Australian connection

Residential construction took the largest hit when the global financial crisis struck Australia, but for the industry as a whole, there were few elements of the supply chain left unscathed.

For cranes this meant very careful fleet management and optimisation to achieve the highest utilisation rates possible and weather the worst of the storm.

In Australia, playing to the country’s strengths has resulted in what many are referring to as the development of a multispeed economy, where endeavours such as mineral extraction create the majority of the country’s wealth while other sectors languish.

Although not typically a bedrock for many in Australia, infrastructure work looks set to provide significantly more activity for the crane rental businesses down under.

Tutt Bryant’s Southern regional operations manager Malcom Smith comments: “Interestingly enough probably in the last two to three months of invoicing we’ve actually seen a big swing towards infrastructure, purely due to the numbers of cranes on desalination plants in Adelaide and in Wonthaggi in Victoria, and also we’re also doing an upgrade to the one in Perth.

“It has swings and roundabouts but that’s the first time ever in history of Tutt Bryant that we’ve actually had infrastructure lead the way in revenue.”

Much of this revenue boost for Tutt Bryant is thanks to work in southern Australia, primarily on desalination plants in Victoria and Adelaide.

But as Smith observes, these swings and roundabouts mean that across the country there is a fair amount of disparity in the level of opportunity infrastructure work brings.

In Australia’s metropolitan areas there has been little government spending on civil infrastructure in recent years, and with residential construction depressed, firms in these areas have had a difficult time.

That may be about to change, according to CICA president John Gillespie. “There certainly was a slowdown after the global financial crisis. It did slow down and there were some significant projects which were put on hold or deferred.

“Those deferred projects are now back in the planning or the implemented stage, so it’s returning to its former momentum and building up now.”

For eastern Australia any extra momentum would certainly be appreciated, as a number of tunnel, bridge building and other infrastructure projects have recently completed.

Construction services and machinery group Freo’s managing director, Tony Canci, comments: “The finishing of the gateway bridge and some other projects coming to an end have really seen a downturn of activity in Brisbane of about 20%-30%, and that’s been compounded by the floods that they’ve experienced.

“Queensland has had a fairly bad period over the last 12 months, but we’re hoping that will improve from here on.

Gillespie shares this sentiment for the east coast, particularly for the state of new South Wales, which accounts for around 30% of the Australian economy.

“In Sydney there’s been very little money spent on infrastructure in the last five or six years. We’ve recently had a new state government elected and the new government is committed to spending a lot of money on Sydney’s transport network, a couple of large infrastructure projects which will commence in around 12 months.

“The first one they are going to do is the north-west rail which is around about a $7bn project. Then there are road projects and other rail projects in and around Sydney that they will be spending significant amounts of money on, so speak to me in 18 months time and I might have a smile back on my face!”

160km north of Sydney lies Newcastle Port, one of the largest coal exporting operations in the world. The port is currently in the midst of a A$2bn expansion over several years that will more than double the port’s export capacity.

With such prospects looming, and metropolitan construction looking more upbeat it is easy to forget that even grander plans are afoot in other regions, particularly western Australia where the lion’s share of the mining, oil and gas concerns are based.

However with 65% of its fleet in western Australia Tutt Bryant knows on which side its bread is buttered, and has an unrelenting focus on the oil and gas sector based in the north-western shelf of Australia.

Large-scale resource development projects such as the Gorgon LNG project, valued at around A$50m, and the Pluto LNG project, valued at A$12m, demonstrate that the bulk of the opportunity for crane firms remains firmly in the west.

And with other markets in Europe and the Middle East still taking tentative steps away from recession, these opportunities have not gone unnoticed by international players in the industry.

Mammoet, one of the first nondomiciled internationals to establish themselves in Australia, already hold a substantial heavy lift and transport contract for the Gorgon project.

With the likes of ALE, Al Jaber, Fagioli and Sarens also on the scene, competition is starting to tae on new levels across Australia.

Freo’s Canci comments: “We’ve seen fairly competitive prices from these big internationals coming in trying to cut out a market share and build relationships with people in Australia.

“There is forecasted to be significant activity here, but I think they’re coming in because of a lack of activity outside of Australia. There’s a lot of equipment being parked up in Europe and the Middle East that’s under-utilised.”

As well as Australia’s strong mining, oil and gas sectors, outside companies have been looking to other avenues, including the nation’s fledgling renewable energy sector.

Irish crane rental company McNally’s Crane Hire sent a Liebherr LTR 11200 to Australia in 2010 to work on a wind farm in Waterloo, and seem intent on exploiting the country’s renewables market.

In addition, wind power firm Suzlon has begun purchasing its own cranes to perform turbine installations, which adds to the impression of a sector currently under-served by Australia’s crane fleets.

Smith says: “The state federal governments within Australia probably haven’t committed to the renewable energy sector as much as they could have. There is a lot of talk but not much actually being put pen to paper.

“There’s still renewable energy targets that we are looking to achieve and we’ll probably achieve that in Australia in each state. There is a fairly significant project in the early stages of construction for around 140 [turbine] towers for lower Victoria.

“But there’s so many other projects on the drawing board that just don’t seem to have gained momentum to a point where they’ve become real jobs.

“True Australian companies haven’t had huge success in the renewable energy sector as such, especially the wind tower sector, which is probably the biggest of the renewable energy sectors in Australia.”

With more government backing to rouse the potential of sector that will undoubtedly become increasingly important the world over, rising competition in Australia could be balanced with even greater opportunity.

But for now the focus remains firmly on resource extraction, and despite the current state of affairs, Smith believes activity within the infrastructure sector will realign itself to its usual position dependent on the growth of Australia’s dominant resources extraction industries.

“We’ll see the trend go back the other way to the mining sector, so some of these projects that were in the feed stage 12 months ago will cause a huge swing back the other way. There’s so many of them, they’re so significant and they take big numbers of cranes.”

All of this activity brings with it another consideration for the future of Australia’s industry, namely the availability of skilled workers capable of operating such expensive machinery safely.

Smith says: “Because of the volume of projects, one that comes to mind is the project Gorgon, at the peak when that construction site is operational and they’re building wharfs and LNG trains and laying pipes on the ocean bed, they are going to be looking for around 10,000 skilled construction workers for one project.

“You can understand very quickly if you look at the amount of projects currently being undertaken in the planning stage for the future, and there’s just not enough skilled labour to actually cover that.”

Already there are shortages of skilled operators in western Australia, forcing firms to resort to flying manpower out from the denser populated eastern areas.

Although this may seem like an expensive solution, the alternative is less desirable.

Canci observes: “If you’re looking at the total cost of ownership, if a machine is down and the technicians aren’t there, it’s going to affect the downtime considerably.”

To this end, Freo gives much more consideration to the proximity of the manufacturer and its after-sales service staff when buying new cranes. But the training of new operators and technicians will have to be given its due attention if Australia’s current level of growth in activity is to be sustained.

With the lessons of the global financial crisis firmly ensconced in the minds of the industry, even with Australia’s mining, oil and gas sectors charging ahead at full speed, complacency does not come easy.

Reflecting on the dangers of overreliance on certain sectors even when future prospects are bright, Smith comments: “We understand that marine, oil and gas and mining in, maybe, four years time will actually start to decline dramatically. We need to know what else we can target in the marketplace that we can have success with.

“It’s a balance, you’ve really got to concentrate on having a good balance in your fleet so that you’re not top-heavy. If the industry goes quiet on heavy lift all of a sudden you’re not in financial difficulty, that’s what it’s all about for us.”