To its workers, Glenbrook steel mill is like family
Mark Palmer works at the steel mill; Andrew Hoggard farms 560 cows. So how were they dragged into a trade war? Jonathan Milne and Gerard Hutching investigate.
Last year, the Glenbrook steel mill celebrated its 50th birthday. In December, the company threw a Christmas family picnic at the Karaka showgrounds and a Rainbow’s End fun park outing for older kids. There are family open days. Staff take time out to clean up local beaches. They hold midwinter dinners.
‘‘It’s not an environment that you’d find in many other places, particularly not in a big city,’’ says steelworker Mark Palmer. ‘‘Because they’re quite small and tight-knit communities – places like Waiuku and Pukekohe and Tuakau particularly – people play rugby and soccer together, they’re in the same tennis clubs. You work with friends, with neighbours, with people you go fishing with. It feels very close’’
New Zealand lost nearly 30,000 manufacturing jobs between the 2006 and 2013 censuses – nearly one in seven. But not from steeltown. In Tuakau, of 500 adults in paid employment at the last census, 150 were in manufacturing. That’s 30 per cent of the town’s jobs; and most of the dosh.
Like most well brought-up Kiwis, they’re a little embarrassed to talk about money – but the truth is, they’ve been on a pretty good wicket. A typical steelworker with a few years’ experience under his or her leather tool belt could be grossing $100,000 a year. Then there’s the pension, and the health scheme.
Perhaps that explains why there are families where father, then son, then grandson have worked at the mill. Husbands and wives. At one point, workers were staying an average 20 years in their mill jobs. NZ Steel’s estimated worth to the wider Franklin community is $130 million a year.
Till now. This world is changing. Tuakau and the New Zealand steel industry are being tossed about in a global melting pot.
Palmer has been working at the Glenbrook mill for 35 years, most of that on the furnaces. He’s 59. He remembers when iron ore was getting $100/tonne. Steel was US$600/tonne. Now you’re lucky to get half that.
NZ Steel’s mines at Waikato North Head and Taharoa, on the South Island’s West Coast, once provided the ironsand that built this nation. Now, New Zealand’s biggest roading project, the Waterview Connection tunnel and interchange, is being built with cheaper Chinese steel. Another 1600 tonnes of Chinese steel, used to make piles intended for four bridges along the Huntly section of the Waikato Expressway, were found to be substandard.
The popular narrative is that quality New Zealand steel is being priced out of the market by shonky Chinese product. The truth, of course, is never so simple. Indeed, one industry expert says China’s steel is good quality – though you do get what you pay for. NZ Steel mills such as Pacific Steel at Otahuhu can produce perhaps 600-800 tonnes a day; similar plants in China will produce three times that with three shifts.
Either way, NZ Steel and its workers are in trouble. Steel prices are down. Iron ore prices are down. New steel mills are popping up every week in China, supplying more steel than the world can use. NZ Steel can’t compete on price, it can’t compete on volume, and it’s just not cost-effective to export a heavy product like steel from the arse-end of the world, so it’s dependent on the domestic market. That’s not enough, not even close.
The company has put Taharoa mine, which lost up to $30 million this year, up for sale. And Glenbrook itself, which can employ up to 1500 people, has been under threat of closure.
Glenbrook is 45 minutes from Auckland if the traffic is good. Forty five minutes down roads and across viaducts built with steel made at that mill.
NZ Steel isn’t letting us on to the site, so we meet Mark Palmer and his E tu union rep, Joe Gallagher, in the site office by the main entrance.
Palmer recalls how the commodity prices dived, and then the devastating news in October of Glenbrook’s potential closure. ‘‘Particularly for the newer recruits, who had found what they thought was secure employment with a good wage, and on the basis of that they had bought a house, got a mortgage, were fairly heavily committed, and were then faced with the likelihood that was all going to end on them . . .’’ He trails off. ‘‘A lot of people have lived locally all their lives, and they were faced with the possibility of not only losing their jobs, their homes, but also having to relocate elsewhere away from their families, their friends, the people they’d grown up with. There were some very real fears.’’
The workers and the union held a meeting at the big white Pukekohe War Memorial Hall. More than 400 people turned out.
Normally, one expects a union to fight for bigger pay packets. This time, on behalf of the workers, the union made some big concessions. No pay rise in 2016. Only 1 per cent in 2017. And, critically, NZ Steel’s long-established monthly bonus scheme – worth about $10,000 a year to most workers – would be on hold until the price of steel recovers to $600 a tonne.
It was enough to save the jobs. For now.
Then, this week, we break the news to Palmer: the steel industry is at the heart of a new and emerging trade war with China.
‘‘People are concerned,’’ he says. ‘‘Forty years ago, industries in New Zealand were controlled by oligarchies, the Fletchers, the Fisher and Paykels. And they were all about growth, about growing their business. Now we are seeing a philosophy where cashflow is king. And if we haven’t got a positive cashflow in two years then it’s likely our director will just say, ‘close it down’.
‘‘We’ve already seen trial shipments of Chinese coil brought in to our works. If they can import hot roll coil cheaper than we can make it, then why keep it open? ’’
In Beijing in 2008, New Zealand became the first country in the world to sign a free trade agreement with China. Now, nearly a quarter of New Zealand’s exports are shipped to China, which in 2013 overtook Australia to become our biggest trading partner.
In 2013, too, China became the world’s biggest trading nation with exports and imports topping US$4 trillion – a mind-boggling figure which allows it to throw its weight around.
China has pointedly remarked that it is at peace with New Zealand, for now. The heavy implication is that if New Zealand doesn’t back off and shut down any investigation into China dumping steel in this country, we could soon be at war.
The world’s response to their steel makes China behave like a panda with a sore head. Just last month, the United States Commerce Department imposed anti-dumping and anti-subsidy duties of up to 450 per cent on Chinese steel, which US authorities believe is being subsidised and dumped on world markets at unsustainably low prices that will drive other manufacturers out of business.
In Australia, NZ Steel’s parent company BlueScope has applied for punitive tariffs to be imposed against Chinese steel-makers. And in New Zealand, one of its subsidiaries, Pacific Steel, has done the same.
China believes this is a concerted crackdown on its steel, led by fearful United States politicians ahead of the presidential elections. It is seen as being linked to the confrontation in the South China Sea over the military bases China has built on contested atolls.
So will these disputes affect our wider trading relationship? ‘‘The South China Sea is not an issue between China and New Zealand, and we value our relationship with New Zealand,’’ China’s ambassador Wang Lutong told TV3’s The Nation in unscreened footage this weekend. ‘‘China and New Zealand can disagree on some of the issues, but it doesn’t necessarily affect our good relationship.’’
China is almost certainly wrong to think New Zealand is acting on US instruction, but the effect will be to bring New Zealand and the United States even closer together. US Vice President Joe Biden visits New Zealand this week – China’s angry reaction to US, Australia and New Zealand inquiries into steeldumping will surely be a talking point in his meetings.
The preliminary MBIE inquiry process was meant to be secret until the chief executive advises the Cabinet he intends to investigate – but somehow, China got wind of it.
Chinese agencies responded by calling in some of New Zealand’s big exporters and laying the hard word on them to get the government to shut down the steel inquiry, or face the consequences. China has begun formally consulting about using retaliatory tariffs to restrict New Zealand dairy, wool and kiwifruit exports.
That blows out the disagreement from a dispute affecting one industry, to a major threat to New Zealand trade.
It’s Saturday, but dairy farmers don’t get a day off. Andrew Hoggard is out on his 300 hectare property on the banks of the Oroua River near Fielding, where he farms 560 cows.
He’s wary. New Zealand dairy farmers could be plunged back into the gloom of last year’s superlow milk solids payouts, if China decides to punish dairy exports to send a message to the Government.
‘‘A trade war with China is definitely not in our interests,’’ Hoggard, who also chairs Federated Farmers’ dairy group, says. ‘‘It’s about 20 per cent of our markets and we’re getting good market penetration with added value products in there.’’
In its latest global dairy update released on Thursday, Fonterra was bullish about trade with China, saying the rise in disposable income among the Chinese was increasing in ‘‘lower tier’’ cities.
UHT milk powder is now being supplied to retailers in Hebei, Jiangsu, Sichuan, Shandong and Beijing provinces through an online ordering app. At present 15,000 stores are involved, but this will increase to 50,000 by the end of the year. At the same time, Chinese demand for products from all dairy producing countries appears to be on the increase. During the last year to May, China imported 410,000 tonnes of dairy products, up 23 per cent on the year before.
While China imported 30 per cent more dairy product in May, a Fonterra spokeswoman said this could not be read as a sign that demand was necessarily increasing, as it often fluctuated during the year.
It could all change very fast, if China makes good on its retaliatory threats.
The question, then, for Hoggard: what price a principle?
Is it worth kicking up a fuss about a little low-priced steel dumped on the New Zealand market, when that could jeopardise New Zealand’s far bigger dairy, wool and kiwifruit industries?
Hoggard said he did not know the details of Pacific Steel’s complaint – but it was important New Zealand was seen to uphold global trade rules.
‘‘International trade rules are international trade rules,’’ he said. ‘‘People should follow them.’’