The future of Bluescope’s Port Kembla No. 5 blast furnace – and 5,000 jobs – looks set to be decided in the next six to eight weeks.
As reported yesterday, the company announced a return to profit, with a full-year net profit of $136.3 million. However, the announcement came with a warning that its hot rolled coil steel production was under intense competition amid a global glut, and $200 million in savings had to be made from its Australian operations.
The Australian Financial Review reports that 500 jobs being cut at Port Kembla would be a starting point in reducing costs. Without the necessary savings being made, said CEO Paul O’Malley, around 5,000 direct and flow-on positions would be lost.
"One way or another the costs will come out,” The AFR reports him as saying.
“But one scenario comes with 4500 fewer job losses."
The need for action was urgent, he added.
“The next six to eight weeks will really tell. It is important," he said.
Closing Port Kembla would cost a reported $760 million, reported AAP yesterday, plus remediation costs.
The collapse in price and the lack of demand within China – which O’Malley believes has peaked – means low-cost steel is likely to leach out internationally.
According to The Australian, the East Asian price of hot rolled coil steel was $US 326 million in July, compared to an average of $US 608 million for 2010-2014.
The option of importing steel substrate for China to make coated and painted products is being considered. BlueScope is the world’s third-biggest steel painter in the world, though its loss-making steel production is only a small in international terms.
"When there's oversupply and a shortage of demand – and the equivalent of an extra 50 Port Kemblas on the market globally – you know you have to respond to international competitive pressures," O’Malley said yesterday.