$40m rebuild wallboard deal split between NZ, German supplier

A $40 million government procurement deal to supply wallboard for the Christchurch rebuild is being used as a way to inject competition into New Zealand's high-cost home building market.

With home affordability a hot political issue – and lack of competition for building supplies identified as a key issue by a Productivity Commission report – the government has announced it will split the wallboard contract between New Zealand's only wallboard manufacturer, Winstone Wallboards, and multi-national German manufacturer Knauf.

Winstone is owned by Fletcher Building, whose shares had risen 0.65 percent to $9.35 at 4.30pm.

The announcement from Economic Development Minister Steven Joyce emphasised the deal would save the government around 6 percent on wallboard costs and should spark wider competition.

"Having Knauf set up shop in New Zealand will see increased industry competition that will provide consumers with more choice and could potentially drive down prices," Mr Joyce says. "If Knauf is successful in penetrating the market, the savings could even be higher."

Knauf, the world's second largest wallboard manufacturer and one of only seven firms that dominate 80 percent of total global production, already has a New Zealand operation, selling wool-based insulation material.

The contracts will cover plasterboard and associated fasteners, adhesives and jointing compounds being used in the Earthquake Commission and Southern Response Earthquake Services Limited reconstruction programmes.

The contracts were let after a competitive tender that attracted nine bids.

(BusinessDesk)

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About time they had their heads pulled in.

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Poor ol' Fletcher Building. The government hands out subsidies left, right and centre to its favourite industries - agriculture, movie and television show production, radio broadcasters, tourism. The list is very lengthy.

But Fletchers will not a get a subsidy. Instead, the government will fund a German multinational company that has substantial market share in the global wallboard market to set up shop and compete with Fletchers. Wow. Fletchers must have done something really bad to deserve this treatment.

I have no objection to a German or other foreign-owned company coming to New Zealand and setting up a wallboard or other building materials operation to compete with Fletchers. Competition is good. But not when its subsidised by the government.

Why does the government subsidise wallboard and not a foreign company to set up an international cable to compete with Southern Cross cable? By Mr Joyce's logic, the government could save quite a bit if there were lower tariffs on the international cable usage, and ISPs could lower their price.

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Calm down and read the article properly. The Govt is not subsidising Knauf at all. Its has awarded them part of the contract to supply. Huge, huge difference.

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I disagree with you, Paul. The govt is subsidising by way of giving Knauf a guaranteed income stream for the first 5 to 10 years.

My house is being rebuilt by southern response and I am insisting on Winstone Wallboards. Winstone has a big gib factory in Christchurch. In fact, I can see it from my house. The way I see it, using wallboard made in Christchurch is supporting the recovery of Christchurch.

Using wallboard made overseas does not help NZ Inc one iota.

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EarthWool is fibreglass, it will never be wool. Wool is a protein-based fibre from ovine animals.
Tasman Insulation is suing Knauf over their misleading claims.

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Fletcher are not losing here as the Chch rebuild will run for a decade. Monopolies are never competitive.

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It wasn't so long ago that Ellephant board was available throughout the country. It was cheaper than gib board and every bit as good. The same company imported and distributers an alternative insulation to Batts. Once again, cheaper and as good or better. Fletcher's proved to be too tough to compete against. They know how to be competitive alright, but only for as long as they need to be.

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Surely if a product is cheaper AND better, backed up by real business brains driving its entry into a market, the market would take to it.
If a product is cheaper because it is inferior it will soon be found out.

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