New Zealand’s trailer market

According to a recent report by the Organisation for Economic Co‑operation and Development (OECD), growth in the small Pacific nation of New Zealand is likely to outpace the crawling world economy in 2014.

A combination of rising international dairy prices, favourable farming conditions and a strong construction industry could lead to GDP growth of 3.3 per cent in the year to come – compared to an estimate of 2.9 per cent for the US and a mere one per cent in the Eurozone. Meanwhile, the current account deficit will narrow to less than four per cent of the country’s gross domestic product, making for an unusually positive economic vibe. 

The most obvious driver of growth in New Zealand is the nation’s dairy industry, which is feeding large parts of Asia, next to a construction boom fuelled by the need to rebuild after a series of earthquakes in 2010 and 2011, and a need for additional port development. Construction activity in Christchurch, for instance, is expected to lead to a surge in materials and goods being imported through the Port of Lyttelton, where container traffic grew by 4.5 per cent in 2013 (351,217 TEUs). Meanwhile, container volume in the Port of Tauranga has reached the 850,000 TEU mark in 2013, and the Port is now embarking on a major $50 million dredging project to prepare for larger ships – making it the first NZ port to be able to host container ships with a capacity of 5,000 to 6,000 TEUs at low tide and a symbol of the country’s success story. 

But, the star of the show still is the agricultural sector. For years, New Zealand has lived in the shadow of neighbouring Australia, which grew strongly feeding China with minerals and coal. But now the country has unleashed its very own ‘resources boom’ – albeit in the milk and dairy industry.

New Zealand has 6.6 million dairy cows and 30.9 million sheep, outnumbering its 4.5 million people. “As Asian consumers turn to higher-protein diets, that is powering the economy at a time when Australia’s growth is fading due to less-vigorous Chinese industrial production,” the Wall Street Journal’s Rebecca Howard analyses. “Nicknamed the Saudi Arabia of milk because it accounts for a third of global exports, New Zealand has benefited from a 48 per cent rise in dairy prices over the past 12 months. The price gains have pushed the country’s terms-of-trade to a 40-year high.”

Both the milk boom and the US$30 billion rebuild of Christchurch are expected to increase the need for specialized transport equipment to deal with the related freight task. Trailer registrations in 2013 already grew by a solid 20 per cent.

According to Dave Wright of local trailer low loader expert Tidd Ross Todd (TRT), that positive development did not come as a surprise. “Business in 2013 for New Zealand’s trailer market has been reasonably busy, especially with the surge in orders for trucks and trailers that complies with the high-productivity motor vehicles (HPMV’s) scheme allowing for heavier loads and longer trailers,” he says. “We are now starting to see the value of that concept making fleets more efficient – more freight being moved, albeit with less trips.”

As a result, Finance Minister Bill English is confident that New Zealand is well placed to tackle 2014 head-on. “We still have more work to do, but this is significantly better than … five years ago and shows we are making progress towards paying our way in the world.”

However, Otago Chamber of Commerce president, Peter McIntyre, commented that jobs and economic growth were only going to stay if businesses were able to make strong decisions in a stable economic climate.

One such “strong decision” has already been made, but it will not lead to additional job creation in the Christchurch area. 135-year-old manufacturing company, Steelbro, has announced it will be shutting down its Christchurch-based facility and moving its production to Asia.

“In order to offer clients the continued quality, durability and innovation of their side-lifters, while meeting the increasingly diverse regulatory requirements of the many markets that Steelbro operate in, the company has made the decision to phase out production at its New Zealand factory. Other parts of the Steelbro side-lifter business will continue to operate as usual,” the company announced in a statement to Global Trailer.

Given that total manufacturing sales volume rose for the September 2013 quarter, the decision may come surprising, but some experts think the upturn could be more short-lived than expected – putting the re-structuring into a different light. The New Zealand Manufacturers and Exporters Association’s John Walley explained that apparent paradox in early December, saying the recent upswing could just be a blip. “We’ve seen exports falling for a year and now we’ve seen that reverse and seen an increase,” he said in a local radio interview.

“We’ve seen domestic sales improving for the past six months or so and this month we’ve seen them go south, so the hope is that it’s a blip in one case and not in the other but we probably think things are still quite weak.”

In fact, those who are content with the current situation are often exporting to nearby Australia or making business overseas as a second mainstay – including TRT and Steelbro. “From TRT’s perspective, we’ve been busy with the low loader market with plenty of orders coming out of Australia this year, and we don’t expect that to change going into 2014 and beyond,” says Dave Wright.

Steelbro’s Susan Tattersall adds, “Steelbro has a diversified global market and has managed to balance out any downturn in one market on one side of the globe with an upturn in another.”

Going forward, Steelbro is making the bold move to supply side-loader cranes and controls from a purpose-built manufacturing facility in Tianijn, China – producing matched chassis in each destination market, tailored and customized to meet the local requirements of that market.

To do so, Steelbro will be partnering with local trailer manufacturers to build chassis to Steelbro’s specified requirements and strict quality standards. “While retaining the strengths of the current product, this move will allow Steelbro to provide a cost-effective product in the responsive manner required by its customers,” Susan explains.

“Steelbro has already been successfully supplying some markets from its Tianjin factory for a number of years and the experience to date has allowed us to ramp up production in this facility, while maintaining the quality and durability expected of Steelbro product.”

While local hero Steelbro said the decision to cease manufacturing in New Zealand is irrevocable, the country’s benchmark stock index continues to outperform global shares and the New Zealand dollar is trading close to an all-time high against a basket of currencies from around the globe.

“It is a remarkable turnaround for an economy that dipped into recession even before the global financial crisis as a housing bubble – fuelled by easy credit in the early 2000s – burst,” business journalist Rebecca Howard comments, pointing out that analysts are still somewhat cautious about New Zealand’s long-term performance.

After all, a country where the dairy industry accounts for around a third of all exports is especially vulnerable to industry setbacks as well as shifts in global investor sentiment. At the moment, however, New Zealand is leading the global recovery from the front. Business confidence hit a 20-year high in the final quarter of last year, migration is surging, and employment is picking up – the perfect mixture for on-going growth.

Leave a Reply

Send this to a friend