Jan 23 (BusinessDesk) - 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," said Joyce. "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 four-fifths 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.