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Reactions to sourcing of steel for Snowy 2.0 from Italy

Manufacturing News

Elsewhere today @AuManufacturing has reported on the letting of contracts for steel fabrication for Snowy 2.0 to an Italian company, contrary to the original tender requirement for Australian steel to be used. We sought comment from many sources which are published here, along with extracts from questioning in Senate estimates.

@AuManufacturing contacted numerous stakeholders in the steel supply process and late last night had had received no comment from Snowy Hydro and industry minister Angus Taylor.

BlueScope Steel declined to comment given the sensitivity of the issue.

Opposition industry spokesman Ed Husic said: “The Morrison-Joyce Government talk a big game about supporting Australian manufacturing but it rarely backs it in reality. This decision is the result of Australian industry being slowly abandoned over a decade of this tired government.

“Average Australians get we must be a country that makes things. They’ll be staggered to learn that the Coalition let two thirds of the steel going into Snowy 2.0 come from an overseas firm. That’s not good enough.

“At a time when quality Australian steel makers are under pressure, it’s stunning to learn that big government contracts went overseas rather than looking to open opportunities to local firms.

“The Federal Government spends billions in purchasing the goods and services it needs. Why can’t it use those dollars to make a massive difference in helping rebuild Australian manufacturing? Instead, it has actively decided to leave Australian industry behind, in favour of their international competitors.”

Australian Manufacturing Workers Union national secretary Steve Murphy said: “This Government continues to sell out local manufacturers by not requiring a minimum level of content on public funded projects. Encouraging the cheapest outcome with imported steel puts the future of our workers and industry at risk.

“The Federal Government has already sold-out or put at risk over 100 jobs at wind tower manufacturer Keppel Prince when it refused to accept responsibility for inferior imported towers on the wind farm that will partially supply power to Snowy Hydro 2.0.

“These ongoing failures undermine our ability to get a foot hold on the skills and work we need to secure our future energy needs.”

Further, here we report extracts from questions during Senate estimates on October 25, 2021:

Senator PATRICK: We’d had a discussion about this and about whether or not the specifications had been written in such a way that they precluded Australian companies. In some sense, this is the burden of my line of questioning, and you may want to pay attention to this, Minister. I recall your initial statement to Senator Carr, a few years ago now, when you said, ‘We’re going to try and maximise what we can do with Australian industry.’

Mr Broad (Paul Broad, CEO Snowy Hydro): Yes.

Senator PATRICK: In these circumstances, where we’ve got a steel requirement that can’t be carried out here in Australia—I accept you saying there’s no capability here to do stuff—what process did you go through to look at the transfer of skills or the transfer of capability and indeed the investment here in Australia that would permit this project to actually assist Australian industry to build a capability, as is the Defence policy?

Mr Broad : It’s a very good question. As you know, we forced the issue; we built a (concrete) segment factory here in Cooma. We’ve built a whole new industry here which would not have been here unless we insisted. They were going to build it in, I think, Indonesia or Malaysia.

Mr Whitby (Roger Whitby, COO Snowy Hydro): Yes.

Mr Broad : We insisted that it be built here…

Senator PATRICK: Sure, but I’m—

Mr Broad : On the steel thing, Roger will talk a bit more about it. It was the penstocks, in particular, where the issue was. I think that’s where you’re getting to. I’ll ask Roger to talk a bit more about the steel, if you’d like, because, with 35 years in the industry, he understands a bit more about those sorts of details.

Senator PATRICK: Sure.

Mr Whitby : Firstly, I don’t claim to be a steel expert; that’s not my expertise. As my colleague Paul said, the low-pressure, downstream linings of the tunnels will be supplied by Australian Steel. I think there are about 3,000 tonnes of steel in that portion. The high-pressure portion—the critical upstream portion—is being supplied by the company that you mentioned, Senator. That is critical, given the pressure fluctuations and the fatigue stresses that occur on that portion of the penstock. It’s absolutely critical that that is of the utmost quality. We went through a process of our owner’s engineer reviewing the requirements, based on many, many stations throughout the world, to make sure the specifications were right, given the design lifetime of the station is 150 years and given those pressure fluctuations. The specifications reflect that. The other aspect of the underground construction of these penstocks is that there is no space behind the linings of the penstock, so all welding and non-destructive testing of the welding has to be done internally. You can’t get behind the welds to check them, which is another critical aspect of the—

Senator PATRICK: I accept your proposition that this is special steel or it involves special capability. The question actually goes to what efforts you had in terms of engaging Australian companies and looking at what the costs might be to upgrade their capability. We were going to build our future submarine hulls using Australian steel because Defence made an effort to get Bisalloy up to where it needed to be in order to be able to produce that. That’s the question I am trying to focus on, what you did to try and engage Australian industry and upskill Australian industry in relation to steel production?

Mr Whitby : I think the process we went through is essentially outlined via the letter from our contractor, which we’ve tabled.

Senator PATRICK: Your joint venture partner or the big player in here is—I think the name has now changed hasn’t it?

Mr Whitby : It’s still Salini.

Senator PATRICK: This is their normal supplier. They’ve just gone to their normal supplier…

Mr Broad : Again, I’m not a specialist, but, as I said, come and visit us one day and we’ll talk you through the—it is not something that’s upskilled. As I understand the penstocks, these global players—and there isn’t a big demand for them around the world…

Senator PATRICK: You might have a conversation with someone like Bisalloy or someone that does steel—I just know them from the submarine contract—and they might say, ‘We’d have to invest in this.’…I’m trying to understand what effort you went to…

Mr Broad : I understand your point, I really do. I appreciate your point. You’ve been on it from day 1 and I appreciate that. We’ve asked the hard questions—a lot of them. At the end of the day they have to deliver it.

Picture: Snowy Hydro

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