WA, Qld keeping demand side of the equation strong
DEMAND for steel will be strong in Australia, with Western Australia and Queensland offsetting any weakness elsewhere, according to Australian Steel Institute ( ASI) chief executive Don McDonald.
Alongside building construction, the ASI assessment embraced water, road and rail infrastructure. While the demand for steel was down in the NSW housing sector and in rural areas, particularly in the drought- affected areas of the eastern states, demand from the resources sector in Western Australia and Queensland was an offsetting force.
‘‘ I think you find that when GDP is above 2.5 per cent or so, then that’s pretty good for steel,’’ he said.
But while things may be motoring along quite nicely for the steel industry at the moment, the ASI did flag some concerns last year with a federal House of Representatives standing committee, after it invited submissions to its inquiry into the state of Australia’s manufacturing sector. The inquiry is ongoing.
In its submission, the ASI said the Australian steel industry had undergone significant rationalisation and structural change.
It said there had been many takeovers and mergers in the last five years, with one of the largest being the proposed acquisition of Smorgon Steel. In June, OneSteel’s bid received a conditional go- ahead from the Australian Competition and Consumer Commission. Smorgon’s distribution assets were tagged to go to BlueScope Steel.
The industry had also seen the closures of the Newcastle steel mill, the Smorgon Steel pipe and tube mill in Melbourne and the BlueScope Steel tin mill at Port Kembla.
According to the ASI, measures such as these were steps the industry had taken to stay competitive globally, but the organisation also said there were ‘‘ limitations to the amount of mergers and closures that can be made without affecting the foundations from which to compete’’.
On top of this, the ASI felt there was a lack of a level playing field between the Australian steel industry and many of its competitors. The organisation believed competition with China was a particular concern, and said that country’s legal, monetary, intellectual property, export, occupational safety and import tariff policies created advantages in the Chinese economy.
McDonald sought to allay fears that there was any shortage of capacity in Australia.
‘‘ We’ve got capacity and that clearly means we want to do business.’’
The ASI, with 2000 members, is a peak body representing companies and individuals involved in steel’s subsectors, including manufacturing, detailing, fabrication and distribution.
According to the ASI, the country’s steel industry produces around 7.5 million tonnes of steel a year, of which about 5- 5.5 million tonnes were consumed domestically. Annual turnover exceeded $ 21 billion.
McDonald said the industry had seen claims from time to time that the industry was overheated and running at full capacity, and that steel customers were therefore looking to place their orders for fabricated steel with overseas suppliers.
‘‘ We know for a fact that a number of our members are not fully loaded, and by that I mean they’re somewhere around 50 per cent loaded up at times. They can increase capacity with extra shifts with enough notice.’’ The industry was keen to have ‘‘ a proper crack’’ at all projects, he said.
However, McDonald indicated that for customers to receive competitive, comprehensive bids, they needed to hold up their end of the deal by engaging with steel product and service suppliers at a stage in the project that was reasonable.
He said the benefits of early engagement included customers being able to tap into the local steel industry and its ability to deliver to time, cost and quality specifications. For instance, good links between steel detailers and fabricators in the west of the nation meant customers enjoyed reduced lead times, reduced errors, certainty in job scheduling and controlled just- in- time deliveries to sites.