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Recent key developments in MAKE│NZ
• Continuing on from last week – a glance at one of our members:
Peri Drysdale is the founder and CEO of sustainable lifestyle fashion brand Untouched World (UW) and Chair of the Untouched World Foundation. In 1981 with $200 in capital, she began a cottage industry knitwear business starting out with developing toddlers knits, then called Snowy Peak. Within 5 years, Peri had 500 outworkers, and soon after, made the move to computerized knitting creating luxury, high quality adult knitwear made from NZ natural fibres.
While travelling extensively exporting her knitwear, Peri became deeply concerned about the ecological trajectory the planet was on. And so, in 1997, Untouched World was born out of a desire to use fashion as a vehicle for change, and to do better for people and the planet. A fully fledged apparel and knitwear brand, Untouched World set out from the get-go to cause disruption in an industry that is sadly very broken. Peri wanted a brand that would model a new way of doing business, to show the world it was possible to deliver stylish, quality pieces without polluting the planet, filling up landfills or treating workers badly in the process.
UW has a wonderful team, of about 110 staff. Many have worked for Untouched World for well over a decade – some are over 30 years! Peri is particularly proud of the growth in each and all of her team members, for example- a promising buttonholer machinist, then cleaner, with the support and training opportunities, became the General Manager of UW; a graduate designer becomes the Business Development and Sustainability Manager; and a customer services junior becomes Brand Manager.
In 2000, after a lot of research into what would make the most long-term impact on people and the planet, Peri started the UW Foundation to educate and inspire young people through Leadership for a Sustainable Future Programmes. These week-long programmes help our young people realise their potential, find their passion and learn from all stakeholders about the environmental issues facing the world today. To date, over 3000 students have graduated these programmes and the Foundation has been recognised by the United Nations for its ground-breaking work in this space, with Untouched World also being the first fashion company in the world to be recognised by the United Nations for Sustainability.
-Peri Drysdale, Founder of Untouched World and Kim Holden, General Manager of Untouched World
• We had a great Production Managers’ meeting at Energyline last week – a really impressive operation in a growth phase and expanding sales internationally. Thanks to the team – Aaron, Mark, & Michael – for hosting us. The day before we visited another company on a very impressive growth trajectory and a strong presence in export markets. Common features: around the same size, around 50 employees, and the same focus on processes – all their processes – being excellent. That, as much as the features of their products, is what gives them a competitive edge in their respective markets. What they don’t have is products that would get our Minister for Space and Science, Innovation and Technology, the Hon. Judith Collins, excited and rushing down to have her picture taken in their factory – but that’s alright, too.
The other thing I attended last week was a presentation on the New Zealand log market – radiata pine, that is – by Chris Rayes, Marketing Director, Rayonier Matariki Forests Ltd, New Zealand’s third-largest forestry company. Four things stood out:
– The dominance of export log sales vs. domestic processing (64% by volume)
– The strong dependence on China as the export market for our logs
– The global opportunities to supply wood into a growing market for engineered timber:
– The apparent lack of opportunity for New Zealand manufacturers to be part of that growth curve. Last year, less than 4% of New Zealand’s forestry exports by value fell into the category that includes engineered wood. Chris’ comment, when asked, was that “our cost structures are just too high for us to succeed in that market”. We could add the recent shutdown of Winstone Pulp International and OJI to that …
So, on the one hand we have a large number of really smart and successful manufacturers of high-value products going into niche export markets, but collectively they probably don’t have the scale to significantly ‘moved the needle’ on the government’s goal to double exports (by value) by 2030. Nor does the government seem to have great expectations on us ““The Coalition Government has set the aspirational goal of becoming an exporting powerhouse by doubling the value of our exports in 10 years. Our food and fibre sector will be pivotal to achieving this goal,” says Agriculture Minister Todd McClay. But will they?
Recent key developments in New Zealand
• We talked about scale in connection with Energylight above. The company started operations in 2004 with a handful of employees and has grown ever since, but at 50 employees still is a small SME by world standards.
In 2017 we took a group of New Zealand manufacturers to Germany on an Industry 4.0 study tour. One of the companies we visited as an early Industry 4.0 adopter was a lighting manufacturer called Trilux (https://www.trilux.com/en/ ).
We came away impressed – for the same reason as with Energyline – an equally strong focus on product innovation and excellence as on a persistent drive to get everything right in their processes end-to-end. Like Energyline, Trilux is still privately held by three families and known in the market for their innovative products and product quality.
However – in 2022 Trilux had around 5,000 employees and sales of € 740m. Where does that difference in size come from? Like Energyline, Trilux’ founder, Wilhelm Lenze, started manufacturing parts of light fittings in their family home with a handful of employees, and even back then took out patents on the design of some of their products. But that was 112 years ago, in 1912. The company soon started to make its own complete gas and energy lights and after the Second World War focused production on low-voltage fluorescent tubes that had three times the light yield of incandescent lights – hence the name.
Not only has Trilux been operating for almost six times as long as Energyline, it also had a much bigger domestic market to grow in initially; today the company has a presence in 50 markets globally.
So, there is hope – for Energyline, who are on a foray into the Australian market now, and for New Zealand.
• Energy again – sorry, it keeps cropping up in relation to manufacturing … A recent article in Business Desk (https://businessdesk.co.nz/article/energy/the-ongoing-decline-of-nzs-industrial-base-shown-in-energy-statistics ) – under the headline of “The ongoing decline of New Zealand’s industrial base shown in energy statistics” argues that the recent fall in industrial electricity consumption, as shown in the graph below, is evidence of a “…fall in national average energy intensity [that] also points to a decline of industrial activity.”
The article refers to recent examples where manufacturing operations have been (temporarily) shut down due to low energy supplies / high prices (Methanex; OJI Penrose; WPI). However, there appears to be a bit of confusion here. Energy consumption is not the same as Energy Intensity – the latter is the amount of output ($ GDP) produced per unit of energy consumed (https://www.oecd-ilibrary.org/docserver/factbook-2015-40-en.pdf ). And drawing a direct line between a decline in energy intensity and a decline in manufacturing activity is cutting a few corners too many.
As a matter of fact, manufacturing output has risen – at various rates -over the period in question, while energy consumption – in this case electricity – has remained more or less stable, with ups and downs. As a result, energy intensity has fallen over the same period, which is a good thing from a productivity and from an environmental / energy efficiency perspective:
The spike in the above graph is most likely due to the fact that during COVID industrial activity that consumed a lot of energy to produce relatively low-valued-added products (aluminium, dairy) were allowed to continue, while other manufacturing activity was reduced due to pandemic restriction measures.
Ultimately, what we need to aim for are manufacturing businesses that produce as much value as possible with as little energy input as possible – minimal energy intensity, in other words.
Recent key developments in the World
• Shipping News – recent developments:
-Profits are rising
– Major container lines jockeying for position
– Port strikes in the US – Gulf and East Coast ports
• Shipping line profits and profitability are on the rise again:
This comes as shipping volumes are on the rise again:
Growing exports to the US from China are a major driver of this increase. In spite of all the talk about re-shoring. China was exporting an all-time high of 6.2 million TEU in May, accounting for 39% of global container trade. Average spot rates from the Far East to the US West Coast reached USD 7840 per FEU (Fourty-foot Equivalent Unit) on 9 July, for example, a 200% increase since 30 April. Demand is also increased due to the restrictions of traffic through the Suez Canal:
Global TEU-miles so far this year have increased by 17.9% compared to 2023 due to higher demand and longer sailing routes around the Cape of Good Hope, primarily driven by Red Sea diversions. Normal traffic through the Suez Canal would have resulted in a smaller increase of 8.6%.
On top of that, and especially in winter, the Cape route can be challenging for larger container ships in particular. CMA CGM recently lost a total of 139 containers overboard from two of their ships sailing through the South African Indian Ocean area.
• The top ten container lines control 85% of the global container freight capacity at sea. Not only that, they operate in vessel-sharing alliances. These alliances are seeing some major changes coming up. In January 2023, Denmark’s Maersk and Swiss-based MSC, the world’s largest container shipping companies ‘agreed’ to end their 2M vessel sharing alliance in January 2025, allowing them to pursue individual strategies. The 2M Alliance was introduced in 2015 to cope with a glut of ships and weak demand, and to ensure competitive and cost-efficient operations on main shipping routes from Asia to Europe, as well as across the Atlantic and Pacific oceans. The split happens as Soren Toft, who joined MSC as their CEO in 2020, coming over from Maersk, where he was COO, is driving MSC’s strategy to ‘go it alone’; another part of that strategy is to sweep global markets for second-hand container ships to cement their position as the largest single operator globally.
As Maersk leaves MSC – or rather MSC kicks out Maersk – the latter is forming a new alliance (Gemini) with HAPAG-Lloyd, who are leaving THE ALLIANCE, which is soon to be known as THE PREMIER ALLIANCE.
What all of that will mean for New Zealand manufacturers in terms of frequency of port calls and managing inward good supply chains, and export shipments, as well as costs, remains to be seen. The last thing we need is rising inventory costs again because of unreliable supply lines.
• The current contract between USMX, the association managing pretty much all East Coast and Gulf ports, and the 45,000-strong dockworkers’ union (ILA) will expire on Sep. 30. As late as Monday last week, the two parties were not even negotiating, and the ILA has announced its members will go on strike from October 1. At issue primarily are concerns about job losses as the USMX is driving automation in container handling; the ports in question have poor productivity levels by international standards.
The vast majority of New Zealand’s sea freight traffic with the US is going through West Coast ports and may not be directly impacted. However, these ports may come under serious pressure, too, depending on how long the strike will last – keeping in mind that the dispute between port authorities and the port workers’ union on the West Coast (ILWU), covering 29 West Coast ports, was finally settled in June last year after 13 months of fraught negotiations that led to serious disruptions in container traffic. Already, the Port of Los Angeles has seen a 16% increase in container traffic in August, compared to August 2023, as everyone tries to get their freight in before the strike. Also, ILWU has promised to take action in support of their ILA colleagues if / when it comes to strike action.
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