Structural Metal Product Manufacturing Industry in Australia
As the world emerges from the debilitating effects of the COVID-19 pandemic, an important and interesting feature to be analyzed is whether manufacturing demand would increase proportionately, specifically metal and steel fabrication and manufacturing. Focusing on Australia specifically, the demand trend can be analyzed to better understand whether the beleaguered metal manufacturing industry is likely to receive a boost in coming months. This article will dive deeper in this topic and will cover the likely drivers of this industry from an Australian perspective.
Demand from Building Construction
Commercial and Industrial: The commercial and industrial building construction market is an important source of demand for a range of structural metal products, such as metal security doors and shutters, staircases, balustrades and curtain walls. Greater activity in these construction markets boosts demand for many industry products, for example the use of I-beams in structural steel construction. Demand from commercial and industrial building construction in Australia has fallen in 2020-21, threatening industry performance.
Residential: Residential building construction represents one of the most important sources of demand for structural metal products. House and apartment building construction generates demand for a range of industry products, including window and door frames, fly screen doors, metal balustrades, and shutters and garage doors. Demand from residential building construction in Australia has declined in 2020-21, thus negatively affecting the industry.
Downstream Construction Markets
Declining demand from the residential building and heavy and civil engineering construction markets has weakened industry expansion over the past five years. Firms that construct buildings such as houses, apartments, hotels, offices and factories require a range of structural metal products such as garage doors, curtain walls, pressure vessels and metal door and window systems. Demand from the Australian Institutional Building Construction industry has increased over the five years, largely due to PPP-funded buildings for education, healthcare and aged-care. Institutional buildings such as schools, libraries, courthouses and hospitals are important markets for metal door and window systems, awnings and shutters. However, growth in commercial building construction activity has made this market more significant to the industry compared with institutional building.
Industry Competition
Industry products are forecast to become increasingly vulnerable to competition from substitute products over the next five years. Substitute products, such as structural timber, aluminum and plastic, share many desirable characteristics with steel products, while also being lighter and often cheaper. These substitute products are increasingly gaining acceptance in Australia as a more efficient and aesthetically-pleasing alternative to steel products. Consequently, the rising popularity of these products is projected to negatively affect demand for industry products over the period.
Key Markets
Residential building construction is expected to drive the Australian metal product manufacturing industry expansion over the next few years, with the construction of houses boosting demand for garage doors, windows and door frames. Furthermore, the construction of large multi-unit apartments and townhouses in major capital cities, such as Melbourne and Sydney, is also anticipated to support demand for the industry. Rising disposable incomes are also forecast to increase customer demand, which may be a challenge for the fabrication and manufacturing industries. Since the industry is highly fragmented, small-scale manufacturers tend to focus on specific product segments rather than diversifying their manufacturing capacity.
Conclusion
A question may arise as to how non-building construction companies in Australia contribute to the metal product manufacturing industry? While there is a demand for industry products for mineral and energy infrastructure construction, transportation construction etc., declining capital expenditure spends has reduced industry revenue in recent years. The demand from the residential building construction market remains the strongest driver of industry performance and it is hoped that a recovery of demand in this sector comes sooner rather than later!