Prohibitive shipping costs will prevent Brickworks from ramping up production at its WA plants to help support an east coast network hit by sharply rising energy prices.
The country’s biggest brick maker yesterday added to the growing pressure on Federal and State governments over a looming energy crisis by warning it may have to shift some manufacturing offshore for the first time in its 108-year history.
Frustrated industry groups have castigated the Federal Government and the NSW and Victorian governments over the energy policy failures that threaten to leave manufacturers in eastern Australia short of gas by the end of next year.
Brickworks yesterday said that while it had secured gas supplies for its east coast brick and tile plants until the end of 2019, it would have to pay 76 per cent more for the supply, adding $20 million a year to its energy costs.
The group is now looking to mitigate the hefty price increase by evaluating new, more efficient kilns, alternative energy sources, increased imports and the possible relocation of some manufacturing offshore.
“We never thought after 108 years of making bricks in Australia, we would need to investigate manufacturing overseas,” Brickworks chairman Robert Millner said.
The company’s Austral business already imports bricks from Spain and smaller volumes from WA, where it operates plants in and around Perth, at Cardup, Bellevue and Armadale.
One option would be to increase the feed of bricks from WA, where it has spare capacity, to Austral’s busier east coast markets.
However, Brickworks said little had changed since last year when the group complained that expensive domestic freight rates meant it cost twice as much to ship bricks from Perth to Sydney as it did to import them from Spain.
“It’s two-thirds the cost of manufacturing bricks to get them from the west to the east,” Brickworks managing director Lindsay Partridge said.
“If that wasn’t the case … then we would be running our plants in WA to supply the east, for sure.”
Brickworks said the east coast’s new LNG suppliers should be banned from “covering their shortfalls by buying third party gas from assets that have traditionally served the domestic market”.
“Longer term, Australia needs a policy response that focuses on reform such as freeing up exploration and development and getting more suppliers into the market,” Mr Millner said.
“Exporting our gas is not just putting at risk the jobs of 2000 to 3000 brick makers in Australia, but also the more than 25,000 bricklayers that rely on an uninterrupted supply of products.”