STATE OF THE INDUSTRY When it came to climatic conditions more generally, 34.25 per cent expected climatic conditions to have positive effects on the industry in 2022, while 21.92 per cent expected them to have significant negative effects.
Ongoing issues with competition and skilled labour
Increasing competition in a globalised market, as well as staffing difficulties, have been issues within the pump industry throughout recent times, and this was no different in 2021. One respondent stated that “unskilled opposition entering our markets” was one of the biggest challenges of 2021, and expected that they would “continue to provide pricing pressure” in the future. Another respondent cited “staying ahead of your competition, as everyone is chasing the same opportunities” as a significant challenge in the industry. For 2022, 39.73 per cent of respondents thought online competition was an important factor that would affect the industry negatively, while 5.48 per cent saw it in a positive light. Staff availability and finding adequately skilled personnel remains an issue for many. A “shortage of workforce” and “smaller number of apprentices – expected to remain the same if nothing changes in the training sector,” were challenges for many respondents. One respondent identified “competition for skilled labour” to be “probably the biggest issue” for the industry in 2022. Current trends in unemployment rates, which impact labour supply, were expected to be a key challenge for the year ahead by 28.77 per cent of respondents, while 6.85 per cent thought they would be a positive.
Global supply chain issues created a challenge for some companies.
Tensions with China
The fraught relationship between Australia and China has undoubtedly had far-reaching effects on Australian industry, the pump industry included, with 2021 seeing no thawing in relations. Bans and increased tariffs on Australian imports to China remain in place, after coming into being after the rapid deterioration of the relationship between the two governments over 2020, following a push by the Australian Government for further investigation into the origins of COVID-19. Nearing the close of 2021, tensions again escalated between the countries’ governments over Taiwan. China is Australia’s foremost trading partner for both imports and exports, meaning the volatile relationship has significant consequences for many industry sectors and the Australian economy in general. Colin Heseltine, senior adviser to Asialink at University of Melbourne, states that when it comes to the economy as a whole, overall “the impact of China’s trade sanctions has been less serious than first feared (though damaging to individual companies),” noting that “with the benefit of exports of iron ore, which are essential to China and therefore not subject to sanctions, and a very high iron ore price until recently, the value of Australia’s goods exports to China actually hit a record in the first half of 2021”. China has
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pump industry | Summer 2022 | Issue 38
announced its intention to break its dependency on Australian iron ore imports by ramping up domestic production, increasing investments in overseas mines, and strengthening scrap steel recycling. However, many commentators and investors remain sceptical about the viability of this plan. Nevertheless, taking iron ore out of the equation, the effects of a fractious relationship on Australian imports has hit some industries hard. The Australia-China Relations Institute reported that from January to September 2021, the value of 12 disrupted goods fell by $US12.6 billion ($17.3 billion), compared with 2019. As a result, many survey respondents reported tensions between Australia and China as having significant impacts on performance over 2021, and expected this to continue in 2022. Negative impacts reported by survey respondents included “raw materials costs increasing significantly” or “skyrocketing”. “Tariffs affecting prices and longer lead times are the most noticeable effects,” said one respondent. Other respondents said that “China has influenced local spending in mining” or that the issue had a “major effect on client confidence”. “Almost all industries and markets have been affected negatively due to our failed relations with China,” said one respondent. “We have definitely noticed a negative impact particularly with our wine producing customers,” said another. “These customers have lost between eight per cent and in some cases up to 90 per cent of their business due to the breakdown in the relationship with China.” Other respondents, particularly those involved in domestic manufacturing, saw upsides to the conflict. “More manufacturing is coming back to Australia and exporters are finding new markets outside China,” said one respondent. Another reported that they had seen “a lot less cheap product on sale.” Nevertheless, over half of respondents (58.90 per cent) expected relations with China to be a key challenge for the industry in 2022, while a smaller number (10.96 per cent) anticipated positive effects. Opinion was divided as to how affairs between countries would develop into the future. For instance, one respondent was “hoping for improvements” as a result of a developing “two-way investment relationship,” while another said, “things will get worse.” “I believe we need to either do something to improve our relationship with China (without compromising our sovereignty),” said one respondent. “Or if that's not possible then I think that the Federal Government needs to make significant investment into promoting our products overseas and provide accessible funding to companies for technological advances and export potential.”
Where do the opportunities lie?
In accordance with the industry’s generally optimistic outlook for 2022, survey respondents identified a number of growing areas of opportunity. Many of these related to the aforementioned expected growth in key sectors for the pump industry.
Seizing opportunity in post-COVID economic recovery Government investment to spur economic recovery through infrastructure projects and other funding offers substantial opportunities to those who can secure the contacts. In particular, respondents mentioned spending on power generation, agriculture and water industries. “Building and construction boom inputs” were also seen as potential drivers of business. As restrictions ease around Australia, a general uptick in business was also anticipated by some. “Sales and services should increase due to the backlog created by the pandemic,” said one respondent.
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