By Adam Copp, CEO, Infrastructure Australia
Understanding Australia’s local steel production capabilities is essential for balancing supply chains and ensuring project success.
If we want to better balance the use of local and international steel in the delivery of the nation’s major infrastructure projects, then we need a better understanding of local capability and their capacity to meet demand.
When it comes to infrastructure projects, or any piece of work, it is ultimately up to the market on how they decide to deliver it.
But at a time when there is such an incredible demand to build and resources are so limited, especially when it comes to materials – all choices need to be on the table.
One such way we can increase the amount of choice for those delivering major projects is increasing the avenues for sourcing steel, including from the local steel industry.
Reliance on international supply
Our research shows that steel imports have grown about 20 per cent over the two years to October 2023, compared with the previous two decades, meaning there is now more of a reliance on internationally sourced steel than domestic.
While the market should be free to choose where it sources its steel, this does come with several supply chain risks.
In our 2023 Infrastructure Market Capacity report, we highlight that these risks include being exposed to fluctuating prices, transport costs, and complex logistics.
For example, during the COVID-19 pandemic, there was a spike in shipping costs, which we are only really seeing normalise now. Or, as another example, immediately following the pandemic there was a significant increase in demand for globally sourced materials, which drove up prices.
Our report also points out that importing steel brings uncertainties with embodied carbon emissions and the impact it has on Australia’s efforts to decarbonise the infrastructure sector.
All of these issues place pressure on the ability of those delivering major projects to keep to budget and meet deadlines.
Local capability
That then leaves the question – how can we assist those delivering major projects to see the local steel industry as a viable option to meet their needs, especially when the local sector is able to deliver?
I believe the answer lies in one of the recommendations Infrastructure Australia made in our 2023 Infrastructure Market Capacity report, which called for a national analysis of the country’s steel production and fabrication capacity. But what would this achieve? First, the insights from this analysis could inform governments and those delivering major projects on the actual availability and capacity of the sector.
Having a clear understanding of local capability, what they can do, and at what scale is invaluable in the early stages of project planning and design. That is, projects could be designed with local businesses in mind.
It could then also help foster earlier engagement with the industry so it knows what projects are coming, how long they will be running for, and their value.
With this early engagement and transparency, the industry can then invest into itself to increase capacity to support the needs of these projects.
For our part, Infrastructure Australia is currently conducting an analysis of domestic fabricating capacity by geography in collaboration with steel industry groups.
Conducting an analysis of the sector could then also inform governments and their use of policy levers to encourage greater use of the local steel industry.
An example here could be leveraging the procurement process to ensure local businesses are considered in the delivery of certain project types.
This would be especially powerful for projects that are in close proximity to steel producers, fabricators and manufacturers.
Through early engagement, there are also opportunities for potential collaboration between steel businesses.
What I mean by this is rather than looking for one business to deliver every aspect themselves, there is time for multiple businesses to work together to meet a project’s needs.
Domestic steel at work
A very strong example of how this has worked in the past for a major project is CommBank Stadium in Parramatta, New South Wales.
This was a project that cost $360 million, created 1,200 construction jobs, and used 4,500 tonnes of Australian steel.
The steel was supplied by a local supplier and the exposed local steel was fabricated and painted by several Western Sydney businesses.
This was all possible because the structure was designed and specified to ensure local steel mills could competitively produce steel, which was then sent to a large group of existing suppliers and fabricators within a 10km radius of the stadium.
The scale of the project and early engagement with these businesses was able to give them confidence to invest in new equipment and expand their capability to deliver on this project as well.
Of course, this is just one example, but it shows that the local steel industry can and does work well on major infrastructure projects.
Projects like these are of course multi-year projects, which also gives the industry a more sustainable flow of investment into their businesses.
This more sustainable flow of investment means that the local steel industry can consider longer term business planning and strengthen its capacity to meet demand.
The obvious long-term benefits here are a stronger local steel industry with increased capacity to be able to meet the demand to build major infrastructure projects.
An added benefit is that those delivering major projects are less exposed to risks associated with looking at international supply chains, such as those I mentioned earlier.
Increasing the opportunities for the local industry and elevating its capacity to meet demand starts with understanding the data – specifically understanding our local capability and what they can do.
With that understanding, the market will also have more choice for sourcing the steel it needs to deliver these projects.
