The Benefits of a Local procurement policy for Local Steel in Government Construction
BIS Shrapnel estimates that a local content policy achieving a 90% local steel content:
- Will cost an average of $61 to $80 million annually in extra costs to the public sector (government and government business enterprises), which represents only an extra 0.2% of total construction costs for public projects. This extra cost is based on the assumption that the prices of locally sourced steel is 10 per cent higher than the equivalent imported product (and based on projected import steel prices for the next five years).
- Add a cumulative $1.3 billion to real GDP over the next five years (which is equivalent to around 0.3% of 2014/15 GDP), if the extra tonnages – which average 690 kt annually – were supplied by extra production from the steelmakers, while leaving export tonnages constant at 850 kt (rather than switching to sales for public sector construction).
- Prove a substantial net benefit to the economy, after accounting for only marginally higher public construction costs