BlueScope CEO: Manufacturing at ‘tipping point’ over energy costs
Australia’s biggest steelmaker says local manufacturing has hit a ‘tipping point’ and without urgent gas market reform, Anthony Albanese’s vision for a revival won’t happen.
BlueScope Steel warns Labor’s Future Made In Australia manufacturing policy will not exist unless an urgent intervention is made in the nation’s east-coast gas market to free up supply and cut prices, casting doubt over a reboot of the embattled Whyalla steelworks.
“Today, the situation is more dire than ever,” BlueScope chief executive Mark Vassella said after its annual results on Monday.
“Manufacturing is at a tipping point with energy costs that are no longer just too high, but unsustainable. What was once our competitive advantage is gone.”
BlueScope, which is considering a buyout of the troubled Whyalla plant in South Australia, said Australia no longer had a functioning gas market and also revealed concerns over Abu Dhabi’s $30bn takeover of Santos.
“At BlueScope, we see energy costs across our global footprint. Australia is three to four times more expensive than the US,” Mr Vassella said.
“We, more than any company in Australia, wholeheartedly endorse the Prime Minister’s Future Made in Australia vision. But without immediate intervention in the east-coast gas market, there will be no Future Made in Australia.”
Mr Vassella took a hit of more than $800,000 to his short-term bonus after the steel giant suffered a major writedown on its US buildings and coated-product business.
The steel boss took home $518,552 as a short-term incentive, just 26 per cent of his total fixed remuneration, compared with a maximum available bonus of $1.343m.
BlueScope revealed a $438m writedown on its North American BCP business citing poor performance and the time being taken to integrate the assets and deliver against expectations.
The company’s shares fell 76c or 3.1 per cent to $23.48 on Monday.
The BlueScope boss said XRG’s buyout of Santos may damage the domestic gas industry given “the bad outcome” of exporting LNG from Queensland’s Gladstone at the expense of local supplies.
“I’m very concerned about how we treat those domestic resources and ensure that we get some benefit as the domestic owners and users of those resources,” Mr Vassella said.
“If I look at what’s happened to Gladstone since 2015 it’s been a really bad outcome for the domestic market and the east-coast gas market and manufacturing in this country. I don’t want to see that happen again with Santos.”
Asked if he was opposed to XRG’s takeover, the BlueScope boss said: “What I would be looking for from a major gas-user perspective is that we get access to competitively priced gas in Australia, rather than seeing that gas exported, and we just recreate the same situation that we’ve got with the LNG exports out of Gladstone. We can’t have that happen.”
BlueScope said it was continuing to assess the “wicked problem” of Sanjeev Gupta’s failed Whyalla steelworks, cautioning it had made no commitment to proceed with any deal with its international partners.
The ASX-listed steelmaker joined forces with Nippon Steel Corp, JSW Steel and POSCO to consider a deal for Whyalla, previously owned by Mr Gupta before it collapsed into administration.
“This is a wicked problem, and one that we’re not committed to doing anything at all,” he said. “We’ve got optionality. We’ve got the right partners. There’s a bunch of work that needs to go on to determine what the future or structure of steel making might look like in Whyalla.
“This has got a long way to run. The last administration went for 18 months. It’s early days: we put our expression of interest in, it’s non-binding and we’re not sure whether we’re going to go through the second stage and that’s all going to play out.”
Its board exercised its discretion to cut Mr Vassella’s actual award from 35 per cent of overall remuneration to 26 per cent “considering the impairment of BCP”.
The BlueScope boss will take the short-term award in share rights while his total fixed remuneration remains at $2.015m.
The company bought the Coil Coatings business from Cornerstone Buildings Brands in 2022 for $US500m.
BlueScope wants a domestic gas-reservation scheme and is opposed to the prospect of LNG imports, while also pushing back against gas producers’ complaining about changes hiking sovereign risk.
“And let me be really clear about this,” Mr Vassella said. “This does not increase our sovereign risk. Restricting exporters from buying domestic gas for re-export and prioritising domestic supply over LNG imports. In what world does exporting LNG in massive quantities only to re-import it to supply a shorter domestic market make any sense? It’s like importing sand into the Sahara.”
UBS estimated LNG imports on Australia’s east coast will increase domestic gas prices by $2 a gigajoule as market pricing shifts to the mooted supply source.
The federal government is mid-way through a review of the gas market including the prospect of domestic reservation and how to free up more supplies for local users.
BlueScope blamed cyclically soft conditions and global uncertainty for a 90 per cent drop in its 2025 statutory profit to $83.8m, compared with its $805.7m result a year earlier.
Underlying earnings fell to $738m, 3 per cent lower than analysts’ consensus, while the group is guiding to underlying EBIT of $550m to $620m in the first half of FY26, a jump on its prior corresponding result of $309m but again 3 per cent lower than consensus.
BlueScope will pay a fully franked final dividend of 30c per share, steady on the previous year.
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