BlueScope calls for industry re-adjustment

While BlueScope reported a significant loss yesterday, its CEO Paul O’Malley suggests the company is still well-placed to deal with challenges the steel industry faces.

While BlueScope reported a significant loss yesterday, its CEO Paul O’Malley suggests the company is still well-placed to deal with challenges the steel industry faces.

BlueScope announced a net loss of $1.04 billion yesterday.

However O’Malley has predicted the company will become earnings positive in 2012/13.

It cautiously expects a “break-even” profit in the six months to December, the Sydney Morning Herald reported. Chinese over-production was cited as a challenge. 

The steel maker cited Chinese over-production as one of its main challenges. 

'There is no doubt Chinese product is trying to find its way around the region,” O'Malley said.

''Post the [global financial crisis] China's steel industry had been over-stimulated and we'll see a significant restructuring of the Chinese steel industry in the next few years.”

He told the Australian Financial Review that Chinese as well as Australian steel-makers would have to adjust to the current conditions, adding that China’s steel capacity has been reached.

“I think there is a significant overproduction of steel in China at the moment.

“To the extent that we’re at peak steel capacity in China at the moment you will see a slowdown.”

BlueScope has re-structured in the last year, doing away with its export business and its Port Kembla facilities.

Last week it announced a joint venture with Nippon on coated steel, covering a portion of its debt.

Chinese dumping and weak building figures were issues the company would have to deal with this year.

"The big factor is soft domestic demand,” O’Malley told the Daily Telegraph.

We've seen flat demand now over the last four halves and a drop-off in building-construction demand particularly in the last six months."

He also predicted that the industry internationally would have to make changes to suit the demand for its product.

“This is not just a China-only story, this is a number of countries looking for new markets that ultimately may need to wind back on capacity,” he told the AFR.

“I think there are many countries that have too much capacity as we did and will have to wind back and I think perhaps we’ve done it earlier than others but we won’t be the last to do it.”