Saturday, 20 July 2019
Engineering and Construction Business Upswing in 2018

Engineering and Construction Business Upswing in 2018

Contributed by Bede Boyle, Director, Hi Value Strategies

2018 presents Unprecedented Opportunities in Multiple Sectors for Manufacturers and Engineering Firms to Boost Profits

A group general manager told me that his 2018 business plan was Locked and Loaded for immediate action with his team to boost profits in 2018. His robust business plan targeted multiple sectors with strong growth projected for 2018.

NSW manufacturers have a strong foundation for growth. RDA Sydney observes that “NSW has the largest most diverse manufacturing base in Australia with over $33 billion in GRP in 2013-2014, with two thirds of it ($21 billion) based in Sydney”.

2018 will be a profitable year for NSW manufacturers and engineering firms with unprecedented opportunities in multiple growth sectors including:

  1. Defence;
  2. Export Coal Industry; and
  3. Building and Construction.

1. Australian Industry and Defence Network [AIDN] NSW president Medhat Wassef highlights some key drivers of Australian defence sector that offers SMEs countless unprecedented business opportunities. 

In an interview with Defence Connect Medhat Wassef – who is defence business development manager at Albury-based subsystems specialist Milspec Manufacturing – said the current defence environment for Australian SMEs was truly unique. 

“We're living in an era that we haven't seen for years. I've been in the defence industry from both the Defence and the defence industry side for about 30 years, all up. I have never seen a period like what we are seeing now,” Wassef said. “There's a lot of interest in involving certain defence industry in the Defence projects, and Defence is spending a lot of money, as we all know, so the defence industry could not be any happier.”

Wassef attributed the upbeat market conditions for local SMEs in large part to a deliberate policy change on the part of the Defence agencies.

“Defence is making it clear to all the primes, local and international, that they do need to engage local industry and to engage them in meaningful work, not just superficial type work,” he said. “And as a result, they're all knocking on the doors of SMEs and trying to establish partnerships in areas to work together.” Source: Defence Connect 

A critical success factor for SMEs to win defence contracts is to demonstrate their Defence Ready Capability to Department of Defence and Defence Primes. Our study of What Really Works to Boost Productivity and Profits includes Defence Industry case studies and is available free on request to bede@manufacturship.com

2. 2018-2027 will be a Decade of Growth for Australian Coal Exports which presents business opportunities for Mining Equipment, Technology and Service (METS) firms

ASIA requirement for Energy Security and Economic Development is providing sustained Demand Pull for Australian High Quality Coals for use in steelmaking, power generation, cement and chemical industries. In 2017 this demand pull translated into higher coal prices and company profits.

In 2018 NSW and Queensland coal companies are committed to major refurbishment and upgrading projects and brownfield development projects.
Reinvigorated by improved coal prices a small group of junior developers in Queensland are hoping to develop the next batch of new metallurgical coal mines.

Our study of METS business opportunities with the Australian Export Coal Industry is available free on request to bede@manufacturship.com

3. There are Unprecedented Opportunities for Building and Construction Systems driven by investment in Western Sydney Region

There are lucrative business opportunities in Western Sydney Region with major infrastructure projects together with both commercial and residential developments. An expected 9,000 jobs will be created by the Western Sydney Airport by the early 2030s and a further 60,000 jobs in the coming decades. 

Over the next 20 years Sydney’s population will increase by around 1.3 million, much of it in the eight local government areas covered by the Government’s Western Sydney City Deal. The region will need about 185,000 new homes over the next two decades in the west and southwest districts of Sydney to keep up with growth and take the pressure off house prices.

Tim Reardon, Secretary Transport for NSW was keynote speaker in November at 2017 Tunnelling Conference in Sydney and stated that “With the New South Wales population to expand from 7.5 million to 9.5 million in the next 20 years, NSW has a $41.5-billion capital works program over the next 4 years on top of its annual recurrent service delivery and expenditure." Tim emphasised the overarching strategy to promote development and jobs in Western Sydney as a City Precinct including Badgerys Creek Airport.

$1 billion to support local governments' finance critical infrastructure was announced in the 2017 federal budget. The National Housing Infrastructure Facility (NHIF) will, over 5 years, provide for transport links, site remediation works and power and water infrastructure needed to speed up the supply of new housing. 

Our Western Sydney Home Building, Industries and Infrastructure Foresight Study is available free on request to bede@manufacturship.com

However Rising Electricity Costs are Threatening Australian Manufactures Global Competitiveness 

In December 2017 I attended an Advanced Manufacturing Round Table in Sydney where participants raised serious concerns with the doubling of the cost of electricity from 2016 as an uncontrolled input cost to their business. Manufacturers were also expressed concern with the impact to their business with planned load shedding and supply disruptions this summer. 

I observed that as Australia lurches from having the world’s lowest cost Coal-fired base load Generation to Intermittent Renewable Energy and Gas Generation based on Export Parity Gas Supply Costs we have managed to create a system that is both Unreliable and Globally Non-competitive with some of the world’s highest power bills. 

I referenced my recent Study of the Australian Export Coal Industry which highlighted the growth of coal-based power generation to support economic development in India and Southeast Asia. My study is available free on request to boyle.bede@bigpond.com 

In India nearly 100 new coal fired power plants currently under construction are scheduled to come online by the end of 2018 partly to support Prime Minister Modi's Make in India Campaign. 

In 2015 India was the top destination globally for foreign direct investment, surpassing the United States of America as well as the People's Republic of China with US$63billion in FDI. International companies including Apple, Ford, GE, Sandvik and VW are establishing major manufacturing facilities in India. 

The success of Prime Minister Modi's Make in India Campaign in attracting Foreign Direct Investment in India Advanced Manufacturing is a wakeup call for Australian Politicians who have dithered for a decade and failed to develop a clear energy policy.

I am an advocate of High Efficiency Low Emissions (HELE) power stations based on Australia High Energy Coals as having the proven ability to provide reliable economic base load electricity whilst contributing to lowering CO2 emissions. 

Bede Boyle Chairman Manufacturship Group bede@manufacturship.com

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