The slowdown in steel market conditions in New Zealand has prompted Vulcan Steel to issue a bleak market update on trading conditions and the company’s performance for the September quarter of calendar 2024, which is the first quarter of the 2025 financial year (FY25). The update was based on unaudited management accounts. In a statement to the New Zealand and Australian stock exchanges, Vulcan said its revenue had fallen 13% year-on-year to NZ $263.1 million in the first quarter of FY25 compared to the NZ $304.0 million achieved in the corresponding first quarter of FY24. Earnings before interest depreciation and amortisation fell 30% to NZ $33.1 million in the opening quarter of FY25 from the NZ $47.5 million in the equivalent FY24 period. Vulcan further advised that sales volume had fallen 10% in FY25´s first quarter to approximately 57,000 tonnes from the 64,500 tonnes of FY24´s first quarter. Vulcan is an Australasian-wide industrial product distributor and value-added processor with 66

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logistics and processing facilities employing approximately 1,300 people across the company’s steel and metals divisions.

Commenting on the results, Vulcan’s Managing Director and CEO, Rhys Jones, said: “Following a challenging end to FY24, business conditions for our industry in 1Q FY25 remained soft and deteriorated across most market verticals and geography, especially in New Zealand. These conditions are expected to continue for the balance of the 2024 calendar year.”

However, despite challenging conditions in the near term, Vulcan sees encouraging signs for 2025. “The reduction in the official cash rate by the Reserve Bank of New Zealand since August 2024 has led to a notable lift in business confidence and pre-sales activity level among our customers, though the timing for this translating into tangible benefits during 2025 calendar year remains uncertain,” Jones said. “In Australia, we expect trading conditions for some of our operations to improve as business confidence lifts and when other present industry disruption in that market abates,” he added.

Notwithstanding the overall market downturn, Vulcan reported that its net debt since the end of FY24 had been reduced by $22 million to NZ $254 million by the end of September 2024 and that the company remains in compliance with its current banking covenant thresholds. Jones commented: “In addition, our banking syndicate continues to be supportive and we have entered into an agreement with our lenders to provide a relaxation of the existing banking covenant thresholds for the next 14 months, with our current covenant thresholds to then apply again from 31 December 2025. We have taken the prudent step to secure these amendments in the event an economic recovery in Australia and New Zealand takes longer to materialise.”

Therein lies the problem: when will market conditions improve? The latest figures from the high steel-consuming home building sector give insight. Stats NZ reports that, in the September 2024 quarter, 4,485 stand-alone houses were consented: a 24% increase on the September 2023 quarter figure. “The September 2024 quarter marked the first quarter since December 2021 where there was a year-on-year increase in the number of stand-alone houses consented,” said Stats NZ´s economic indicators manager, Michael Heslop. Furthermore, in seasonally adjusted terms, the number of new homes consented in the September 2024 quarter was up 6.2% on the June 2024 quarter. “Stand-alone house consents are down from their 2021 peak, but have increased for the last four quarters in seasonally adjusted terms,” Heslop said.

Unfortunately, the overall home consents figure remains in sharp contrast to the stand-alone housing figure and thus represents an ongoing concern for the steel industry. In total, there were 33,677 new homes consented in the year ended September 2024, down 17% on the year ended September 2023. “The annual number of new homes consented is still decreasing, but the pace is easing,” Heslop said. In the year ended September 2024, all regions except Otago and Nelson consented fewer new homes compared with the year ended September 2023. The five regions with the highest number of new homes consented in the year ended September 2024 were: Auckland with 13,821 (down 19% compared with the year ended September 2023); Canterbury with 6,702 (down 7.0%); Waikato with 2,887 (down 25%); Otago with 2,182 (up 9.3%); Wellington with 1,883 (down 40%).

These figures suggest the New Zealand steel industry would be unwise to choose home building as the sector on which to pin all its hopes for a market recovery.