OneSteel closes Kembla pipe manufacturing business

OneSteel will close its Kembla Grange Oil and Gas Pipe (OGP) manufacturing business on 31 May 2012, in an effort to cut costs in its steel processing business.

The Australian steel giant is moving away from the domestic construction and infrastructure markets, and instead beefing up its mining and mining consumables businesses, the company’s chairman reported last year.

OneSteel reported a statutory net profit after tax of $230 million for the year ended 30 June 2011, mostly due to its mining businesses.

The OGP business manufactures and sells approximately 40 to 50 thousand tonnes per annum of pressure pipe to the oil and gas and steel distribution markets in Australia.

The business employs 56 people, all of whom have been “aware of its challenges for some time”, the company said.

OneSteel claims it will continue to provide support and assistance to the 56 employees leading up to the plant’s closure.  

“Today’s announcement will result in a write down  of assets in the company’s Distribution segment of approximately $13 million inclusive of goodwill, and a restructuring charge of approximately $5 million (both before tax) in  the company’s results for the year ended 30 June 2012,” OneSteel announced yesterday.

“It is expected that restructuring costs will be substantially funded through the realisation of working capital.”

The company will sell the OGP plant, including its manufacturing equipment and related land, which it hopes will reduce the losses incurred by the closure. 

Last year, the government pledged $300 million to boost steel manufacturing in Australia, which has been negatively affected by high material prices and overseas competition.