Gib boss defends tariffs on imports

By BRIAN FALLOW

WELLINGTON - Last week's inflation figures record a 7.8 per cent jump in the price of Gib board, which would add about $275 to the cost of lining a typical new house.

Its maker, Winstone Wallboards, estimates its market share is 93 or 94 per cent. It has an avowed policy of pricing at whatever levels keep its market share high and its costly plants in Penrose and Christchurch humming.

With this sort of near-monopoly how do we know the consumer is not being ripped off? What drives the price?

Import parity, says Winstone's development director, David Brown.

In practice, and in the absence of imports from Australia, that means the price at which Thai plasterboard can be landed here, including the anti-dumping duty which it attracts.

Thai board gets hit with an anti-dumping duty because:

The price at which Thai producers sell to New Zealand importers is less than the price at which they sell in their home market (that is called the margin of dumping).

The Ministry of Economic Development continues to accept that without the protection of an anti-dumping duty, the New Zealand industry (Winstone) would suffer material injury.

``There is evidence of an adverse economic impact over the period since the last review [1996] ... ,'' the ministry concluded last month in its latest review of the issue.

If anti-dumping duties were removed, it concluded, there would be material harm to Winstone's sales, profits and return on investment, and to wages and employment.

The review upheld the ministry's decision last September to increase the anti-dumping duty to the full margin of dumping.

That increase was followed by Winstone's raising its wholesale prices 5 to 7 per cent on November 22, which is reflected in the latest increase in consumer prices.

Kevin van Hest, whose firm, Sigma Agencies, sells Elephant Board imported from Thailand, describes the duty increase as devastating.

``Now the board lands for more than Winstone sell [Gib board] for so an importer cannot compete.''

The ministry also appears to suspect that a duty based on the full margin of dumping may be higher than is necessary to prevent injury to Winstone.

It has embarked on another assessment of what the non-injurious price would be.

In the meantime, says Mr van Hest, the importers are ``just bleeding to death.''



He also imports Thai board into Australia. ``That is keeping us going. But no doubt the Australian producers will be pouncing on us as well eventually.''

The other New Zealand importer is Stephen Tully, whose company is CTS Quality Building Products.

Last September's duty increase ``priced us out of the market,'' Mr Tully said. His response was to stop importing the standard 9.5mm board and start importing 10.5mm board, not covered by the duty.

Winstone has complained that these are ``like goods,'' and ministry officials have begun an anti-dumping assessment.

Part of Mr Tully's business is to further process plasterboard into ceiling tiles and movable partitions for open-plan offices. This manufacturing operation, employs about 10 people directly and about as many indirectly through subcontractors.

He is planning to move it to Australia.

Last September's reassessment of the anti-dumping duty, came as Winstone's fortunes were improving.

Fletcher Challenge, which owns Winstone, told shareholders in its report for the half-year to December 1999 that Winstone Wallboards' earnings before interest and tax (Ebit) were up $9 million on the same period in 1998. Up to what, and on what sales revenue, it will not say.

Production was up, too. For the full year to December 1999 it was 14.2 million square metres, 22 per cent up on 1998.

The ministry's review found that although Winstone's Ebit-to-sales ratio increased in 1999 it had fallen in the two preceding years and was lower than it had been in 1996.

Its competitors are small businesses, although Winstone prefers to sees them as the ``opportunist'' agents for foreign concerns larger than it is.

``It makes no sense for New Zealand to allow dumped product from Thailand to destroy the industry and then watch the price go up again when the New Zealand industry has closed its doors,'' says Winstone's Mr Brown.

He also points to the specialist boards like impact-resistant Toughline which flow from its research and development effort and upon which a thriving export business is being built.

The destruction of Winstone's manufacturing operation through predatory dumping would destroy not only about 100 jobs, he says, but put New Zealand's trade account about $70 million deeper in the red.

Anti-dumping duties do not apply between Australia and New Zealand. But, apart from a shortlived foray by CSR in 1998, Australian plasterboard is not sold here.

The Ministry of Economic Development's review concluded that while it was likely that imports from Australia could be priced below Winstone's current prices, ``the likelihood of such imports cannot be foreseen and are not imminent.''


Winstone sold some board to Australia last year, taking advantage of a period of tight supply related to the Olympics and pre-GST inventory-building.

But generally, Mr Brown says, ``we don't ship board to Australia. We wouldn't make much money from doing so.''

Winstone buys its gypsum, the main raw material of plasterboard, from an Australian mine jointly owned by CSR and one of the other two Australian manufacturers, Boral.