Vulcan Steel calls out bigger problems than Trump tariffs

There are bigger issues than tariffs, such as the grim Victorian economy and aggressive stock liquidation by someone “desperately trying to turn steel into cash”, says steel maker Vulcan.

British businessman Sanjeev Gupta’s steel business is under scrutiny. Picture: Mark Brake

Metals distribution and processing company Vulcan Steel has taken a swipe at the state of the Victorian economy as it braces for any fallout from US president Donald Trump’s threat to impose 25 per cent tariff on steel and aluminium imports.

Vulcan chief executive Rhys Jones said the tariff threat added to market uncertainty for the dual listed Australian and New Zealand company, which has about 1300 employees and is big player steel and aluminium distribution.

Mr Jones also took aim at British businessman Sanjeev Gupta and the impact his loss-making Whyalla steelworks in South Australia was having on margins in the steel industry.

“A number of people are struggling. I don’t think there’s any secret that InfraBuild/Whyalla/Gupta has been in the media a lot. The particular behaviour of that party is they’re obviously running their business for cash,” he told market analysts on Tuesday.

“They’re under all sorts of duress and that has been very negative to the margins on steel.”

Mr Jones said there had been “aggressive stock liquidation by some market participants desperately trying to turn steel into cash due to balance sheet pressures”.

“We also saw the industry marked by several participants experiencing significant operating losses,” he said.

Mr Jones said Vulcan had endured an extremely tough six months that saw its first-half profit plunge to $NZ9.2m ($8.28m), down 64.8 per cent from last year. The company’s earnings before interest, tax, depreciation and amortisation fell by more than 30 per cent to $NZ56.9m.

Queensland and NZ account for about 60 per cent of Vulcan’s revenue (down 12.6 per cent to $NZ493m) with Vulcan seeing light at the end of tunnel in both markets.

Mr Jones said he was optimistic about other parts of Australia, but warned Victoria remained an economic basket case.

“The real concern is Victoria. That’s 11 per cent of our revenue. That’s a state government that’s got very high debt levels,” he said.

“A number of projects on the horizon are basically stalled, or there’s no more coming. You’ve got very high costs, and you’ve got a very negative investment environment.

“We see Victoria, which is a large user of structural steel, being in a very slow environment for some time. We don’t see any real improvement in the near term.”

In contrast, Vulcan see positive signs for steel demand in Queensland as the state begins to step up preparations to host the 2032 Olympic Games.

“They’re got the Olympics emerging and business confidence has definitely increased,” he said.

“They’ve had a new state government, which has increased business confidence further, and they’ve had migration from different parts of Australia.

“Separately, NSW has been stable, but we do believe that will improve progressively over the next 12 months as interest rates drop and confidence emerges.”

Vulcan is also hoping for an uptick in steel sales in recession-hit New Zealand after what Mr Jones described as the weakest period of economic demand for many decades.

“The economic conditions in both Australia and New Zealand have continued to be difficult, with New Zealand in recession and the Australian economy remaining well below trend growth,” he said.

“Our customers have continued to face restrictive interest rate levels and weaker markets, and our first half results reflect this, particularly in our steel division.”

Vulcan slashed its interim dividend to NZ2.5c, down from NZ12c at the same time last year.

Originally published as Vulcan Steel calls out bigger problems than Trump tariffs