BlueScope reviewing future shape of NZ business

BlueScope is struggling to keep it's New Zealand business' steel operations viable. Photo / Getty Images

BlueScope Steel is reviewing the shape of its New Zealand business as it struggles to keep the steel operations viable, blaming government policy for making things even harder.

The Australian steelmaker today said it's undertaking a strategic review of its Kiwi operations – NZ Steel and Pacific Steel – and expects to have an update when it reports its earnings next month.

BlueScope said it expects to write down the value of the NZ businesses by A$200 million ($213.3m) on new expectations for lower sustainable earnings over the long-term.

"The company is monitoring recent developments in other parts of New Zealand's domestic industrial base," it said in a statement to the ASX.

"The objective of the review is to re-evaluate the footprint of the business to ensure its financial viability in a challenging environment, made more uncertain by public policy settings in carbon, trade and energy."

The threat comes about two months out from a general election, where job security is top of mind for many New Zealanders as the government's wage subsidies start rolling off and firms struggle to keep staff.

Heavy industry

NZ is already facing the exit of one of its biggest industrial operations with Rio Tinto last week saying it plans to close the Tiwai Point aluminium smelter in August next year.

The coalition government has drawn a line in the sand in offering an inducement for the multinational mining company to keep the furnaces running, and has instead talked up the prospect of cheaper electricity prices once the smelter's demands are removed.

Last month, Jarden analysts said the Covid-19 lockdown could lead to NZ Steel and Pacific Steel reporting their first half-yearly loss in four years, and would be the only BlueScope unit in the red.

BlueScope is the country's only producer of steel, which it makes at NZ Steel's Glenbrook site by smelting local iron sands with local and imported coal. It also owns the Pacific Steel business in Otahuhu and employed about 1,400 workers across both sites last year.

The firm has been struggling in recent years amid low regional metal prices and increasing costs for electricity and gas.

Last month, the firm shut its pipes and hollow sections operation at Glenbrook with the loss of 51 jobs.

BlueScope today said the NZ unit's operations were hit by the government shutdown in March and April, plus ongoing cost pressures.

Glenbrook was threatened with mothballing in 2015 by its parent unless $50m of annual costs were stripped out of the business. It then enjoyed two years of strong earnings, having shed 100 staff, renegotiated new freight rates and coal supplies, and selling the export-focused Taharoa ironsands business.