HIGH energy costs are threatening the viability of Australia’s oilseed processing businesses.
Australian Oilseeds Federation (AOF) executive director, Nick Goddard, said crusher members of the organisation had highlighted their concerns in recent months.
“Oilseed processing is an energy intensive business and a lot of the energy needs are being met by gas,” Mr Goddard said.
“There is no doubt rising gas costs will impact Australian crushers’ competitiveness on the world stage.”
Already, one of Australia’s largest oil crusher, Cargill, has suggested it will reconsider expansion plans in Australia unless assurances can be made about a cap on pricing.
Cargill Australia corporate affairs manager, Peter McBride, said energy bills were a large percentage of total costs for both the business’s crushing and malting arms.
“Australia’s high manufacturing and employment costs are making it very difficult for Australian manufacturers to remain globally competitive,” he said.
He added Australian food processors needed to focus on international opportunities, given the relatively small domestic market.
“In a global marketplace, Australia cannot stand on its own,”Mr McBride said.
The Australian market alone is too small – our population is roughly the size of a city like Shanghai.”
Mr McBride said Cargill faced a minimum of doubling in price of its gas contracts for its Narrabri and Newcastle crushing facilities which he said would add millions to energy costs.
Riverina Oils and Bio-Energy (ROBE) trading manager, Lachy Herbert, said energy costs were also a major component of doing business for his Wagga Wagga based company.
“It is one of the big challenges we face in terms of exporting our product, competing with other nations with cheaper sources of energy,” he said.
Mr Goddard said there was a large export market for Australian-crushed oil and added it was a logical way of creating more value for the nation than simply exporting the unprocessed oilseeds.
“Roughly a quarter of the Australian crush capacity ends up producing export oil,” he said.
We are competing against the efficiency of crush assets in other parts of the world, China and Canada in particular.”
He said domestic crushers provided valuable competition for Australian canola producers.
“Around a quarter of the canola grown here is processed locally, so it is an important market.”
Mr Herbert said energy costs and labour costs had traditionally been hindrances to international competitiveness for the Australian oil manufacturing sector.
“These costs can make it hard to compete.”
He said ROBE was using the biofuel it manufactured in the plant to help cut costs, but added natural gas would still be required.
“The bio-energy we produce we will use in our generators.”
Mr McBride said without change, the utility imposts in Australia could impact high value processed agricultural exports.
He said Cargill was pushing for certainty of supply.
“Major gas retailers have expressed uncertainty in guarantee of supply past 2018.
“The lack of new gas and the transition to gas fuelled power generation will place increasing pressure on gas and electricity prices for Australian manufacturers.”
“The manufacturing sector needs a bipartisan Government approach to tackle what has the potential to be a major crisis for Australia’s energy supply and our manufacturing sector,” he said.