergoing the stress of re-evaluation and re-invention. I will expand on some of these economic challenges below. Simple commodity castings will continue to be made in the lowest cost countries and in centres where proximity to market provides for economies of scale. The challenge for New Zealand businesses is to compete against countries that impose fewer compliance costs and have much lower labour cost whilst being geographically remote from major markets. Challenges facing our industry globally include high raw material prices caused by unprecedented demand. These high prices are causing ongoing evaluation of the cost/ benefit of using metals at all. This is ameliorated somewhat by the dramatic price rise of competing commodities like petrochemical products (e.g. plastics). I'm old enough to remember the difficulties managing business and private finances in a high inflation environment. But bludgeoning the productive export sector with a high and volatile exchange rate caused by high interest rates set by the Reserve Bank in order to keep inflation down which is in turn caused by high property prices supported by uneven immigration makes little sense to this amateur economist. The Reserve Bank Act is a very blunt instrument indeed and history will judge it harshly. Our minor currency bobs like a cork on the ocean and, at the end of the day, after we have analysed the current situation and implemented our latest exchange rate risk management plan we have added no value whatsoever. We have only mitigated a locally imposed disadvantage. In New Zealand our central government is unwilling to offer incentives to keep our industry viable. They are far too academic and purist in their approach without the common sense that officials in some other countries employ. They talk constantly of the knowledge economy without realising that there is a significant sector of our population that will either work with their hands or they won't work at all. New Zealand industry has always relied heavily on skilled immigrants to give us the expertise and experience that we need to be competitive. We are grateful for the really clever internationals in our midst. We haven't been so good at training New Zealanders however. There have been many discussions with our political and industry leaders and they are concerned about the situation. It may well be that structural changes are required to create the environment resulting in significant training actually happening. In spite of the un-level playing field some of our foundries are leveraging their competitive advantage, and they are prospering. In many cases the successful business is niche focused and operating where design and services are bundled in with the castings. We are extraordinarily good at problem solving and devising innovative solutions. The New Zealand Metal Casting Industry is full of good people. We're a clever yet modest bunch. Together we fight for our right to earn a living adding real value to our economy. In every case it is our people that make the difference. Visit www.castingtechnologynz.org. The company's big project this year is hosting the 37th Australasian Foundry Conference in Rotorua October 15-18. It's shaping up to be a very rewarding event for delegates and their partners in the famous geothermal wonderland. We invite readers throughout the region to register for this event. AsianFoundryOverview 38