Sprawl ups steel demand

Trend towards lower-density living underpins outlook for BlueScope

BLUESCOPE Steel boss Mark Vassella says Australia’s trend towards a widening urban sprawl is still accelerating in the wake of the coronavirus pandemic, which is good news for his business.

BlueScope recorded a 78 per cent lift in first-half net profit to $330.3m and projected stronger earnings in the second half.

Mr Vassella also signalled the likely relining of a mothballed blast furnace at its Port Kembla steelworks in NSW as the company’s best option for the future because replacement low-carbon emission technology won’t be ready for commercial use by 2026. The cost of the works would be $700m to $800m.

The steelmaker reported that underlying earnings before interest and tax (EBIT) for the December half rose 75 per cent to $530.6.

BlueScope said it expected second-half underlying EBIT in a range of $750m to $830m. The company declared a 6c interim dividend, flat on a year ago, and the steel maker elected not to extend its share buyback given the outlook for parts of its business was still volatile.

BlueScope shares rose 2.3 per cent to $17.67 on Monday.

Mr Vassella said he believed the Australian trend away from high-density living was accelerating in the wake of the pandemic, noting that net migration to regional areas was up 60 per cent and the share of detached dwellings from total approvals was up 6 per cent to 67 per cent in the second half of the year.

“We have seen it manifest in sales,” he said. “The Australian steel products business had the highest level of sales that it’s had for 10 years.

“There’s no doubt we’re seeing that shift towards lower density and regionalisation. And that move to regionalisation works well for us. How long will it last? I don’t have a definitive answer to that, but we’re guiding to another six months of really quite strong activity in the Australian domestic market.

“Our customers — builders, etc — are largely telling us they’ve got strong order books through 2021, so it will be interesting to see where this ends.”

BlueScope said its Australian steel business delivered EBIT of $259m for the halfyear, up 103 per cent, but it stressed that east coast energy costs were still too high.

Earnings at BlueScope’s North American building products division rose 189 per cent to $70.5m.