Higher iron ore prices and lower steel prices decimated BlueScope’s earnings last half but the concern going forward is the impact of the coronavirus which will mean zero earnings from China this half but potentially much wider impact.
BlueScope chief Mark Vasella said his 2000 workers in China were back on the job and his team was monitoring developments. But at this stage no one really knows the real impact. The only BlueScope office not open in China is its sales office in Hubei.
The wider unknown is the reason BlueScope’s stock price fell 6.9 per cent to $12.96 a share in late morning trade on Monday, and why the entire market is worried.
The only supply chain issue BlueScope has confronted concerns two small parts made in a foundry in Tianjin which are needed for its $1 billion steel plant expansion in Delta Ohio.
That tells you something about the global supply chains, which have stockmarket investors worried as they try to get a handle on how the virus may affect earnings.
BlueScope’s earnings were down for more traditional reasons, like higher costs for key inputs like coal and iron ore and lower steel prices, which meant returns were down to 8.4 per cent from 24.9 per cent a year ago. A $10 a tonne move in iron prices sends BlueScope’s earnings down $33 million.
The company also said Asian boss Charlie Elias will quit, which was a surprise albeit not totally unexpected given he was a candidate for the top job which Vasella assumed in January 2018.
The numbers were broadly in line with expectations.
But one surprise on the upside was stronger than expected sales from its coated steel division in Australia.
The Zincalume operations are performing well despite a fall in the housing construction market which has mainly hit multi-dwelling apartments.
Meanwhile, North Star earnings were down 72 per cent to $114.5 million while Australian earnings were down 60 per cent to $127.9 million.
BlueScope remained active in its anti-dumping activity, with an action on galvanised steel from China, Taiwan and South Korea, zincalume from China and hot rolled coil from Taiwan.
The ACCC’s cartel case against BlueScope continues to meander through the courts with a case management hearing in Sydney next month.
The company is denying any wrongdoing.
More Coverage
R.M. Williams digs heels in over Adelaide rental dispute
R.M. Williams is facing a legal stoush in its spiritual home of Adelaide with its former landlord taking it to court for about $200,000 in disputed rent and other costs.
Gupta’s woes spread to NSW as coal workers stood down
Workers at Tahmoor Coal in NSW have been stood down on full pay and production curtailed, as rumours swirl that Sanjeev Gupta’s debt worries have spread beyond Whyalla.