Make what is heavy, urgent or made to measure

Few subjects produce more heat with less precision than whether Australia should make things. One side argues that a country unable to make its own building materials has lost something essential, and points to the shortages of 2021 as proof. The other side compares an import's landed price with a local factory's cost and concludes that the factory is an indulgence. I have argued both positions inside one company, and I have come to think both ask the wrong question.

The useful question is not whether to make things in Australia but which things. In my experience the answer lies in three properties of a product: its weight relative to its value, how quickly a customer needs it, and how far it is made to that customer's measurements. A product that scores high on any of them can usually be made here profitably, if the plant is efficient. A product that scores low on all three will eventually be made wherever it is cheapest, whatever anyone says about sovereign capability.

Freight is the first protection

A pallet of five hundred clay bricks weighs well over a tonne and sells for less than a thousand dollars. A sheet of plasterboard is bulky, fragile and cheap. Moving either across an ocean adds a large share of its value in freight, handling and breakage before it reaches a builder's site, and a damaged pallet is a total loss. That is why imported bricks and plasterboard have remained a small share of local demand even when Asian producers' costs were far below ours. The protection is physical. No tariff or campaign created it, and none is needed to keep it.

The arithmetic runs the other way for aluminium window profiles. A tonne of extruded profile is worth many times a tonne of bricks, it stacks densely and it does not break. Freight adds only a few per cent to its landed cost. When overseas extruders with larger presses and cheaper energy can sell standard profiles below the cost of running an older Australian press, goodwill will not keep that press full. We learnt this at Marrangal in 2018, when our Melbourne extrusion press, installed in 1989, needed A$24 million of work and was running at 58 per cent of its capacity.

Energy complicates the picture without overturning it. Bricks and plasterboard are energy-intensive, and the rise in east-coast gas prices after 2022 narrowed the freight advantage on some heavy products at the margin. That is a reason to treat energy as a strategic input, contracted with as much care as the plant it feeds. It is not a reason to give up products that freight still protects.

Where an importer cannot follow

Urgency and fit matter most in windows. A residential window is made for one opening in one house, often to a size the builder confirms only when the frame is standing. If a window is damaged on site or mismeasured, the builder needs a replacement within days, not after a container's sailing time. A local fabricator that can measure on site, deliver in ten working days and replace a unit within forty-eight hours is selling time as much as aluminium and glass, and builders pay for time because an idle crew costs them more than the window.

Imported finished windows compete well where those conditions disappear. High-rise apartment projects order thousands of identical units months in advance against a fixed programme, and the windows can be made offshore and shipped in sequence. In 2018 imported systems from Chinese fabricators were winning apartment tenders at prices 25 to 30 per cent below ours. We were losing money on that work, about A$61 million of revenue a year, and we were losing it on the one product where an importer's disadvantages vanished.

Fit protects other products too. Prefabricated timber frames and trusses are designed for a particular house plan and delivered in the order a crew will stand them. Their value lies in the detailing, the scheduling and the delivery more than in the timber, and an importer would struggle to offer any of the three.

What we stopped making, and what we kept

The decision we took in 2019, when I ran the windows division, followed these properties rather than any general view about manufacturing. We closed the extrusion press and bought standard profiles from an Australian extruder and a Malaysian one. We withdrew from high-rise apartment windows. And we put A$19 million into an insulated-glass line in Melbourne so that we could make double-glazed units to order, a product that is heavy, fragile, made to measure and increasingly expected as energy requirements for new homes tightened. In short, we stopped making what travelled well and invested in what did not.

The decision cost 85 jobs at the press, of which we redeployed 31 into glazing. Our operations director argued, with good reason, that we would lose control of lead times and of the dies that shaped our profiles. He was partly right. In 2021, when shipping schedules collapsed and builders were working through a stimulus-driven surge, deliveries from our Malaysian supplier slipped by seven weeks, and the backlog cost us about A$9 million in lost sales and expediting. I now think we should have kept ownership of our dies and held a strategic stock of every profile that only one supplier could make. An import strategy without a disruption plan is only half a strategy.

Even so, the division's EBIT margin rose from 2.1 per cent in FY2017 to 8.4 per cent in FY2021, and double-glazed units grew from 9 to 41 per cent of the windows we made. We could not have funded the glazing line while also rebuilding the press.

The test applies well beyond windows. It suggests that Australian manufacturers should be wary of public calls to rebuild capacity in products that travel cheaply, unless a customer, a government or a defined strategic need is prepared to pay for that capacity explicitly and for long enough. It suggests equal care about importing heavy, fragile or urgent products on the strength of a quoted price that leaves out breakage, delay and the cost of an idle crew. And it suggests that the best defence against cheap imports is rarely a cheaper version of the same product. It is a product that cannot sensibly be put in a container.

Directors of manufacturers can apply the test with three questions for each product line. What does freight add to an importer's landed cost? How quickly does the customer need the product, and what happens when it arrives late or wrong? How much of its value lies in fitting one customer's measurements? A business that can answer those questions knows where to invest and where to buy. One that cannot will keep arguing about patriotism and price.