Cheap imports costing local jobs, says steel industry

Media release

4 August 2011

Cheap imports costing local jobs, says steel industry

New Zealand's structural steel industry has come out strongly in support of a new report from the NZTE-backed Industry Capability Network (ICN) which found local firms, and the wider economy, would benefit significantly from their improved participation in procurement processes for large-scale projects.

Steel Construction New Zealand (SCNZ) Manager Alistair Fussell says it should be mandatory for New Zealand steel firms with appropriate credentials to be considered as potential suppliers for major projects.

"The reality is that too many procurement decisions for major projects in both the public and private sectors are based on price, and this has led to imports of cheap fabricated steel tripling over the past five years.

"Our analysis shows that in the year to 2009, steelwork imported into New Zealand increased by $43 million, resulting in the loss of more than 150 jobs in the steel construction sector, as well as the associated tax revenue.

"We fully support ICN's development of Local Industry Participation Plans for major projects, but at present these are just voluntary guidelines. We believe the time has come for the Government to make the guidelines mandatory and help to grow local industry."

Mr Fussell says it is generally accepted that heavy engineering is of strategic importance to sectors including oil and gas, energy, infrastructure, manufacturing and defence, but the economic importance of local fabrication is often overlooked by those who make procurement decisions.

"In the case of the public sector for example, Government purchasing decisions are meant to be based on a whole-of-life approach, in which the true costs of a procurement decision are considered over the planned life of the product or service. Our concern is that this is not happening.

"Lowest-cost purchasing decisions are invariably the most expensive option when whole-of-life criteria are applied.

"Unplanned additional costs are likely to arise associated with poor design, sub-standard materials, late deliveries, low-quality fabrication, inability to correct errors, and penalties incurred for project delays.

"What's more, all too often overseas competitors don't follow our high standards of safety; many have never heard of sustainability; often subsidies and special procurement conditions apply, which amounts to dumping; and what they pay in wages is well below what we would regard as fair."

Mr Fussell says it is important to understand that SCNZ is not asking for preferential treatment for local industry. Instead, what local industry needs, and deserves, is a level playing field.

More effective public sector procurement practices would see government entities working with local suppliers to build local capability and develop innovative solutions, according to Mr Fussell.

"If the Government takes the lead, the private sector will follow. The result will be local firms increasing their capability and capacity, and producing export-quality products. It should be our common goal to build competitive industries, but we won't achieve this if we base our procurement on finding the cheapest option."

The ICN report is available at www.icn.govt.nz

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