THE economic boom is destroying part of WA’s manufacturing base, agriculture machinery makers say.
As a result of the lopsided expansion caused by mining, the state’s builders of farm equipment are facing an uncertain future with mounting costs from blowouts in steel prices, a tightening of supply of machinery components and a declining skilled workforce.
In combination, the pressures have severely impacted on the makers’ productive capacities to a point where manufacturers will not be able to meet domestic demand in the immediate future.
Since January, steel suppliers have increased steel prices 8pc to 20pc every six to eight weeks.
Depending on the products, this has meant prices have risen over the past five months between 30pc and 100pc.
In the same period, there has been a serious decline in skilled labour, based on anecdotal reports from manufacturers.
AF Gason managing director Les Gason said the current combination of high grain prices and rapidly escalating steel costs presented a challenging scenario not previously seen in his 50 years in the industry.
Wild escalations in demand over the past couple of years, difficult to predict steel pricing and changing ordering patterns are putting great pressure on manufacturers.
"If the proposed RHS increase for June comes through, it will represent a 39pc increase over five months," Mr Gason said. "We’ve had periods of rising steel prices in the past but nothing like this.
"Machinery sales across Australia fell in mid-2004 when grain prices plummeted. Last year we saw interest increasing in line with rising prices and then sales really jumped as the 2007 crop came off.
"Stock on the grass quickly sold and lead times have now gone right out. Suddenly order books are full to overflowing and we are chasing staff and desperately trying to keep up with demand. Getting our suppliers to ramp up quickly is also a problem.
"But the really big challenge is pricing, and it’s a challenge for manufacturers all over the world.
"How do you factor these increases into your product range? It’s not just steel and castings - all components are going up at an alarming rate."