The widespread shutdown of global supply chains caused by COVID-19 has been good news for Adelaide metal printing company AML3D.
“We’ve seen quite a reasonable increase, probably two-fold from what we would normally get,” founder and managing director Andy Sales said.
His company makes metal parts, such as propellers and compressors for ships and the automotive industry, at its factory in Adelaide and exports them around the world.
The parts are created using a new layering technology, developed by Mr Sales, that combines traditional welding techniques with digital drawing, a robot and 3D printing to create metal objects out of titanium, aluminium, nickel and steel.
“Parts and components normally produced in northern Italy and other parts of Europe at the casting shops and forging shops, with the recent unfortunate COVID-19 environment shutting down a lot of this industry, some of these customers in Australia are looking for local solutions,” said Mr Sales.
There is growing interest from the oil and gas sector for his locally made products, as Mr Sales also eyes off orders as part of the Royal Australian Navy’s fleet expansion.
“Our technology offers the possibility of reduced lead times and reduced manufacturing times and the process we’ve got actually offers enhanced strength, which is more beneficial than the traditional casting and forging techniques,” Mr Sales said.
Australia’s share of manufacturing
AML3D’s growth is the kind of resurgence economists and those in the sector want to see more of to pull manufacturing out of its decline.
In the late 1980s manufacturing was the biggest employer in Australia, with 16.5 per cent of the workforce.
Now less than 1 million people work in the sector, accounting for 6.4 per cent of jobs.
Manufacturing’s contribution to GDP peaked in the late 1950s and into the 60s when it was just shy of 30 per cent. Now it has shrunk to about 5.5 per cent.
New analysis shared with The Business by The Australia Institute’s Centre for Future Work reveals Australia does not fare well against its OECD counterparts.
“Most other industrial countries have manufacturing sectors that are successful and large enough to, in aggregate, meet their own domestic needs for manufactured products,” report author and director of the centre Jim Stanford explained.
“In Australia’s case, however, we’re using more manufactured goods all the time but we’re producing a smaller and smaller share of those.”
Dr Stanford has ranked OECD countries based on their manufacturing self-sufficiency — the amount of goods they manufacture versus the amount of manufactured goods they use.
Australia is last, producing about two thirds as much manufactured output as it consumes.
Most other OECD countries produce, on aggregate, more manufactured goods than they consume.
“Australia has one of the most underdeveloped manufacturing sectors of any industrial country in the world,” Dr Stanford told The Business.
“I think there is a mistaken assumption that if you’re a rich, high-wage, industrial country you just can’t do manufacturing. After all, it’s much cheaper to do things in China or Thailand or some other low-wage country.
“We found that traditional assumption is absolutely false.”
Job maker
Dr Stanford estimates that increasing Australia’s manufacturing self-sufficiency to 100 per cent could add another $180 billion a year in new manufacturing output, boost GDP by $50 billion a year and add more than 650,000 direct and indirect jobs.
“I think it’s a pragmatic and ambitious goal to try and rebuild manufacturing in Australia back to a level that’s comparable to our own need for manufacture,” Dr Stanford said.
The impact the COVID-19 pandemic has had on businesses and workers across the nation is well documented.
Advocates for manufacturing say the sector could again be a major employer if it is encouraged to grow.
Most of the 926,000 workers in the sector are employed by small to medium enterprises (SME) with fewer than 20 employees.
“We’ve gone from being a very significant employer to less than a million people now,” said Vonda Fenwick, the chief executive of the South East Melbourne Manufacturers Alliance (SEMMA).
Her group is one of many calling on the Government to incentivise more manufacturing in Australia.
SEMMA is calling on all tiers of government to buy more locally made goods.
“It simply makes sense for us to be really sticking to those policies, making sure that we’re buying locally, making sure that we are mandating local content requirements to ensure that we’re providing work for manufacturing.”
Local supply chains
After the roofs of the Australian National University and the National Library of Australia were damaged by January’s Canberra hailstorm, they were covered in an Australian invention made in Sydney.
Stormseal is a polyethylene film that is laid on storm-damaged roofs. Heat is applied to it and it shrink wraps onto the roof.
The company’s managing director Matthew Lennox makes the product on food-grade manufacturing facilities in Sydney and most capital cities in Australia.
He also has plants making his product in France and the US.
“We call it a storm-ready response product, so what that means is that when a big storm hits we actually have the ability to make it on demand, which allows us to not to have to hold stock or have expenditure when we don’t need it,” he said.
Mr Lennox has been approached to produce the film in Asia where it would be cheaper, but he said making it close to his customers meant he could deliver the film more quickly and support the local economy.
“It’s good in respect to keeping jobs here in Australia for the reason of the manufacturing side of things,” he said.
“But it’s not just the manufacturing, it’s the supply chain that has benefits too, so our polymer, our fire retardancy, our UV inhibitors that go into the film, that all has a flow-on benefit.
“Outside of that, we’ve got several consultants that we use for marketing and sales and communications that are all Australian based too.”
About 30,000 square metres of his product remains on the roofs of national buildings in Canberra.
More than minerals
Australia’s extensive mineral resources — including iron ore, bauxite and nickel — plus other primary products, such as agriculture, account for about three quarters of our goods exports.
The wealth created by exporting raw mineral and resources products was almost $290 billion last year.
Last year almost 75 per cent of Australia’s exports were primary products (minerals, LNG and farm products) worth almost $290 billion.(ABC News)
However, Dr Stanford said Australia was selling itself short by exporting minerals such as lithium, a mineral we are the largest producer of in the world, in its raw form.
“Once again we’re limiting our horizons to just digging it out of the ground and then sending it to other countries, to then manufacture it into these value-added products that we then import back from them,” he said.
“Lithium is worth about $US750 ($1,046) a tonne in its raw form but, if we actually manufacture it into batteries, that same amount of lithium would be worth about $US150,000.
Dr Stanford said there were also strategic benefits to increasing manufacturing.
“About two thirds of all world trade consists of manufactured products, so if you don’t have a strong domestic manufacturing base you’re shutting yourself out of most world commerce,” he said.
How stupid were we to let manufacturing independence fall so low?
Yet it is not coming back on current policies. Our bubble managers have no idea how to bring it back. It will entail:
major tax incentives that we will not do thanks to the power of miners;
major energy reform that we will not do thanks to the power of big oil;
major property tax reform to lower the currency that we will not do thanks to the power of banks and property;
major productivity reform that we won’t do because it hurts;
major monetary policy reform that we won’t do because the RBA and APRA only want to protect their bubble.
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It also takes balls and all industry policy like this, at Bloomie:
Japan’s government will start subsidizing some companies to invest in factories in Japan and South-East Asia as part of efforts to reduce reliance on manufacturing in China.
Fifty-seven companies including privately-held facemask-maker Iris Ohyama Inc. or Sharp Corp. will receive a total of 57.4 billion yen ($536 million) in subsidies from the government to invest in production in Japan, the Ministry of Economy, Trade and Industry said Friday. Another 30 firms will receive money for investments in Vietnam, Myanmar, Thailand and other Southeast Asian nations, according to a separate announcement, which didn’t provide details on the amount of money.
While the METI statement doesn’t explicitly state the money is to move production out of China, Prime Minister Shinzo Abe said in March that Japan needed to bring production back home or diversify output to Asean nations and elsewhere to cut reliance on any one country such as China.
Eventually, manufacturing will come rushing back when we panic and pay it to but that will probably only happen with the next major war.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
