The World Steel Association claims that 52% of all steel produced each year is used in the building and infrastructure sector. It stands to reason, therefore, that any significant downturn in the amount of home building taking place will result in less steel being purchased. Herein lies one of the key problems facing the steel industry in New Zealand. On 2 July, Stats NZ reported there were only 34,851 new homes consented in the year ended May 2024. That represents a drop of 23% compared with the year ended May 2023. “The record for the number of homes consented was 51,015 in the year ended May 2022. In the two years since, the number of homes consented has fallen 32% from that peak,” said Michael Heslop, the construction and property statistics manager for Stats NZ. Within that decline, a fascinating trend has developed: multi-unit homes now make up a much greater share of the total number of consents. The number of multi-unit homes consented in the year ended May 2019 was

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just 13,200. However, that figure has now increased by 48% to 19,542 for the year ended May 2024. In contrast, the number of stand-alone houses consented decreased by 29% to 15,309 during the same five-year period.

To put the challenge facing the steel industry into perspective, in a statement to the New Zealand stock exchange on 14 June, Steel & Tube said post-pandemic steel demand in New Zealand had reached levels even lower than those experienced during the 2008 global financial crisis. The statement to the NZX provided earnings guidance from Steel & Tube for the financial year ending 30 June 2024 (FY24), and an update on trading for the 11 months of the year to date. Notwithstanding the depressed conditions, Steel & Tube´s CEO, Mark Malpass, said the company has continued to grow margins and maintain market share, strengthen customer relationships and significantly improve operating leverage to position itself for New Zealand’s economic recovery.

“Whilst the trading environment is challenging, we have controlled the controllables and we are positioned for demand growth once the New Zealand economy improves,” Malpass said. “Whilst the timing and pace of that economic recovery remains unclear, our expectation from our customer mix is that we are near the bottom of the cycle and should start to see demand improve in the 2025 calendar year,” he added. Malpass remarked that Steel & Tube continues to deliver margin growth, cost reductions which have offset inflation and resilient operating profits. Additionally, the company´s investment strategy into high value products and services is delivering results. Steel & Tube is forecasting FY24 normalised EBIT of $14m to $15m and normalised EBITDA of $35m to $36m. Net cash on hand is expected to be between $7m and $10m at year end.

The statement´s trading update on the 11 months to 31 May 2024 noted that average selling prices have remained elevated due to international product costs and a weaker New Zealand dollar, despite market contraction and increased competition. Also, the company´s gross margin dollars/tonne had improved as a result of keen pricing, cost control, improved product mix and customer value add. Steel & Tube’s net cash balance remains positive.

The company also advised the NZX it had acquired 20 owned and leased trucks and eight owned trailers from Roadex Logistics, a long-term provider of freight delivery services to Steel & Tube. The trucks are specialist units designed for steel freight and lifting operations. Mark Malpass commented: “After steel and labour costs, freight is the third largest cost element of the steel supply chain.” The transaction was effective 30 April 2024. Malpass said the company will continue to review options to extend its fleet of specialist steel delivery trucks across the country where this can provide improved service and positive earnings.

In news further afield, Fletcher Building has agreed to divest 50% of its Fiji construction business to two local partners, Fiji National Provident Fund and Fijian Holdings Limited. The transaction values the Fiji business, comprising Fletcher Construction and Higgins branded operations, at approximately NZ$40 million. Fletcher´s acting CEO, Nick Traber, said: “We believe the partnership positions the business well to continue to play an important role in Fiji, focused on infrastructure development.”  Also in June, Fletcher Building announced that, rather than waiting until October, Board directors Martin Brydon and Rob McDonald would step down on 30 June, thus facilitating an acceleration of the planned Board renewal.