Governments around the world are competing vigorously to attract high technology medical manufacturing plants.
And so when CSL decided that the boom in demand for the blood protein albumin required a new global plant, it had to chose between expanding its Swiss, German, US or Australian plants.
Governments in Switzerland, Germany and the US all offered to contribute money to try and attract the new albumin plant. Australia won because the Victorian government could afford to make a generous contribution (Canberra lives in a world of its own) and, because the fastest growing demand is in China, it made sense to base the expansion in Australia.
The fact that CSL had an albumin plant here, albeit small and locally focused, improved the economics. In addition the local management made sure that Australian productivity matched its international rivals which required work practice changes.
International companies, even those based in Australia, will not expand if work practices do not match global best practice.
Albumin demand is rising because it is used to treat burns and trauma, as well as being used in emergency surgery which increases as countries become industrialised and people get access to better medical facilities. The Brazil market is also expanding rapidly.
The current CSL Broadmeadows plant only supplies the local Australian market . The new plant will give Australia about one third of the CSL global market, although it is being built in two modules and the first one will take four years to complete so it is a long term project.
CSL has about one third of the world market in albumin, so Australia will be a significant global player.
It will be CSL’s second global plant in Australia. It is currently completing a $250 million global immune disorder plant for the world market. In that plant the federal government joined the Victorian government in competing with other other countries to bring the plant to Australia.
Currently the CSL Broadmeadows plants rely on local Australian plasma, but the two global plants will bring fractionated plasma from the US.
The US is the main source of global plasma. A large number of lower income Americans rely on income from plasma collection and CSL has one of the largest collection networks in the US.
What makes today’s CSL announcement particularly important is that it comes as Boston Consulting criticised Australian CEO’s and boards for paying dividends that are too high and not investing in their business (Raising the alarm on bloated dividends, October 8).
Maybe CSL’s decision will cause a few CEO’s to ponder whether their local facilities could be grown for the Asian market.