Is Australia a quarry or a foundry?

Activating the Industrial-scale Reconstruction Fund should be used to kick start the next stage of the metals processing supply chain, right here in Australia.

The US Administration’s Inflation Reduction Act (IRA) converts $800bn of tax breaks and subsidies over the next decade to boost high-tech manufacturing throughout the US. That kind of investment would turbocharge any industry, and this is what is required here in Australia. “There has been a renaissance in American manufacturing,” said American Council of Renewable Energy CEO and President Gregory Wetstone in a recent Goldman Sachs report. “I don’t think I have ever seen a law have greater impact on economic development in this country.” Australia’s Climate and Energy Minster Chris Bowen said he believed the US IRA might one day be viewed as significant a moment in the fight against Climate Change as the signing of the Paris Agreement in 2015. In fact, the IRA has put everyone on notice. The beauty of it is that the majority of the incentives go to the consumers. That’s good politics. Here, the Safeguard Mechanism was brought in, which is just an incredibly complex way for industry to buy ‘credits’. But just like the US, the powergrid as it stands cannot keep up with the projected load over the next decade. Australia is also way behind in being able to source the steel, build and deploy the high voltage towers and transmission lines, taking the current to those power-hungry industries. This is somewhere in the vicinity of 10,000 kilometres of extra high-voltage cable and towers. Australia could power 60% of our domestic and manufacturing industry energy through rooftop solar, by saturating the market and pumping it back into the grid. Rewiring Australia’s Saul Griffith wrote that Australian rooftop solar is the cheapest electric power in the world, at three to four cents per kWh after financing. Now, Prime Minister Anthony Albanese said it is “absolutely critical” to have a strong manufacturing industry in Australia. “During the global pandemic, we were reminded of the problems that can arise with global supply chains,” Albanese said. “And the need for us to be more self-reliant and more resilient, the need for us to make more things here, the need for us to have a manufacturing industry here in Australia.” Treasurer Jim Chalmers released the latest Intergenerational Report in late August, warning that Climate Change threatens to devastate the economy over the next 40 years, but that Net Zero reforms offer lucrative opportunities, the same as mentioned above. The last Intergenerational Report by the Coalition hardly mentioned Climate Change. The lucrative opportunities are the Critical Mineral Strategy and the National Reconstruction Fund deals, extracting the critical minerals for batteries, panels, towers and inverters, mined in this country. We sold 55% of the world’s required lithium brine in 2022. Critial minerals are essential to help cover the growing cost of health, NDIS, defence and servicing government debt, which together will rise from a third of GDP to 50% by 2060. We also need to process our own iron ore into steel, here. Half of the cost of steel-making is the energy used in making it. We need to mine and process our ore into steel here, with the cheapest electrical power in the world. It could be more than a $1Tn industry, ten times larger than our fossil fuel industry. Imagine if we could process iron ore into green steel to deliver us home-grown metals to manufacture everything, here. Imagine the turbo-charging this would do for Australian manufacturing. Australia has the largest ore bodies of all the vital elements required for the next Net Zero steps the whole world needs to take. Australia has to stop being tauted as just the “world’s quarry” and it needs to get suited up pronto to be the “world’s foundry”.

AMR in our futures

If manufacturing can navigate through a recession, it can make its way through the minefield of a future wave of superbugs. But that’s a big ‘if’. When setting a scene for Australian manufacturers on what to watch for in their futures, there’s not much light on the horizon right now other than a polycrisis. But let’s give it a go. Advances in technology, such as automation and artificial intelligence (AI), have the potential to disrupt traditional industries and are now drastically reshaping the manufacturing jobs market. When technology drives productivity and innovation, and reskilling doesn’t keep pace, it can lead to job displacement and increased income inequality. I’ll stop here cos I’m telling you stuff you already know. Fiscal and monetary splurges made in response to global COVID lockdowns have also ignited consumer demand for technology and other supplies. Combined with severe disruptions to the supply chains wrought by that same global pandemic and various theatres of war, inflation has ensued globally at levels not seen in decades. You might have seen the news. We are still trying to tame that monster. One extra spanner accelerating towards our collective works is the battle between antibiotics and bacteria. The rise of AntiMicrobial Resistance (AMR) happens when bacteria, viruses and fungi develop the ability to defeat the medications designed to control them. As the climate crisis worsens, AMR has emerged in several extra ways: higher temperatures increase both the rate of bacterial growth and the spread rate of antibiotic-resistant genes between micro-organisms. As we head toward summer in Australia, we only need to read what is happening now in the northen hemisphere to sample what we have in store. Severe weather and flooding can lead to conditions of overcrowding, poor sanitation and increased pollution, which are known to increase infection rates as oils, heavy metals and other pollutants and waste in water create favourable conditions for bugs to develop resistance. The battleground is not only in hospitals, but also our manufacturing workplaces, assembly lines where food is produced, or anywhere manufacturing production humidity levels may not be controlled as closely as it should. Will it be necessary in future to adopt cleanroom environments when manufacturing anything humans might go near? Developing and validating methods for measuring AMR, pathogens and residues in complex environments will need to be improved in hospitals, clinics and food manufacturing sites. Industries will use AMR data and insights to optimise their procurement, production and waste management practices. This will improve safety, security and protect the production, and wider environment. Close market intelligence scrutiny will help secure international access and safeguard export growth in jurisdictions with more stringent safety requirements. As AMR becomes a more clear and present danger, the import/export markets of almost everything will have to be monitored even more closely. Data and insights will help raise community awareness of AMR and ensure confidence in participating sectors’ AMR mitigation strategies. In the very brightest of futures, Australia’s manufacturers will be successful in adopting cost-effective and efficient interventions, reducing and removing AMR elements and residues from industry value chains and environments. Human health will benefit from new vaccines and more effective antimicrobial stewardship in receiving environments. New and improved AMR solutions will allow business operations to increase productivity and reduce losses across industrial supply chains, better positioning the sector to reach the Australian Government’s Ag2030 productivity targets. Let’s hope I’m right.

Composites and Advanced materials

Resources and energy exports projected to earn more than $2Tn for Australia over the next six years The global deployment of solar power technology will be critical to the success of the global energy transition. As you’d have heard ad nauseum, digging resources out of the ground just won’t be part of the global energy future. When I say resources, I don’t mean coal, gas and oil (any more). By 2050, solar and other renewables will have to be the leading source of energy generation globally. This important energy transition is accelerating at scale and at pace, but geopolitical tensions and the COVID-19 pandemic have highlighted the fragility of Australia’s current supply chains and the risks associated with highly concentrated energy supply chains. In the March 2023 edition of Resources and Energy Quarterly (REQ), there is an extended five-year outlook highlighting the medium term prospects of the resources industry. This includes industries producing the raw steel, copper, nickel, aluminium and other metals from which we manufacture everything. Short-term effects on these prospects include flooding of local mines and transport routes, and the fallout from the Russian invasion of Ukraine and a subsequent spike in energy prices, which are expected to boost resources and energy exports to a record $464bn in 2022–23. Australia has world leading solar resources and a vast land mass that will allow us to facilitate deployment at scale. These advantages must be leveraged to meet Australia’s national targets of cutting emissions by at least 43% by 2030 and reaching net zero by 2050, enable the export of energy to other countries to help achieve their net zero goals and establish a local green hydrogen industry of global significance. It will require a rapid and large scale escalation in solar power installations and there will be challenges ahead. The Australian Silicon Action Plan, generated by PwC and CSIRO, addresses the need for Australia to improve its standing in locally produced silicon for solar panel manufacturing from the abundant supplies of quartz. Local silicon of course should also be available for the local production of semiconductors and fibre-optics. However, the vast majority of the world’s silicon is produced in China. Renewable technologies will generate 90% of the world’s electricity by 2050, with solar PV the leading technology. The International Renewable Energy Agency (IRENA) has estimated that annual global solar power generation capacity must increase from the current level of one terawatt (TW) to 5.2TW by 2030 and 14TW by 2050 to stay on track to meet the Paris Agreement’s emissions goals. Global demand for thermal coal demand has passed its peak, with most proposed thermal coal-fired power plants now cancelled around the world. Falling prices are expected to reduce thermal coal earnings from $65bn in 2022–23 to $19bn by 2027–28. Australia has a genuine opportunity to emerge as a global superpower in solar PV manufacture, energy generation and export. We have the highest per capita deployment of rooftop solar in the world: a great start. We also have world class solar resources and significant areas of land available for large scale solar arrays. However, one of the greatest risks to Australia’s solar ambitions and energy independence is our complete reliance on overseas supply chains for solar cells. Silicon, the critical mineral required for solar cell technology, has a highly geographically concentrated supply chain. This creates significant risks for the cost, reliability, and timeliness of new solar developments.

Pivoting, juggling and getting on with the job

Local manufacturers are up to the task of producing materials and products that are high-quality, ready-for-market, and fit for purpose. Sheet metal manufacturing has never been busier. Businesses involved in CNC cutting, forming and fabrication, have not been busier in years. The feeling sensed in the crowd of manufacturers at the latest AMTIL industry event showed there was huge momentum in orders, and many had exceeded their capacity in forward orders due to the unavailability of raw materials. Juggling can be hard and full of risk if you don’t know where the balls are falling. And the reason for that is that economically, the international picture is very cloudy. As KPMG’s Partner In Charge of Manufacturing and Life Sciences, Toni Jones, says in a recently released report on the world economy, divisions in the world economy were growing, well before war broke out in Ukraine or before COVID tightened its grip. Since then, these worldly tensions have caused companies to rethink their international strategies. Around 85% have discontinued working in Russia in particular, in response to the Kremlin’s moves on Ukraine, but globalisation is not necessarly retreating, it is more likely just changing shape. Jones’ companion Stephane Souchet, the Global Head of Industrial Manufacturing at KPMG, cites an uncertain future for businesses, characterised by the disrupted patterns of global trade, geopolitical tensions and a growing investment drive into defence. The move into defence is a signal of changing shapes in our economy, not a retreat, as such. Jones adds that, “we have to not only focus on re-evaluating our sourcing locations, supply chain dependencies but also [to] foster nearshore and onshore capacity.” Labour shortages here in Australia, increased costs for inputs, supply delays, wet weather and flooding were constraining factors in November. Interest rate rises have reduced demand from construction customers with builders delaying or cancelling orders. Import competition has increased. Despite all of this, surprisingly, new orders and stock deliveries were all positive in that month. COVID-19 has also highlighted many risk and resiliency gaps. In another recent KPMG study citing global supply chain issues, 67% of CEOs indicated they would increase investment in disruption detection and innovation processes to reduce the impacts of disruption. Government and industry leaders are also looking to build domestic capabilities to reduce their reliance on global supply chains. Of course, organisations must review their sectors’ supply chain flows and consider local inventory capabilities to reduce risk. Spreading the load of third parties to rely on for supply will ensure access to their stock. Relying on this ecosystem of vendors and having a wide-ranging strategic partnership within the domestic industry will keep parts coming in, and your knowledgebase up to date to future conditions. You should know everyone in your local network will want you to succeed as well. AMTIL knows the value of local networking during times like this, and it pays to stay connected. The KPMG report confirmed the volatility of the Australian construction industry, with complexity becoming the new normal. As manufacturing is so much a part of the maze of construction and infrastructure ecosystems in Australia, learning to transform these projects into manageable business is paramount. Juggle as you stay on top of what you manufacture but keep all your balls in sight at all time.

Reaching for future goals

Energy companies are big and powerful enough to do what’s right for the industries and community they service. There’s nothing wrong with making profits but profiteering during an emergency is a bad look. While setting off to write this column, I wanted to write about something other than gas prices. But the continued predictable behaviour from fossil fuel companies, complaining about having their stellar profits clipped in order that society and businesses can continue to function, hastened me to just start writing. Now, history shows that fossil fuel companies are used to getting their way. The backlash worked in 2010 against Kevin Rudd, and in 2013 their lobby supported the Abbott-led Coalition’s dumping of Labor’s carbon-pricing mechanism, allowing emissions to shoot up once again. I mention this because I don’t want manufacturers to forget it. Now that Labor is back in again, the gas price caps are the only measure available to save the economy. There will still be price rises, and the opposition and lobbyists will crow about them. Watching long term trends has been a mainstay of economists and sociologists but few have seen a tougher challenge. “A windfalls profits tax would potentially be a much more long-lasting solution to this problem,” says Alia Armistead in The Saturday Paper in December 2022. She’s a researcher for the climate and energy program at The Australia Institute. “It would be a preferable way to capture this excess profit, to ease pressure on households from being stuck with high energy prices. It could go towards fast-tracking the transition towards renewables and building out the huge amount of new generation and transmission that will be required to achieve Labor’s renewable energy target by 2030.” The Ai Group says 2023 looks like it is still going to be ‘messy’ on the energy front, no matter what happens. There are some valid criticisms about the government’s policies. But at least these decisions are not ones made by the gas industry. Gas companies can still make profits and they’ll still be able to make their investments, but the Government needs to be allowed to protect households, businesses and jobs. The rapid adoption of digital and data technologies in recent times has meant that many sectors and organisations have experienced years’ worth of digital transformation in the space of months. This is evident in the growth in online retail, remote working, telehealth, virtual education, digital currencies and data-driven organisations. While this progress has been significant, experts predict that this is just what we can see from the surface, with the next wave of digitisation in industries and the opportunities enabled by digital and data technologies yet to appear. WASTE Australia generates more waste per day per capita (1.5kg) than the East Asia and Pacific region (0.6kg) and the world average (0.7kg). Almost 85% of plastics in Australia were sent to landfill in 2019, and if nothing changes, RMIT estimates that Australia’s landfill space will reach capacity by 2025. Six years ago, Xi Jinping announced bans on solid waste imports, prompting many countries including Australia to reassess their waste management strategies. The Australian Government has banned exports of waste plastics, paper, glass and tyres and set a target to reduce waste to landfill by 30% by 2030. Global energy demand declined by 5.3% in 2020, but this is expected to rebound to pre-COVID levels this year. Renewable energy sources are expected to account for 80% of the growth in global electricity demand by 2030, surpassing coal as the primary source by 2025. Australians absolutely must pull an electric rabbit out of our hats in order to get through the next couple of years. The International Energy Agency forecasts that global electricity demand will grow at twice the rate of primary energy demand out to the year 2040. Most of that demand will come from China and India. The Australian Energy Market Operator is preparing Australia’s grids to manage 100% renewable energy by 2025. The global energy transition opens up new industry and job creation opportunities. It is estimated Australia’s abundant access to raw commodities and renewable energy, advanced agile manufacturing capabilities and concentration of relevant skilled workers yield a strong competitive advantage in emerging clean energy industries, such as green metal manufacturing. I mentioned earlier, of the multinational gas suppliers pulling massive profits out of the country and blooming gas prices, even though Australia’s local supply is abundant. By passing legislation to enable temporary gas price caps the Parliament has taken badly needed action that will help local energy users and soften the blow to Australia from events in Europe. While the uptake of agile manufacturing approaches, leveraging artificial intelligence (AI), robotics and other technologies, could also enable Australian manufacturers to dynamically respond to market changes in a cost-effective manner.

Food for thought

When you lose workers from COVID and the Great Resignation, business can be tough. But when climate, sickness, economy, and the resultant component and food shortages combine, the solutions can seem further away. The $127bn food and grocery manufacturing sector significantly contributes to the Australian economy and directly employs over 276,000 people with 108,000 of these jobs in rural and regional Australia. The sector’s success at keeping supermarket shelves stocked during the early months of the 2020-22 COVID-19 pandemic demonstrated the importance of a vibrant sector and robust supply chains for the country. In a report by Siemens and the PLMA, results from an industry survey into the Food & Beverage Manufacturing Industry showed the sector has been significantly impacted by the effects of the COVID-19 pandemic over the past two to three years. In 2022, the far-reaching influence of pandemic-related regulation and responses has continued to impact the industry. However, the industry isn’t just looking inwards. Almost half of the industry responses in this report show companies are looking into how to deal with changing customer perceptions and focusing on customer value while keeping up with increased and changing demand for new products centred around premium choices, an emphasis on sustainability and the growing plant-based revolution in foodstuff. The food and grocery manufacturing sector provides the products Australians enjoy, use and export every day. This sector takes the fresh produce from Australian farmers and turns it into the iconic products we know and trust. And yet these iconic products are changing. There is a continued focus on investing in innovation and digital solutions driven by necessity and embracing the changes thrust upon the industry and community. About 61% of survey respondents said their primary focus was investing in processes and technology to better manage supply chain issues, while a close second (56%) was working on cost management and operational efficiencies. However, about half of the respondents were looking into how to deal with changing customer perceptions and focusing on customer value while keeping up with increased and changing demand for new products centred around premium choices, an emphasis on sustainability and the growing plant-based revolution. But food selection and supply isn’t the only sector changing out of sight. Transport, new kinds of energy generation for that sector, and new Australian businesses are jumping into manufacturing projects, and taking advantage of new ways of working. Throughout the pandemic, annual inflation rates have been sitting at their highest level in more than a decade, driven by global supply chain pressures, energy and labour shortages, and strong consumer demand for goods. These aren’t going away in the short term. People aren’t going to stop needing to eat. Like the majority of Pakistan, now the Australian foodbowls of Queensland, NSW, Victoria and Tasmania, floods are destroying grain, fruit and vegetable crops in the ground. Instead of being on the foreign news bulletins, these conditions are now beginning to be felt in our own houses. As the content in this issue of AMT contests, Australian manufacturers are up to the task. The challenges of supply, demand, transport and workforce retention are all part of business and a healthy majority of our industry are looking outside the box for solutions. Companies are looking into how to deal with the changing customer perceptions, focusing on customer value as well as keeping up with increased and changing demand for new products. As the Minister for Science and Industry Ed Husic said on the night of the Federal Budget, the Chalmers paper included $17.2 million to establish a pilot Food Manufacturing Innovation Hub on the Central Coast of New South Wales. And he also established the $15bn National Reconstruction Fund, which has earmarked investments in independently assessed projects across seven priority areas: resources; agriculture, forestry and fisheries; transport; medical science; renewables and low emission technologies. As called for by many industry bodies like Siemens and the PLMA, an emphasis on sustainability and the growing plant-based revolution in foodstuffs is directing switched-on manufacturers into this area. It’s actually quite an interesting time. However, as made clear by the government, the combination of the global conditions make it seem like a solution is a long way off, but we know what we need to do when we do those hard yards. Be inventive and keep moving. There’s a quarter million workers in this vibrant sector and the industry needs robust supply chains for the country to deliver. And people won’t ever stop needing to eat.

Russel Brand

Russell Brand tells Jeremy Paxman how it really is!