Savings still needed if Bluescope to avoid Port Kembla “Plan B”

XINING, CHINA - FEBRUARY 4: (CHINA OUT) Molten ferrosilicon is poured to moulds from a furnace at a village ferrosilicon factory at Yanxiao Village February 4, 2007 in Xining of Qinghai Province, China. The factory produces over 20,000 tons of ferrosilicon worth about 100 million yuan (USD 12.89 million) annually. The ferrosilicon contains 15 percent iron and most of them are sold to steel factories, according to local media. (Photo by China Photos/Getty Images)

Bluescope Steel, which announced a 160 per cent lift in its annual profits yesterday, has said it needs to continue cutting costs and be “competitive and profitable producer” if it is to keep the Port Kembla steelworks open.

Fairfax and others report that CEO Paul O’Malley described the situation as “game on, not game over”. The company will make a decision in ten to 15 years on whether or not to reline the Port Kembla blast furnace, which will cost an estimated $300 million to $400 million.

“It is a bullet decision in 10-years’ time whether we will make that investment. It is game on, not game over” said O’Malley.

Bluescope has cut 200 jobs at the site in the last year, and endured a so-called near-death experience last October, before winning savings such as a pay freeze from workers and a deferral of payroll taxes from the NSW government. This was named “Plan A”.

“To be frank, if we hadn’t achieved what we achieved, we’d be in shutdown mode,” said O’Malley.

Plan B – shutting down the steelworks – is still an option. The Border Mail and others note a report given to investors yesterday, saying if the case for upgrades couldn’t be made, Bluescope “must minimise future costs for Plan B”.

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