Bluescope spreads Asian wings

The Weekend Australian - Review - - Steel Special Report - Rolling out new plans: Bluescope will emerge stronger af­ter Smor­gon break- up Robin Bromby

PREDA­TOR one day, po­ten­tial tar­get the next. No sooner had BlueScope Steel con­sum­mated its deal with OneS­teel to carve up Smor­gon than the talk be­gan that South Korea’s gi­ant Posco was an in­ter­ested buyer.

There is no doubt that the South Kore­ans are on ag­gres­sive ac­qui­si­tion binge world­wide. So what would Posco — its full name be­ing Po­hang Iron & Steel — or, in­deed, any other po­ten­tial buyer be get­ting if they did put their money on the ta­ble for BlueScope?

For one thing, they would ac­quire a flat steel­maker that has ex­panded con­sid­er­ably since it was spun out of BHP Bil­li­ton in 2002. Then the com­pany was val­ued at $ 3 bil­lion; now its value is stated as $ 9.5 bil­lion. In the first half of 2007, it turned over $ 4.9 bil­lion in rev­enue.

The core of its op­er­a­tions is the Port Kem­bla steel­works, south of Syd­ney, pro­duc­ing five mil­lion tonnes a year, along with plants also there and at Hast­ings, Vic­to­ria, pro­duc­ing fin­ished steel prod­ucts. An era fin­ished at Port Kem­bla ear­lier this year when the com­pany closed the tin­plate mill af­ter 50 years, a vic­tim of chang­ing pack­ag­ing. The tin­plate was once widely used for can­ning, and got a big boost in its early years by the growth in canned beer sales.

BlueScope’s po­si­tion in the Aus­tralian mar­ket will be strength­ened con­sid­er­ably by its share of the Smor­gon break- up. BlueScope will pay $ 700 mil­lion for the steel prod­uct dis­tri­bu­tion arm of Smor­gon, so be­com­ing the only do­mes­tic sup­plier of flat steel prod­ucts, much of which goes to the build­ing in­dus­try.

( The only po­ten­tial fly in the oint­ment is a threat by some smaller steel prod­uct mak­ers to mount a court chal­lenge to the Smor­gon deal on the grounds it is less­en­ing com­pe­ti­tion in the in­dus­try.)

Across the Tas­man, BlueScope owns New Zealand Steel which has an in­te­grated steel mill south of Auck­land which uses lo­callysourced iron sand and coal to pro­duce about 600,000 tonnes of steel slabs a year.

But the com­pany’s big ex­pan­sion is in Asia. BlueScope Lysaght op­er­ates steel prod­ucts man­u­fac­tur­ing in Shang­hai and Guangzhou that were opened in 1995 but, since split­ting with BHP, has opened plants in Chengdu and Bei­jing.

There is a large foot­print in South East Asia: dis­tri­bu­tion op­er­a­tions in Thai­land and Brunei, man­u­fac­tur­ing in Viet­nam and Sin­ga­pore for the con­struc­tion in­dus­try, and BlueScope is the only man­u­fac­turer in Malaysia mak­ing coated steel.

As it is in In­done­sia. The com­pany an­nounced in May it would in­vest an­other $ US101 mil­lion ($ 120 mil­lion) to de­velop a sec­ond metal­lic coat­ing line at its Ci­le­gon plant, 100km west of Jakarta. This will pro­duce thin- gauge coil used mainly in con­struc­tion, lift­ing BlueScope’s In­done­sian ca­pac­ity to 265,000 tonnes through the coat­ing line each year, along with 160,000 tonnes through the paint­ing line.

There are man­u­fac­tur­ing plants in In­dia and Sri Lanka. Bluescope in In­dia op­er­ates in a 50- 50 joint ven­ture as Tata BlueScope Steel and it re­cently opened a third plant near Chen­nai. The part­ners are aiming at the con­struc­tion in­dus­try ex­plo­sion in South In­dia. There are plants in Fiji, Van­u­atu and New Cale­do­nia to ser­vice the South Pa­cific.

BHP got into a joint ven­ture steel mini- mill in Ohio, but the BlueScope man­age­ment ex­panded in the US in 2004 by tak­ing over Mis­souri- based Bul­ter Man­u­fac­tur­ing, maker of steel build­ing sys­tems.

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