Wastewater treatment small cap Calix warns Australia needs to source its own chemicals

Managing wastewater is dirty work but someone has to do it, and there are increasing calls for manufacturing industries, including wastewater, to be brought back home.

The closure of factories offshore and interruption of supply chains has forced several manufacturing firms, from textiles to 3D printing, to come home temporarily.

But there are calls for moves to be more permanent and Phil Hodgson, the CEO of Calix (ASX:CXL), one small cap in the wastewater management business (among other sustainable infrastructure solutions), is one advocate.

But he says the industry needs the government’s help to make it happen.

Hodgson pointed to a Department of Defence report completed last year but only obtained by the ABC this month under Freedom of Information Laws.

It warned Australia and its supply chain was unprepared for a so-called “black swan” event. Most chillingly in hindsight, it warned a pandemic from Asia was a likely threat.

Sewers would quickly feel a supply chain breakdown

While the overriding message was that Australia had to be alert, one warning stuck out for Hodgson.

“What struck me is that within one week of a supply disruption to this country, we would not be able to produce sanitised water or treat wastewater properly,” he told Stockhead.

“With Calix being in the wastewater business that struck a chord, hence we need to look at supporting our local industry to have the capacity to step up.”

Hodgson suggested the government consider a minimum local content when conducting tenders. He declined to give a precise figure, saying only that it should be enough to ensure Australia had enough to get by.

Market sets the price, the government should ensure there’s enough

The Morrison government has provided support measures such as JobKeeper. But otherwise it has been reluctant to structurally intervene in free markets.

For instance, it ignored calls to prevent Virgin Australia (ASX:VAH) falling into administration.

Yet, Hodgson thinks critical industries should be a different kettle of fish.

“If [businesses] are so exposed that in the week supply chains broke down there’s not enough local content, the government needs to think about that when they go sourcing chemicals,” he said.

“The free market settles reasonable price to pay but you need to take into account other factors – is there enough content if it’s a critical industry?

“In the post-COVID world we need to take into account more than just the price.

“We need to ask what is essential and what do we need to make sure there is a sufficient local industry.”