WA, Qld keep­ing de­mand side of the equa­tion strong

The Weekend Australian - Review - - Steel Special Report - Sarah Belfield

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.

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