Australia’s steel manufacturing industry could be looking down the road of obscurity, with the country’s two largest steel producers, BlueScope Steel and OneSteel, announcing weak 2011 yearly financials.
Bluescope Steel reported a US$940.85 million (approx AUD$918.27) loss compared with 2010, while OneSteel’s steel segment reported a AUD$193.4 million year-on-year loss.
At its Annual General Meeting in Sydney last month, BlueScope Steel declared its major restructure to exit the Australian steel export business was almost complete and the company reconfirmed its guidance for the first half of 2012.
Still, the Australian steel business was experiencing lower-than-expected trading, mostly due to a weak domestic building and commercial construction market, according to the company’s chairman, Graeme Kraehe.
“The Australian steel industry is experiencing sustained weak trading conditions. Domestic sales have been marginally weaker this half than in the second half of FY2011, as a result of a softer pipe and tube sector and weak building markets,” said Kraehe.
“Total new dwellings construction remains weak and our Lysaght business is seeing lower volumes as a result. Mining and engineering construction will be the key drivers of business investment growth in the short term.
“Performance of our distribution business continues to be below our expectations. This performance is almost entirely a result of lower margins due to soft domestic demand and the competitiveness of imports due to our high exchange rate.”
At the OneSteel Annual General Meeting, chairman Peter Smedley outlined the company’s success for the year ended 30 June 2011, during which it reported a statutory net profit after tax of $230 million – a result of its strategy to grow its mining and mining consumables businesses and diversify its exposure away from domestic construction and infrastructure cycles.
“While our Iron Ore and Mining Consumables businesses performed well during the year, our Australian steel businesses were again severely affected by the adverse external environment that included very weak domestic and international steel markets, as well as a rapid and very material increase in the Australian dollar. Our diversification strategy is continuing to better position the company for the future,” said Smedley.
“Our Australian steel businesses have gone through considerable challenges, and many people have underestimated the company’s ability to work through these challenges and succeed. These businesses are again facing a very difficult external environment which in the past financial year led to a disappointing and unacceptable performance.
"OneSteel has always recognised that it is the company’s responsibility to accept and deal with the challenges before it, and in August we announced we had commenced a labour and other cost reduction program as well as a review of our Australian steel product portfolio and facilities footprint.
“From a OneSteel perspective, policy areas including the Carbon Tax, the National Greenhouse and Energy Reporting Scheme, the Mineral Resource Rent Tax, Research and Development legislation amendments and the effectiveness of the Anti-Dumping Administration have all been areas of concern. We have been liaising with government on these matters and have been encouraged by announcements during this year on the Carbon Tax and Anti-Dumping in particular.”