2012, a grim year for steel manufacturing?

2012 looks to be a grim year for Australia’s steel industry as continued weakening of domestic demand could see steel giants BlueScope Steel and OneSteel take a more cautious road.

OneSteel is currently reviewing its steel manufacturing division after it recorded a $185 million loss last financial year. The steel maker announced the loss earlier this year, along with plans to review all of operations.

The company is considering a range of options to revive its deteriorating financial situation, including the option of closing its Whyalla plant in South Australia. However, closure of the Whyalla plant would be a last alternative for the company, according to a report by the ABC.

The latest update concerning Whyalla steelworks comes as no surprise amidst a company wide review, however rumours that OneSteel might close the plan has raised concerns about the ‘real’ state of Australia’s steel manufacturing industry, Australian Manufacturing Workers Union official Derek Winter said in the report..

Last week BlueScope Steel made the decision not to provide its shareholders with an updated forecast for the coming year due to slow domestic demand. BlueScope Steel managing director Paul O’Malley told shareholders that the Australian steel industry as been experiencing sustained weak trading conditions, in a report by SMH.

”Domestic sales in our Australian business have been marginally weaker this half than in the second half of fiscal year 2011,” O’Malley said in the report.

”Total new dwelling construction remains weak, shedding 5.3 per cent in the June quarter, and 9.9 per cent lower compared to June 2010. Our Lysaght business is seeing lower volumes as a result of this trend. Mining and engineering construction will be the key drivers of business investment growth in the short term.”

The steel producer shocked industry earlier this year announcing that it will cut more than 1000 jobs with the closure of its number six blast furnace at Port Kembla and its Western Port hot strip mill.

Figures released in August showed that the steel giant anticipated a small loss for the full year due to reduced production stemming from the closure of one of its two Port Kembla blast furnaces and the closure of its Western Port plant.

The steel maker also copped a wave of criticism from shareholders at last week’s annual meeting for its decision to pay $3 million in bonuses to senior executives despite a $1 billion loss and job cuts, The Australian reported.

BlueScope Steel defended its decision saying that it had not paid short-term incentives to executives in recent years. About 39 per cent of shareholders voted against accepting the remuneration report