Infrastructure Australia Chief Executive, Adam Copp
Tuesday, 10 September 2024
Brisbane, Queensland
Check against Delivery
Good morning everyone,
Thank you, Adam for that introduction.
And thank you Mark Cain (CEO of ASI) for the invite to join your conference and speak today.
For those that don't know Mark proactively reached out to IA this year to seek to work together.
I’m pleased to say that we have grabbed that opportunity with both hands, and he is ensuring that the data and evidence of the domestic steel sector are well represented in our work.
Before I continue, I want to acknowledge the Traditional Custodians of the land on which we are all gathered today—the Turrbal people and Jagera people.
In doing so, I wish to pay my respects to their Elders—past and present.
I also extend that respect to all First Nations people here today.
It is a great pleasure to be with you all here today for this conference.
Iron ore and steel are vital contributors to Australia’s economic and diplomatic strength.
As you will have seen from the title of my presentation, I am going to talk about the Australian infrastructure landscape and the opportunities for the local steel industry.
And the word ‘opportunity’ is really the key element of my speech today.
We have an incredible demand to build right across Australia.
From projects that are reshaping our cities like the recent opening of the Sydney Metro line, to projects that will be critical to our nation’s future energy security.
All of these nation building projects will afford so many opportunities for workers, industries, the economy, and indeed Australia’s communities.
Although, against this demand to build, we are facing challenges with the market’s capacity to meet demand.
These challenges include:
Skills shortages.
Decades low productivity.
And challenges on the cost and access to materials, including steel.
In fact, cost escalation of non-labour resources has been a massive challenge for the past four years.
But, despite these challenges, there are still opportunities.
And today, I want to share the opportunities we see for Australia’s steel industry to be more involved in the delivery of major projects.
Before I get to that point, I want to talk briefly about who Infrastructure Australia is and what we do.
We are the Australian Government’s expert independent infrastructure advisor on nationally significant infrastructure investment planning, and project prioritisation.
That is our mandate and our purpose.
And this was solidified following the independent review into our agency and then changes to our legislation late last year.
So, how do we go about fulfilling this purpose and provide advice to the Australian Government?
Well, it can be best described in two ways.
The first, is through project evaluation and advice.
We independently evaluate project proposals of national significance on behalf of the Commonwealth government, when a state or territory government is seeking $250 million or more in Commonwealth investment.
Since 2016, Infrastructure Australia has assessed 104 nationally significant projects relating to more than $230 billion in Commonwealth funding.
Given we are in Queensland, think of projects like the Tiaro Bypass as part of the Bruce Highway Upgrade, or the Logan and Gold Coast Faster rail project.
We evaluate these projects from the states and territories and provide our views to the Australian Government.
As part of this work, we also have the Infrastructure Priority List, which you may be familiar with.
This is a list of priority projects that the Australian Government can invest in and essentially become a partner with the state or territory government delivering the project.
The second part is our policy and research work.
As the name suggests, this is where we conduct research and policy work to advise and inform the Australian Government’s infrastructure decision-making.
This work takes in our Infrastructure Audits, Plans and our flagship Market Capacity research program, which I will talk to today.
Across these two streams, our work aims to support Australia’s economic, environmental, and social prosperity.
Now, I mentioned our Market Capacity research program, and this is what I am going to use to give you a picture of the Australian infrastructure landscape.
This is an annual piece of research, which we deliver for National Cabinet.
The program is supported by data sharing arrangements that we have with each of the States and Territories on their forward infrastructure pipelines.
We also leverage data from private sector sources, such as the Australian Steel Institute.
Now, we bring all of this data together and put it through our model to generate an aggregated view of the nation’s infrastructure pipeline.
It also gives us the national demand across Plant, Labour, Equipment and Materials to deliver on that pipeline.
Put simply, the projects that are in the nation’s pipeline and the ability of the market to deliver.
This work is valued by all governments and the private sector, as it helps governments and the private sector understand what is happening at the national level—
Who is doing what, and what is likely needed to make it happen.
In December of 2023, we published our third annual Infrastructure Market Capacity report.
This edition showed that the nation’s total five-year infrastructure and building pipeline stands at $691 billion.
In the pipeline, building projects total $427 billion, while transport and utilities total $210 and $53 billion respectively.
An interesting insight we found through our research was that there is a 400 per cent increase in investment into energy projects over the next five years.
Given the Australian Government’s energy transition agenda, this growth is not surprising.
Although, while this scale of investment is impressive, transport and building projects largely overshadow energy projects in terms of total investment dollars.
That’s the nation’s total infrastructure pipeline.
But what if we are to look at just Australia’s major public infrastructure pipeline?
That is projects that are valued at over $100 million in states like Victoria, NSW, Queensland, and Western Australia.
And over $50 million in the smaller jurisdictions.
From our Market Capacity research, we know the nation’s total five-year major infrastructure pipeline stands at $230 billion.
The graph up right now shows the national forecast of that pipeline.
To quickly explain—the red line shows what was initially forecasted by governments from 2022 onwards.
That is the major infrastructure investment the states and territories, had planned—
Some of which is being supported by the Federal Government’s $120 billion Infrastructure Investment Program.
By comparison—the green line shows what’s actually occurred.
Now the important thing to note is the dark blue line that follows on from the green line.
This has been informed by our 2023 Mark Capacity research and shows a revised forecast of the pipeline and what the Australian, State and Territory Governments plan to invest.
So, what does this all mean?
First, the green line shows Governments are not meeting their total ambitions for infrastructure.
In fact, our historical data shows that they haven’t been doing so for at least the last three years.
We would say that this is because of market capacity constraints, which I will come to shortly.
Second, when you compare the red and dark blue line—the blue line shows a materially lower projected forward pipeline.
It is also less ‘peaky’, and the demand is spread across the future years.
What this indicates is there is a slightly more stable outlook for the nation’s major infrastructure pipeline.
With that being said, demand to build is still incredibly high.
Even with this more ‘stable outlook’.
This means that there are a lot of projects that are all competing for the same scarce resources—labour, plant, and materials.
But just how scarce are these resources?
As I mentioned, our research looks at labour and non-labour supply, and the productivity levels of the industry to get an understanding of the market’s ability to meet demand.
At a high-level—skilled labour shortages are a critical issue for the sector.
From our research, we know there is a shortfall of 229,000 public infrastructure workers, which is up from the previous year.
The professions most in demand are engineers, skilled trades, and labourers.
An interesting insight is trades and labour shortages are growing at the fastest rate and will remain high until 2025.
Productivity is another critical issue leading to constraints within the sector.
In fact, productivity levels in the industry are stagnating at 30-year lows.
This is mainly due to a low and inconsistent take-up of modern methods of construction, and a failing to see the value in leveraging data, and digital tools and technology.
I will also point out that there is a significant lack of diversity within the workforce, which is holding it back.
Women, for instance, only make up 14 per cent of the workforce and this has barely shifted over ten years.
I have touched on labour and productivity, but what of materials, and more specifically, steel.
Through our research, we have seen that steel imports grew 20 per cent over the past two years compared with the previous two decades.
With the construction industry accounting for approximately 70 per cent of demand for flat steel products and over 80 per cent of demand for long steel products, it is important there is adequate supply of steel products to meet demand.
But, as an example, 100 per cent of stainless-steel supply is imported.
Of course, relying on imported steel carries several supply chain risks, such as:
Fluctuating prices,
Transport costs,
Complex logistics; and
Product quality.
I will also point out that importing steel brings uncertainties with embodied carbon emissions, and the impact it will have on Australia’s efforts to decarbonise the infrastructure sector.
All of these risks place added pressure on the ability of major projects to be able to meet deadlines and their budgets.
When it comes to steel fabricators themselves, we also see challenges.
For instance, industry has told us that at a national level, there is a shortage of fabrication capacity and plate to meet strong increases in demand, which may impact the construction of wind and telecoms towers if not well managed.
This lack of domestic capacity is largely driven by two key factors.
The first is due to ‘boom and bust’ or ‘feast and famine’ investment cycles.
That is, uneven annual spend from project proponents, which creates ‘end of year’ bottlenecks.
This means fabricators don’t have longer term certainty to invest into themselves to ensure they have the capacity to deliver what they need to meet demand.
The second is due to a lack of transparency with what’s coming through the infrastructure pipeline and early engagement by those delivering projects.
That lack of transparency and early engagement means there is uncertainty for the industry itself to know what it can support and ensure it has capacity to be prepared for this spend by project proponents.
I want to make the point though that a lack of capacity is not equal or correlate with a lack of capability.
Infrastructure Australia sees that the industry is more than capable of meeting the needs of major infrastructure proponents.
But what we need is a way for governments and those delivering major projects to help give clarity and certainty to the industry so it can be ready to support major projects.
So, this is Australia’s infrastructure landscape as we see it.
A high demand to build, but not really the means to deliver all of it with the resources we have.
The consequences of this are projects running over time, over budget and causing prolonged disruption for communities.
While our Market Capacity program enables us to gain this deep understanding of the challenges in the nation’s infrastructure industry, it doesn’t end there.
We also put forward potential solutions—fourteen of them to be exact.
Fourteen recommendations for the Australian Government to act in partnership with State and Territory Governments to resolve the issues being faced by the sector.
We have grouped these recommendations into four areas:
Ways governments can proactively manage demand,
Ways to expand non-labour supply,
expanding labour supply; and
improving productivity within the sector.
We developed these in close collaboration with governments to ensure we were providing practical recommendations.
Recommendations that would either complement or fill gaps in existing policies.
And recommendations that would potentially lead to improvements.
So, what do we say about steel?
To start, we do see an opportunity to increase Australia’s steel production and fabrication capacity.
To help realise this, we have recommended that the Australian Government undertake an analysis of domestic steel production and fabrication capacity.
But what would this achieve?
Well, this analysis can inform governments and those delivering major projects on the actual availability and capacity of the sector – and track the actual impact of their policy interventions on the economy
For instance, with the data collected through this analysis, governments can use policy levers to encourage greater use of the local steel industry.
An example here could be leveraging the procurement process to ensure local businesses are considered in the delivery of certain project types a
Or, at least making sure the local sector is considered as a first option.
For those delivering major projects, it would give them greater clarity and awareness of the industry and who they can work with.
This understanding and awareness would encourage them to potentially look to the local sector for their steel needs first, rather than internationally.
It will also potentially encourage them to look to the sector earlier to ensure their needs can be met.
But how does this then increase capacity of the sector?
It all comes down to creating confidence.
Confidence across government to know it can potentially use policy levers to foster greater engagement and consideration of the local steel sector as a viable option.
And then it creates confidence among those delivering major projects of who is available within the industry that can support their needs.
The ultimate benefit here is of course the local steel industry to know it will be looked to more to support the delivery of major projects.
This then gives the steel industry confidence to know it can invest into itself to increase its own capacity to better meet demand.
For example, if there is a steady pipeline of major projects that the industry knows it will be asked to support, it is more likely to invest into itself to increase capacity to meet demand.
Another opportunity we have highlighted in our Market Capacity report is around better understanding our country’s local manufacturing and production outputs.
This understanding could enable governments to better track and mitigate future supply shortages for materials.
It could also enable a more coordinated approach to stage demand in line with project needs and the capacity of the market.
To achieve this, we recommend the Australian Government track and analyse local manufacturing and production output by working with the ABS.
So why have we made these two recommendations?
And why have we focused on the need to collect and analyse data?
It is all about improving awareness and making sure we are able to better work and connect with who we have here in Australia.
As I said, knowing who is out there and what they can do, can potentially increase the chance of the local steel industry being looked to for major projects first, rather than overseas.
It can also lead to earlier engagement with the industry so it knows what is coming and what it could potentially support.
I do want to highlight that early engagement is really important for helping improve the industry’s awareness of what projects are coming.
It is important so it can make the necessary investments into itself to ensure it has the capacity to meet demand.
Through early engagement, there are also opportunities for potential collaboration between steel businesses.
What I mean by this is rather than looking for one business to deliver every aspect themselves, there is time for multiple businesses to work together to meet a project’s needs.
And it is here I want to reference a powerful case study, which I am sure many of you would be familiar with.
CommBank Stadium in Parramatta, NSW.
A project that cost $360 million, created 1,200 construction jobs, and used 4,500 tonnes of Australian steel.
Now, the steel was supplied by Southern Steel and the exposed local steel was fabricated and painted by several Western Sydney businesses.
This was all possible, because the structure was designed and specified to ensure local steel mills could competitively produce steel, which was then sent to a large group of existing suppliers and fabricators within a 10km radius of the stadium.
The scale of the project and early engagement with these businesses was able to give them confidence to invest in new equipment and expand their capability to deliver on this project as well.
This is evidence that the local steel industry can and does work well on major infrastructure projects.
Projects like these are of course multi-year projects, which also gives the industry a more sustainable flow of investment into their business.
This more sustainable flow of investment means that the local steel industry can consider longer term business planning and strengthen its capacity to meet demand.
I want to thank the Australian Steel Institute for bringing this case study to our attention.
We plan to spotlight this case study in our upcoming 2024 Market Capacity report.
Now, imagine if we could involve the local steel industry in more projects like the building of CommBank stadium?
Again, what we believe is critical to facilitating this is first an understanding of who is out there, what they can do, and their own respective capacity to deliver.
This would then potentially reduce our need to look to international supply chains as much as we do, and potentially lead to helping de-risk the delivery of major projects, including:
Risks around cost.
Risks around logistics.
Risks on product quality.
And giving the industry greater certainty around carbon emissions as well.
I do want to make the point that, I know as an industry, you will all be aware of what you can do.
How you can work together.
And have confidence that you can deliver what is needed.
What these recommendations are about is ensuring that governments can use policy levers available to them to make these opportunities are available for you.
It is also about creating greater awareness among those delivering major projects on the viability and capacity potential of the local steel industry to meet demand.
Thank you for your time today and affording me the opportunity to share Infrastructure Australia’s insights.
Our Market Capacity Program is a critical part of our advice and support to the Australian Government and, since its inception, has really gone from strength to strength.
My team are currently in the process of developing our fourth Market Capacity report and this will be released later this year.
I know the Australian Steel Institute has been a big supporter of this research and I want to express my appreciation for your assistance in helping its development.
If you are interested in reading any of our research, it is all publicly accessible via our website.
This includes our Market Capacity reports, our Audit, Plan, Annual Statements and even all the summaries of evaluations we conduct for nationally significant infrastructure proposals.
Thank you again and enjoy the rest of the conference.