February 18, 2025

Steel Market Summary - Australia

Shadow Of Tariffs Hang Over BlueScope Steel Results

BlueScope Steel has delivered a net profit after tax of $179 million for the six months ended December 31, 2024. This is a 59% decrease on the corresponding period in 2023. “Underlying earnings before interest and tax (EBIT) for the half year was $308.8 million, a profitable result despite the depressed spread environment in the half, which highlights the need for business model resilience,” said BlueScope Steel´s managing director and CEO, Mark Vassella. In Australia, the company delivered underlying EBIT of $131.2 million, 10% higher than the second half of the 2024 financial year (2H FY2024). This was partly driven by sales of COLORBOND® steel which increased 9% in the half to 313 thousand metric tonnes. The underlying EBIT delivered by BlueScope´s North American operations was $182.3 million, 65% lower than 2H FY2024. The company´s New Zealand and Pacific Islands underlying EBIT was $3.1 million, 83% lower than 2H FY2024. BlueScope expects underlying EBIT for the company in the next six months (2H FY2025) to be in the range of $360 – $430 million, on improved conditions and cost cutting. The results follow the declaration on February 10 by US President, Donald Trump, that he is

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broadening his global trade war on imports into the United States. “Today I’m simplifying our tariffs on steel and aluminium,” Trump said in the Oval Office. “It’s 25% without exceptions or exemptions”. And yet, just a few days later after a phone call with our Prime Minister, Anthony Albanese, Mr Trump said he was considering exempting Australia from the steel tariffs. Mr Albanese confirmed that view and that´s where the matter remains: in limbo. BlueScope Steel is by far Australia’s largest exporter of steel to the United States, sending more than 200,000 tonnes of semi-processed steel to America’s west coast each year. This steel is mostly used to create coated products similar to Colorbond.

With regards to aluminium, on average Australia exports around 10% of its 1.5 million metric tonne aluminium production to the US each year. Australia accounts for about 2.5% of total US imports of aluminium by volume. Data from the US International Trade Administration shows the US imported 82,801 metric tonnes of aluminium for domestic use from Australia in 2024. Following Mr Trump´s announcement, Marghanita Johnson, chief executive officer at the Australian Aluminium Council told Platts: “It’s early days, and we are still working to understand the impact of any potential tariffs on Australia’s trade portfolio. We will continue working with the Australian Government and its representatives on this important issue.”

The prospect of tariffs is unwelcome news for the Australian steel industry which in recent years has laboured under the effects of supply chain disruptions during and after the pandemic, then elevated interest rates. Tuesday´s decision by the Reserve Bank of Australia (RBA) to lower its official cash rate by 50 basis points will, therefore, be warmly received. However, in some quarters the damage is already done. Metals distribution and processing company, Vulcan Steel, had endured an extremely tough six months which saw its first-half profit plunge to $NZ9.2 million (AUD 8.28 million), down 64.8% from last year, the company´s CEO, Rhys Jones, told market analysts in early February when Vulcan released its report for the half year ended December 31, 2024. Mr Jones said the Trump tariffs added to market uncertainty for the dual-listed Australian and New Zealand company, which has about 1300 employees. Whilst being cautiously optimistic about Australia, Jones said the state of Victoria remained a worry. “The real concern is Victoria. That’s 11% of our revenue. That’s a state government with 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,” he added.

Mr Jones also took a swipe 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 the market analysts.

Sanjeev Gupta and his family own GFG Alliance which itself owns the Whyalla steelworks. In a statement on February 11, Mr Gupta said his commitment to Whyalla and his green steel ambitions will not be shaken and that the company is vigorously finalising new financing to bolster cashflow and provide critical capital into the steelworks. However, ASN readers will remember that last year a spokeswoman for GFG Alliance said: “GFG Australia has negotiated a term sheet for US$100 million from a major global credit fund” for those very same purposes. That funding has yet to materialise. Meanwhile, GFG Alliance has been facing legal challenges on several fronts, one of which ended with an $84.2 million judgement handed down in London in January against one of its group of companies. The judgement said Mr Gupta´s solicitors wrote to the court saying, the company “will no longer be able to take part in nor will it be represented at the above proceedings as it cannot afford continued appropriate legal representation”.

In a statement last week, GFG Alliance said it would begin an “expedited process” to sell its equity in the Tahmoor coal mine in the Southern Highlands of NSW, with part of the proceeds “being available for reinvestment in Whyalla” and to pay suppliers. Speaking to ABC Radio Adelaide last week, the South Australian Premier, Peter Malinauskas said the government welcomed this announcement but would remain cautious. He said that over the years governments of all political persuasions had seen statement after statement released by GFG Alliance. “And sometimes they’re true, which is great, and sometimes they don’t necessarily come to fruition,” he said. In February, the South Australian Government revealed GFG Alliance owed it royalties “in the tens of millions” of dollars and that the Government´s $593 million hydrogen ambitions for the region were now imperilled by the failure of GFG to realise its plans to modernise the steelworks.

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