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Metal Casting Technologies : September 2005
AUSTRALIA By Doug Harland Reviewing the year just passed; the Cast Metals Industry finds itself in unprecedented times, the result of a massive global expansion in demand and supply chain management changes. Many key issues emerge: -- 1. Raw Material Cost Increases: While the focus is on China's insatiable appetite for both raw materials and market domination in a diverse range of product areas, as the cause of material shortages and huge cost hikes, it is easy to overlook other countries also contributing to this situation. Brazil's manufacturing base has been performing strongly, even though the world's economists refer to Brazil as a economic basket case -- its population is similar to the United States, and it is consuming significant increased amounts of raw material for both domestic consumption and exports. Russia, with its large population is also often overlooked, and with the ending of the cold war, significant growth in both manufactured goods and raw material consumption has occurred, so much that the Government taxed the export of scrap steel to ensure domestic supply. India, with a population set to overtake that of China in the near future is about to break its growth shackles by building a strategic 17,000km of national freeway over the next two years, which will bring greatly needed logistic efficiencies to this nation. India is also growing at record rates. Add to this the healthy global growth in western nations, and building booms taking place in cities like Dubai, it is easy to see the situation is here to stay, unless a global recession or emerging environmental issues impact on the global economy. 2. Environmental Impacts: Energy and water are emerging as potential threats to the production of the world's material goods. State Government Officials are now discussing publicly and seriously, "The Peak Oil" event, which was subject to extreme sarcasm by many over the past decade. When oil was first drilled, one-barrel equivalent of input energy yielded 20 barrels of oil, this reduced down to 3 barrels out for one-barrel input during the last 5 years. With the global explosion in demand for oil, (China's consumption is set to soon outstrip the USA which was the traditional peak user) many in the industry are predicting the no win scenario of one barrel in for one barrel out is not far away. A Queensland government spokesman recently indicated a time span between 2010 and 2025 for the Peak Oil event, with China & India's rising demand not totally factored in. Web sites are available on this Peak Oil issue. It is difficult to imagine the social implications of this when 90% of our material goods derive from this energy source; at least we would make everything in Australia. Importing vegetables of dubious quality would soon stop. Water, taken for granted for so long is also becoming a key global issue. While people from the country have a great appreciation for this resource, city dwellers have given little thought to the flow of clean water out of a tap and the need to conserve its use. Climate change is reducing annual rainfall in Australia, and we have the situation where Sydney's demand is exceeding traditional replenishment rates by around 15%, and these replenishment rates are reducing. This is why the energy hungry desalination option is being fast tracked, along with new electricity generating plants, i.e. nuclear. Many Australian communities are experiencing extremely critical water shortages and drought right now. It is a clear responsibility for the Cast Metals Industry to review its water consumption, and identify programs to achieve significant reduction -- it all starts by measuring the consumption daily by area of use. 3. Industrial Relations Reform With the Howard's government majority, significant IR reforms are underway, and while some reforms are needed and long overdue, many will have implications for small businesses. One example is the proposed removal of long service leave as an allowable matter under a Federal award provision, this will mean small business is left with the need to comply with State or Territory legislation, where increased costs will undoubtedly occur. The industry needs to become well acquainted with these issues and their implications. On a general note, trading conditions have been buoyant for most in the Industry over the last 12 months, and most are predicting confidently that no major change is foreseen before the end of the year. Import competition is as strong as ever, and the USA with the combined effect of the weak US$ and Australia's elimination of the 5% tariff with the free trade agreement, is once again a strong competitor. Identifying and securing niche markets remains a key strategy for Australian producers. The future of Australian automotive industry is in the spotlight at present, with many suppliers forced to go offshore, and many factory closures. This is a concerning development in relation to our national skill base retention. The flow on affect from these structural changes will have implications in relation to trade training programs and future skill opportunities and their development. Quality and service are still strengths of Australian producers, however pricing is the major focus as the Corporate world continues its journey away from a focus on business inputs, to a total focus on outputs, i.e. profit. It is well known that a focus on outcomes only, usually brings outcomes that are not wanted. Who's Who of Metals 2005/6 23