Metal fabrication work continues to head offshore

The report Modular Fabrication in the Resources Sector in Western Australia was commissioned by the Department of Commerce and the Industry Capability Network Western Australia to investigate concerns about reductions in supply by steel fabricators to some resource projects.

The report, which was tabled in State Parliament last month, surveyed 14 resource developers and 12 companies from the steel modular fabrication industry to investigate priorities considered during the tendering process including cost competitiveness, skill level of trade workforce, ability to meet production schedules, material input costs and workforce productivity.

Lead investigator, Associate Professor Martin West, said the report looked at the factors involved in the tendering process for the manufacturing of steel modules and how Western Australian fabricators compared with overseas competition.

"The study shows that although Western Australian steel fabricators have some of the highest skilled workforces in the world, the costs advantages of manufacturing modules offshore then shipping them back to Australia are winning out," Associate Professor West said.

The study also revealed there was a difference in priorities between resource developers and the steel fabricators.

"The study discovered that the resource developers placed a much higher priority on ensuring the projects complied with technical specifications, were of a high quality and were delivered on time than the steel fabrication companies," he said.

A number of respondents to the survey indicated costs to fabricate certain modules in Australia compared to other international countries could be 40 to 60 per cent higher.

"It is clear that labour rates are a main factor in cost competiveness," he said.

"Respondents quoted figures of $40 an hour for trade labour rates in Thailand compared with $180 an hour in some remote locations in Western Australia."

Industrial action and the rigidity of the labour market were also mentioned in the report as important factors why Western Australian fabricators were less successful in securing work.

The report has proposed eight recommendations government and industry could implement.

"Our recommendations include a review of government policies that impact on modular construction, investigating the feasibility of a financial guarantee system for WA fabrication companies and developing a database of all potential tender opportunities as well as the capabilities of the local industry," Associate Professor West said.