BlueScope Steel posts $1B loss, to cut 1,000 jobs

AP News
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Posted: Aug 22, 2011 2:25 AM

Australia's largest steel maker BlueScope Steel Ltd. announced Monday it will shut two production facilities and shed 1,000 jobs as part of a restructure aimed at turning around a 1.05 billion Australian dollar ($1.09 billion) annual loss.

Bluescope said it will shut down a blast furnace at Port Kembla in New South Wales state and close its Western Port hot strip mill in Victoria state.

The Port Kembla closure will result in 800 job losses, while 200 jobs will be cut at Western Port.

Hundreds of contractors and suppliers will also be affected by the closures, BlueScope said.

The company reported a AU$1.05 billion net loss for the fiscal year ended June 30, compared with a AU$126 million profit in the previous year.

Treasurer Wayne Swan blamed the job losses on the high Australian dollar and Australia's patchwork economy where miners are making burgeoning profits from growing demand for raw materials from China and elsewhere in Asia while manufacturers struggle.

"What we are seeing is some of the painful adjustment taking place in parts of our economy," Swan told reporters.

The government responded with a AU$120 million assistance package to help redundant workers find new jobs and the affected regions create new businesses.

Paul Howes, national secretary of the Australian Workers Union which represents many of BlueScope employees, called on the Australian government to pressure Beijing to increase the value of the yuan. Critics of Beijing's currency's policies say the yuan is kept artificially low, making it harder for exporters in other nations to compete.

BlueScope said the high Australian dollar, low steel prices and high raw material costs were being compounded by low domestic steel demand.

"We are experiencing significant economic challenges and structural change in the global steel industry," chairman Graham Kraehe said in a statement.

The closure of the plants will better match BlueScope's production with demand from Australia, and the company will no longer export its products, he said.

"The restructure announced today will produce a more viable and sustainable Australian steel business and allow us to focus clearly on domestic markets," Kraehe said.

Managing director Paul O'Malley said the changes would deliver a material improvement in earnings and cash-flow, reduce export losses and reduce earnings volatility.

"It's the right decision for the long-term viability of our business," he said.

Export sales delivered an AU$487 million loss in the last fiscal year, BlueScope reported.

The Australia Industry Group, a business advocate, described the BlueScope restructure as "chilling news" for all Australian manufacturers.

Group chief executive Heather Ridout called on the government to reduce the tax burden on manufacturers who are bearing the brunt of the mineral boom and the strong Australian currency, which is hovering near record highs against the U.S. dollar.