- Krish Jay
Overview of Structural Metal Product Manufacturing Industry in Australia
Updated: Aug 20, 2021
Source : IBISWorld
The primary activities of this industry are • Architectural metal product manufacturing • Metal balcony, balustrade and railing manufacturing • Metal curtain wall and fascia manufacturing • Metal door or doorframe manufacturing • Prefabricated metal fire escape manufacturing • Flyscreen door manufacturing • Metal garage door and gate manufacturing • Metal skylight manufacturing • Metal shutter manufacturing • Metal window frame or screen manufacturing • The major products and services in this industry are • Garage doors and shutters • Steel grating • Curtain walls • Balustrades and railings • Metal doors and windows • Other products Demand from commercial and industrial building construction The commercial and industrial building construction market is an important source of demand for a range of structural metal products, such as metal security doors and shutters, staircases, balustrades and curtain walls. Greater activity in these construction markets boosts demand for many industry products. Demand from commercial and industrial building construction is expected to fall in 2020-21, threatening industry performance.
Demand from residential building constructionResidential building construction represents one of the most important sources of demand for structural metal products. House and apartment building construction generates demand for a range of industry products, including window and door frames, fly screen doors, metal balustrades, metal awnings, and shutters and garage doors. Demand from residential building construction is expected to decline in 2020-21, negatively affecting the industry.
Demand from heavy and civil engineering constructionIndustry operators sell a variety of structural metal products for use in heavy and civil engineering construction projects such as roads, power plants and mine developments. These projects are a particularly important source of demand for steel grating for platforms and stairways, along with security and fire-resistant doors and shutters. Demand from heavy and civil engineering construction is expected to rise in 2020-21, presenting an opportunity for the industry to expand.
Demand from institutional building construction Construction of institutional buildings, such as hospitals, schools, museums, law courts and prisons, is a key source of demand for industry products, particularly security and fire-resistant doors and shutters. As a result, greater activity in this market generally supports demand for structural metal products. Demand from institutional building construction is expected to decline in 2020-21. The Structural Metal Product Manufacturing industry has grown modestly over the past five years. The heavy, bulky nature of many industry products tends to make shipping costs prohibitive. As a result, industry exports are low. However, the industry is subject to some low-cost import competition, with over half of imported products coming from China. The industry also exhibits high internal competition and strong competition from substitute products. In many cases, industry products can be substituted for goods manufactured from alternative materials, such as aluminium, structural timber, plastic and glass. These materials are becoming increasingly competitive with steel in terms of strength, workability and weight, while also being more aesthetically desirable to some customers. The industry supplies products to a range of downstream construction markets, which have exhibited mixed demand conditions over the past five years. However, demand from residential building construction has declined significantly over the period, limiting industry growth. Modest growth in both institutional building construction and commercial and industrial building construction has supported sales of curtain walls, fire doors and balustrades. An increase in the domestic price of iron and steel has driven up industry input costs, encouraging many industry operators to absorb these costs to remain price competitive with substitute products. Overall, industry revenue is expected to grow at an annualised 0.2% over the five years through 2020-21, to total $2.7 billion. This trend includes an anticipated fall of 9.2% in the current year, reflecting sharp declines in demand from the commercial, industrial and residential building construction markets in the current year.
Profit and wages Industry profitability has fallen slightly over the past five years. Although demand from key markets, such as commercial and industrial building construction, has increased strongly over the past five years, industry operators have been unable to fully translate these sales into increased profitability due to the rising cost of iron and steel inputs. The industry is highly price-competitive, making many operators unable to pass on these input cost increases. Industry profit margins are generally low. However, profitability varies depending on the type of products manufactured and the scale of the manufacturer's operations. Industry operators with large economies of scale, or those manufacturing highly customised products, are generally able to maintain stronger profit margins than the industry average. Additionally, industry wage costs have risen slightly as a share of revenue over the past five years, as some firms have increased employment to manufacture specialised and customised products. However, firms that provide generic products have minimised their need for increased labour by increasingly automating their manufacturing processes. Reductions in RBA interest rates have lowered the cost of borrowing over the period, allowing firms to invest more in machinery and equipment.
Downstream construction markets Declining demand from the residential building and heavy and civil engineering construction markets has weakened industry expansion over the past five years. Firms that construct buildings such as houses, apartments, hotels, offices, factories and retail complexes require a range of structural metal products such as garage doors, curtain walls, metal door and window systems, and fire-resistant doors and stainless-steel balustrades. Consequently, demand from the residential building construction market is the strongest driver of industry performance. Demand from the Institutional Building Construction industry has increased over the five years, largely due to PPP-funded buildings for education, healthcare and aged-care. Institutional buildings such as schools, libraries, courthouses and hospitals are important markets for metal door and window systems, awnings and shutters. However, growth in commercial building construction activity has made this market more significant to the industry compared with institutional building. The performance of the residential building construction sector over the past five years has also influenced the industry's performance. Residential construction activity grew rapidly over the two years through 2015-16, and continued to rise through 2017-18. Most of this growth was attributable to multi-unit and townhouse construction in metropolitan areas, rather than traditional single-unit detached housing construction. Demand from residential construction is anticipated to fall considerably over the three years through 2020-21. Residential buildings require products such as garage doors, door and window frames, metal shutters, awnings and skylights. The multi-unit apartment and townhouse construction market is also an important source of demand for metal fire doors, balustrades and curtain walls. Falling demand from this market has limited the entry of new businesses into the industry over the period. However, industry enterprise numbers have increased slightly over the past five years as firms have sought opportunities stemming from growth in commercial and industrial building construction markets. Establishment numbers have grown slightly faster than enterprise numbers, as some businesses have expanded their operations. The non-building construction market also represents an important source of demand for industry products. Industry operators supply products such as metal grating, railings, fire-resistant doors, stairs and catwalks to firms undertaking construction on resource developments. Industry firms also supply products for construction on transport infrastructure, such as Melbourne's Level Crossing Removal Project. Demand from this market has fallen significantly over the past five years as a result of sharp falls in capital expenditure on mining. The Structural Metal Product Manufacturing industry is projected to continue its modest expansion over the next five years, supported by an anticipated return to growth in residential building construction activity over the period. However, the domestic price of iron and steel is projected to continue rising over the period, pushing up purchase costs and limiting profitability. Furthermore, industry firms will likely continue to face competition from substitute building products manufactured from structural timber, glass, aluminium and plastic. These substitutes are typically lighter than steel and are often comparable in terms of strength and workability. However, the large and bulky nature of industry products is projected to continue to limit international trade, with imports and exports accounting for negligible shares of domestic demand and industry revenue.
Industry competition Industry products are forecast to become increasingly vulnerable to competition from substitute products over the next five years. Substitute products, such as structural timber, aluminium and plastic, share many desirable characteristics with steel products, while also being lighter and often cheaper. These substitute products are increasingly gaining acceptance as a more efficient and aesthetically-pleasing alternative to steel products. Consequently, the rising popularity of these products is projected to negatively affect demand for industry products over the period.
Key markets The industry is forecast to benefit from steady demand conditions across key downstream markets over the next five years. However, a forecast decline in demand from heavy and civil engineering construction over the period is projected to limit revenue for operators manufacturing products such as railings and catwalks. Residential building construction is expected to drive industry expansion over the period, with the construction of houses boosting demand for garage doors, windows and door frames. Furthermore, the construction of large multi-unit apartments and townhouses in major capital cities, such as Melbourne and Sydney, is also anticipated to support demand for the industry. These construction projects are anticipated to drive demand for industry products, such as steel fire doors, balustrades, stairways and balconies, and decks made of steel grating. Furthermore, many of these large multi-storey apartment buildings also feature steel-cladding facades. Rising disposable incomes are also forecast to boost demand for products like customised garage doors from consumers renovating their homes. The Structural Metal Product Manufacturing industry is highly fragmented. Small-scale manufacturers tend to focus on specific product segments rather than diversifying their manufacturing capacity. Industry products range from mass-produced consumer goods, such as garage doors and window shutters, to custom-designed products such as curtain-wall facades. Most products are manufactured from steel, although some products are also made from non-ferrous metals and alloys.
Garage doors and shutters Garage doors and shutters make up the industry's largest product segment. Roller shutters are often attached to residential windows for homes that are exposed to direct sunlight or passing traffic. Firms also sell shutters and security grilles for installation in warehouses, factories, retail centres and other commercial and industrial facilities. Strongly declining demand from the residential construction sector over the past five years has caused this segment to fall as a share of industry revenue over the period.
Metal doors and windows Metal doors include fire-resistant and flyscreen doors. Fire-resistant doors are typically made from steel as it is non-flammable and able to withstand high temperatures. These doors are used for entries and exits to fire escapes to provide safe passage for building occupants and prevent fires from entering escape stairwells. Steel fire doors are commonplace in large construction projects due to stringent building regulations. Flyscreen doors generally include a security lock and are often fitted to existing residential buildings. These products can be substituted with aluminium doors, although steel doors are generally more secure. Other products in this segment include metal window systems and doorframes, which also face strong competition from timber and aluminium products. This competition has caused this segment to fall slightly as a share of industry revenue over the past five years.
Steel grating Steel grating is used in platforms, stairways, catwalks, balconies and decks. Most steel grating products are used in industrial and heavy industrial facilities including factories, mining operations and oil and gas drilling rigs. Residential and institutional buildings also occasionally feature balconies and decks made of steel grating. Demand from heavy and civil engineering construction is expected to increase in 2020-21, benefitting firms in this segment. This segment has remained largely stable as a share of industry revenue over the past five years.
Balustrades and railings Metal balustrades and railings have applications across a range of residential and commercial buildings, along with non-building developments such as infrastructure projects. Balustrades can be substituted for products made from aluminium, glass and timber. Strong growth in demand for steel balustrades for multi-unit apartments and townhouses boosted sales in this segment over the three years through 2018-19, with rising demand from infrastructure boosting sales over the two years through 2020-21. Consequently, this segment has increased as a share of industry revenue over the past five years.
Curtain walls A curtain wall is an outer facade of a building that does not bear any structural load. Curtain walls are used for aesthetic purposes and to provide shade and protection from the elements. Two well-known examples of curtain walls are the outer facades of the Sydney Opera House and Melbourne's Eureka Tower. Strong demand from the commercial building construction market over the past five years has supported sales of curtain wall products. This segment has remained largely stable as a share of industry revenue over the past five years.
Other products Industry firms manufacture a diverse array of specialist products that fall within the other product segment. The largest sub-category includes specialist metal door and shutter systems for trucks and vans. Metal gates represent another significant product in this category. Other products also include metal fascia, prefabricated partitions, landscaping features, shopfronts, metal traffic barriers and skylights. This segment has grown as a share of industry revenue over the past five years. Structural metal products are predominantly used in downstream residential, commercial, institutional and industrial construction applications. The Structural Metal Product Manufacturing industry's main products include garage doors and shutters, metal doors and windows, steel grating, curtain walls and metal railings. The industry's major markets are divided based on the proportion of revenue that each market generates.
Residential building construction companies Residential building construction companies represent the industry's largest market. These companies construct residential properties including houses, flats, apartments and townhouses. This market also includes businesses that complete any alterations, additions, renovations and general repairs to existing residential buildings. Garage doors are the primary product sold to this market, and are generally sold to developers of detached houses. Apartments and townhouses often use fire doors, stairways and balconies, and decks made of steel grating. Large multi-storey apartment buildings also often feature steel-cladding facades. Residential building construction activity has decreased strongly over the past five years. Consequently, this market has declined as a share of industry revenue over the period.
Non-residential building construction companies Commercial, industrial and institutional building construction companies represent the industry's second largest market. These firms use a range of metal products to construct buildings such as offices, retail shops, factories, warehouses and hospitals. Commercial office blocks are a major market for steel curtain walls and fire doors. Industrial buildings require roller shutters and steel grating. This market has increased as a share of industry revenue over the past five years due to rising commercial building construction activity.
Non-building construction companies Non-building construction companies represent a large market for industry operators. These firms demand industry products for construction work on mineral and energy infrastructure construction, transportation projects and other infrastructure construction. Transportation projects often require handrails, stairs and grating. Mining projects undertaken by this market require steel grating platforms, stairs, metal railways and catwalks manufactured by the industry. Declining capital expenditure on mining has caused this market to fall as a share of industry revenue over the past five years. Consumers and other markets Some industry firms, such as major player DuluxGroup, sell products such as garage doors directly to consumers. Consumers may choose to purchase industry products such as garage doors, shutters, doors and window frames when undertaking renovations or remodelling their homes. This market has remained largely stable as a proportion of industry revenue over the past five years. Road transport operators also require industry products, such as metal doors and rolling shutters for vehicles. Additionally, manufacturers may use industry products as inputs for manufacturing, such as using doorframes from the industry to manufacture complete doors. The industry also services a range of other markets due to the wide variety of products produced, such as gates and ornamental architectural metal.