Bluescope spreads Asian wings
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.