Australia Power Crisis Forces Manufacturers To Eye Offshore Moves, Production Cuts

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Australia’s biggest building materials manufacturers are cutting back operations, hiking prices and considering moving production offshore. This is to manage a spike in power and gas bills. Therefore adding to pressure on the government to resolve the country’s energy crisis.

The CEOs of Brickworks Ltd (BKW.AX), the country’s largest brickmaker, and Boral Ltd (BLD.AX), the top maker of most other construction materials. It, therefore, flagged the changes even as Australia’s new Labor government scrambles to try to beef up power supplies and bring down electricity prices.

Power prices have surged in Australia amid a shortage of coal-fired generation due to planned and unplanned outages. Which has driven up demand for gas-fired generation at the same time as gas demand for heating jumped during a cold snap. Record high global coal and gas prices has exacerbated the price jump, stoked by sanctions on Russia.

Boral, which downgraded its annual profit forecast in May partly due to energy costs says it has cut back on operations. This is due to the speed and magnitude of the change in energy prices”.
Boral welcomed a move last week by the Australian energy market operator to cap wholesale power prices and take control over power supplies. But Todorcevski said those temporary measures “do not provide long-term confidence for large manufacturers”.

In Western Australia, where 15% of gas gets reserved for local consumption, domestic prices are a fraction of the capped east coast price. Successive governments have previously opposed a gas reservation on the east coast. Under pressure from gas producers, which say the structure would deter further investments.


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