BlueScope will keep its Port Kembla steelworks open. Photo: Peter Braig
BlueScope Steel’s 4500 workers and thousands of others in the Illawarra won a reprieve after the state government gave the troubled steelmaker $60 million in payroll tax relief.
The $60 million saving over three years is in addition to the $180 million the company will gain as a result of workers agreeing to pay freezes and the loss of 500 jobs.
BlueScope steelworks at Port Kembla will remain open. Photo: Peter Braig
South Coast Labor Council Secretary Arthur Rorris said thousands of other jobs in the region would also be saved as a result of ongoing production at the Port Kembla steelworks.
“This is an amazing result and a relief for a region that has already been doing it tough,” Mr Rorris said.
“The sacrifices made by our steelworkers and their families have meant that thousands more jobs in other industries throughout the Illawarra will be saved and the Australian steel industry lives for another day.”
Coiled steel is made at BlueScope Steel’s Port Kembla steelworks. Photo: Peter Rae
University of Wollongong researchers have found that the steelworks contribute $3.3 billion every year to the Illawarra economy.
The impact of its loss would be felt in manufacturing and the service industry – “everyone from coffee shops to hairdressers”.
“It would have been a catastrophe,” Mr Rorris said.
“People need to know we’ve come within a whisker of losing the ability to make steel in this country.
“We all owe those steelworkers and their families a great debt for taking the hit when they did.”
Mr Rorris said the state government’s payroll tax relief was a vital contribution to the $200 million BlueScope Steel said it needed to save on its annual operating cost to survive.
Mr Rorris was expecting to meet with Federal Industry Minister Christopher Pyne and his NSW counterpart, Anthony Roberts on Monday afternoon to press the case for local procurement of steel for taxpayer-funded infrastructure.
Australian Workers Union Port Kembla branch secretary Wayne Phillips said the long-term future of the steel making industry depended on state and federal governments standing up to anti-competitive dumping of steel.
“Australian governments need to follow the example of other developed nations like the USA which ensure their steel industry is supported through government procurement and strict anti-dumping measures,” Mr Phillips said.
AWU National Secretary Scott McDine said BlueScope is now expecting strong growth.
“And while the pay freeze accepted by workers is for a three-year period, the bonus freeze lasts only until the end of the current financial year. If profitability continues to climb, Port Kembla workers should be at the front of the queue for bonuses to reflect that,” he said.
BlueScope shares jumped 10 per cent to $4.48 in early trade on Monday.
The company has also announced plans to pay $US720 million to buy Cargill’s 50 per cent share of the North Star joint venture in the US.
NSW Treasurer Gladys Berejiklian moved to kill off concerns that the government had established a precedent of granting concessions to troubled businesses in order to protect jobs.
“We have made it very clear that this is a one off unique solution for BlueScope specifically,” Ms Berejiklian said at a press conference in Port Kembla on Monday.
“The key thing for us is to protect these 4,500 jobs.”
After the three years deferral period, BlueScope will repay the full amount to the state in increments from 2020 to 2029 on top of normal payroll tax payments.
Outgoing BlueScope chairman Graham Kraehe said it applauded “the contribution by our employees, site management and the combined unions in helping to secure $60 million per annum in labour cost savings”.
“We also thank the NSW government for deferring $60 million of payroll of payroll tax payments over the next three years, as well as reductions in other charges.”
Independent senator Nick Xenophon called for Australia to follow the United Kingdom and enforce strict caps on the levels of other metallic elements, such as boron, in steel.
Senator Xenophon intends to introduce legislation for a mandated cap that Australian structures cannot use steel with ore than 8 parts per million of boron.
“The boron makes the steel hard and brittle and the welds prone to snapping,” he said.
“But that hasn’t stopped cheap, high boron content, Chinese steel being bought-up in Australia by governments and prime contractors and going to make everything from bridges, road guards and building materials.”
The world is awash with surplus steel and slowing Chinese demand has put huge downward pressure on steel prices.
Chinese steel exports have doubled to more than 100 million tonnes a year between 2010 and 2015 and Chinese steel exports hit a record monthly high of 11.25 million tonnes in September, up 32 per cent on September 2014.
Port Kembla, the nation’s biggest steel works, has capacity to make 2.6 million tonnes of raw steel every year.
Due to the steel glut prices for hot rolled coil – a commodity steel used in structural sections, tanks, and gas cylinders – are at their lowest level since 2003.
“China is exporting production equivalent to 45 Port Kemblas,” BlueScope Steel chief executive Paul O’Malley said.
“The only thing within our control is to make sure we are cost competitive.”
Mr O’Malley said that Port Kembla had come very close to a shutdown decision.
“It doesn’t get much closer,” he said.
“I’ve never seen people work harder to try to deliver cost competitiveness.”
Arrium Steel boss Steve Hamer, who oversees the Whyalla steel works in South Australia, said last week that Australian steel was “under enormous pressure” and conditions in the steel industry were the worst he has seen.