Steel giant BlueScope joins chorus calling for government action on gas to save manufacturing
As it issued a downbeat outlook for its earnings, Australia’s largest steelmaker has told investors that Australia must introduce a gas reservation scheme for the sake of industry.
Australia’s largest steelmaker, BlueScope Steel, says high gas prices could force local manufacturers out of business and has urged the federal government to take action on installing a reservation scheme to ensure supplies for local industry.
BlueScope has previously warned Labor its 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.
“If we don’t manage the transition thoughtfully and carefully, we will close industry down. That is not a sensible thing to do,” BlueScope chair Jane McAloon told the company’s annual general meeting.
“We have to be realistic, and our view is that unless there is gas available, domestic gas in this country at a fair price, manufacturing will close. It just can’t operate.”
Australian heavy industry is wilting under a raft of cost pressures with the potential closure of the nation’s largest aluminium smelter, Tomago, tearing a hole in Anthony Albanese’s bid to resurrect Australia’s flailing manufacturing sector.
BlueScope’s outgoing chief executive, Mark Vassella, said manufacturing was at a tipping point in Australia.
“BlueScope backs the Prime Minister’s Future Made in Australia vision, but without urgent action on east coast gas availability and pricing, that future won’t happen,” Mr Vassella said.
The call comes as the federal government prepares to unveil new rules for the east coast gas market, with a cabinet meeting expected this week and a policy announcement probably before Christmas.
BlueScope shares fell as much as 9 per cent to a five-week low on Tuesday after the steelmaker revealed its half-year profit would land at the low end of forecasts.
Its shares recovered to close down 1.7 per cent at $22.10.
It now expects earnings before interest and tax of $550m for the six months to December 31, compared with previous guidance of $550m-$620m, implying profit will be 6 per cent lower than expected. Asked about the company’s decarbonisation plans and the potential of hydrogen, Ms McAloon said projects such as the South Australian government’s axed plant showed hydrogen could not be executed on a commercial basis.
South Australian Premier Peter Malinauskas axed his flagship $593m hydrogen plant in February amid the financial chaos surrounding the Whyalla steelworks. “The South Australian government closed down their hydrogen plans and they’ve reallocated those funds to the Whyalla future. And that is because … when you look at the hydrogen plans that have been abandoned in Australia, it’s because it just can’t be done on a commercial basis,” Ms McAloon said. “Rather than just pin our hopes on hydrogen, we have to think laterally.”
BlueScope has targeted a 60 per cent reduction in emissions from its Port Kembla steelworks by replacing coal with gas.
Ms McAloon said the process of decarbonising the power grid in Australia was equivalent to a post-war reconstruction task.
“For some period of time, we talked about the enablers to that decarbonisation, one of which was what we thought would be renewable hydrogen,” she said.
“There has been a lot of money spent on renewable hydrogen, and I also have a background in the energy industry, and have an awareness about what it takes to decarbonise the grid.”
The steelmaker said its consortium bid to acquire the Whyalla steelworks in SA also remained at an early stage, reiterating that it would stick to a strict financial framework before deciding to proceed.
KordaMentha has pushed the closing date for a round of bids on Whyalla to the end of November. The administrators said earlier this year that modernising the steel mill and developing nearby iron ore mines could cost a new owner up to $8bn. “There’s a long way to go on this,” Mr Vassella said. “We will absolutely adhere to our financial framework, and we have the right resources and a fantastic consortium looking at it, but there’s a long way to go.
“There’s an ore resource that’s potentially interesting in terms of future decarbonisation opportunities at Port Kembla and at Whyalla.”
Ms McAloon said the company was weighing its options.
“It’s not for us to determine the future of Whyalla,” she said. “There is a process being run by the government and the administratorand we’re going to indicate some interest in it. If somebody wants to buy the entire operations, that is something that theadministrator will consider.”
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