Steel exports dead, 1000 jobs lost as BlueScope shuts Port Kembla blast furnace
- From: The Australian
- August 22, 2011
The Australian understands about 800 jobs will be axed in NSW and 200 in Victoria as a rising dollar and surging raw materials prices cruel the steel-making sector.
BlueScope will close its No 6 blast furnace at Port Kembla near Wollongong south of Sydney and the Western Port hot strip mill at Hastings east of Melbourne, affecting about 10 per cent of the company's 9000-strong workforce. An unknown number of contractors will lose work.
It will also reveal an expected $1 billion full-year loss.
Australian Workers Union national secretary Paul Howes warned yesterday that Australian manufacturing faced one of its worst periods since the Great Depression because of the effects of the high dollar.
"That's not because they're unproductive or inefficient," he later told The Australian. "It's just a simple matter of the dollar." The Australian dollar has fallen back from its 28-year highs but remains at $US1.04 and has been above parity to the US dollar since March.
Mr Howes demanded the government put pressure on China to float the yuan, arguing that most economists believed it was undervalued by up to 40 per cent.
And he said Australia should, like the US, press China over the issue in international trade negotiations. "A part of open markets means open currencies, not artificially devalued currencies to give export markets a huge advantage, which is what's been happening in China over the last couple of years."
As news of the decision emerged yesterday, the manufacturing unions called on Labor to create industry-specific support plans, such as those implemented by the Hawke government during the structural reforms of the 1980s.
Mr Howes said yesterday he was "confident that government within the next week will recognise" the crisis gripping the manufacturing sector.
Australian Industry Group chief executive Heather Ridout said she met government representatives last week to plead for action and found them concerned and trying to "gather some ideas".
Trade Minister Craig Emerson yesterday refused to comment when asked whether the government was working on any specific policies to support manufacturers.
Merrill Lynch says companies have announced more than 7000 job cuts since June, with many of them in the manufacturing sector.
The closure of the Port Kembla furnace will be a blow to the steel city of Wollongong, which for years has suffered as the manufacturing industry declined. Jordon Stojkovski and Cole Obenikovski both know how it feels to be let go by the big steel-maker.
Sitting in the Port Kembla Hotel last night, both had worked for BHP for 30 years, before Bluescope was spun off, and were made redundant in the past few years. They were both worried about the future of the region.
"I've got three kids and only my missus works now. I'm 54, but I'm worried for the future of my kids and my grandkids, " said Mr Stojokvski, who was made redundant with 300 other people and no longer works.
Mr Obenikovski, who had worked for the company for 30 years since he came from Macedonia, was made redundant in 2002. He then found work as a contractor but was laid off by them three years ago. "It's really sad. I've given my life to the Illawarra. I really don't see much future for the kids here," he said.
At the Hastings plant in Victoria, workers starting their shifts said they had been told to expect a statement to the market today, with most anticipating bad news.
"The hot strip mill, most of the guys are under the assumption they are gone," one worker told The Australian. "They just have a feeling about it - and it makes sense."
Another worker said rumours about he future of the mill had been circulating for weeks.
BlueScope exports about half of the five million tonnes of steel a year it produces from its two Port Kembla blast furnaces, named No 5 and No 6. The other four furnaces were retired as later versions were built. Pressure from a rising dollar, high iron ore and coking coal costs, low steel prices and more efficient giant Asian steel mills have meant BlueScope has accepted exports are no longer profitable.
The nation's other remaining blast furnace, at Whyalla in South Australia, is owned by OneSteel, which last week announced 400 job cuts and flagged many more as it tries to remain competitive among slowing domestic demand.
With OneSteel supplying only domestic markets, the closure of the Port Kembla furnace will mean all steel produced in Australia will be used locally.
BlueScope flagged the cuts on August 11, when it said the bad market conditions had forced it into a $900 million writedown of its local assets and that it was studying a restructure to concentrate on domestic production.
Investment bank HBSC's August economic brief highlighted how soft international demand smashed Australian manufacturing during the global financial crisis despite a drop in the dollar.
"The global financial crisis saw a large retreat in Australian manufactured exports," it said. "Between the peak in manufactured goods exports in mid 2008, and their recent trough in mid 2009, they fell by 20 per cent.
"During that period, the Australian dollar depreciated by around 25 per cent, which you would think supports the industry, but the weakness in global demand more than offset the increase in competitiveness."
Amid predictions of further job losses in coming months, unions and business organisations called on Julia Gillard to respond with policies to support the manufacturing sector.
While Dr Emerson conceded the manufacturing sector was "bearing the brunt" of a high exchange rate he was unable to outline any specific response.
But he said the government was reducing business costs by removing unnecessary business regulation through its seamless national economy initiative and had strengthened tax incentives for research and development and supported the automotive industry through innovation-based grants.
"The government is investing heavily in skills development and infrastructure to help build the capacity of the manufacturing sector," he said.
Australian Manufacturing Workers Union national secretary Dave Oliver, who has been calling for years for a manufacturing industry plan, contrasted Labor's current stance with the economic reform agenda of the 1980s.
"When we floated the dollar, when we took on reform, when we reduced our tariffs, we actually put together industry plans," he said.
"The government worked with the unions and the employers and came up with plans like the Button plans for the auto industry, the steel industry and shipbuilding.
"We need government intervention to guarantee that we've got a viable manufacturing industry in this country."
Australian Industry Group chief executive Heather Ridout said it was clear the nation was going through more than just a period of structural change. Calling for a specific strategy to cope with the crisis, she said she was "very concerned" about the future of manufacturing.
"In the face of a rising currency the Canadian government, the New Zealand government, the Swiss government all went out and said, 'This is a big problem'," Ms Ridout said. "In Australia we just had everyone saying, 'Well, that's showbusiness'."
Mr Howes attacked the Treasury for seemingly accepting the contraction in manufacturing sector to accommodate the resources boom. He said the Treasury appeared to think that "if you lose one job here then automatically that person is going to be replaced over there".
"That isn't the case. I don't accept that Australia can't have a viable manufacturing industry even with as high dollar."
Additional reporting: Christian Kerr, Leo Shanahan, Chip Le Grand