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Best value for everyone…?? - Metals New Zealand CEO Gary Hook Sixteen hundred tonnes of steel from China were found to be non-compliant to design standards for use in four bridges on the $450 million Huntly bypass that forms part of the new $2 billion Waikato Expressway. Contractors Fulton Hogan and HEB Construction admitted to RNZ News the steel tubes were not good enough and they did not comply with standards for structural steel, which for bridges are demanding as they must resist impacts, heavy loads and low temperatures in public safety critical applications. It has been revealed chose a very low bid for the steel piling tubes. They must have been concerned about product quality though. It has been reported the first quality assurance tests were done in China by the local steel mill and tube manufacturer; and it’s reported the second tests were done in New Zealand on samples sent here from China. Both lots of tests said the steel met the specification required under New Zealand Standards. However, the steel failed a third set of testing on the ‘as delivered’ product. The contractors said the weak steel was detected prior to use, but it has also been reported that workers have said the piling tubes performed badly in use. It’s been
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reported that the contractors went for a bid option that was 30 - 40 percent lower than an average market price for these tubes. The New Zealand Transport Agency (NZTA) is the client for this project and in infrastructure procurement capability terms has been regarded as ‘leading the way’ in New Zealand for many years. In October 2013, the Government launched their new Policy (Principles & Rules) for Procurement by government agencies. These stress the desire and need for more strategic procurement (read “not lowest price”) in pursuit of the ‘best value for everyone’. Metals NZ believes the relatively new Principles and Rules are what is needed both to deliver on the ‘best value for everyone’ objective but also to comply with our trade obligations for WTO, GPA and TPPA. This Huntly bypass non-compliant imported product is timely as MBIE is reviewing the Policy framework for product assurance in light of the recent steel mesh
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Steel producers are facing an oversupply of cheap steel that is only likely to get worse. China is responding to the glut by producing even more cheap steel: reportedly increasing production by as much as 4.5 million tonnes, which is almost as much as all the steel produced in Australia last year (1).
One of the smartest, fastest, easiest, and most cost-effective steps steel producers can take to protect their businesses is to get trade credit insurance. While this decision may not fit into accepted economically-rational parameters, it will certainly affect New Zealand steel suppliers, which are tiny compared to the steel powerhouse
that is China. Prices will likely collapse as NZ manufacturing companies source cheaper steel from China, Japan, and the United States. This global oversupply is likely to remain a problem for some time and may drive steel manufacturing plants out of business all over the world. This comes at a time when steelmakers are already operating on ever-tighter margins. While the lower prices may be a boon for manufacturers, steel producers need to protect their cash flow, find ways to economise, and look to boost their bottom line. They can do this by finding ways to innovate; by creating value-added services, for example. By creating a reason to charge a price premium, this can help them weather the storm. Manufacturers can also leverage the demand for sustainability by arguing that the environmental impact of cheap, imported steel outweighs the cost savings. However, one of the smartest, fastest, easiest, and most cost-effective steps steel producers can take to protect their businesses is to get trade credit insurance.
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