Fears BlueScope blast furnace to close

By Ben Langford
Updated November 6 2012 - 2:21am, first published August 11 2011 - 11:23am
Fears BlueScope blast furnace to close
Fears BlueScope blast furnace to close

Fears are growing BlueScope Steel is heading for further grim times and that it may cease production at one of its two Port Kembla blast furnaces.The Illawarra business community is bracing itself for the flow-on effects of a major reduction in steel production and significant redundancies.Many steelworkers are fearing the worst as concern spreads that recent cuts to long-serving staff and contractors could be the tip of the iceberg.BlueScope may be forced to shut down production at the No 6 blast furnace in a drastic move to cut costs, a steel industry analyst from investment bank Credit Suisse has predicted.BlueScope is cutting production as it battles a high Australian dollar, high iron ore and coal prices and weak domestic demand.Credit Suisse report analyst Michael Slifirski said the "firm belief" was that the No 6 blast furnace would stop production and be set on "idle"."We firmly believe that current loss-making commodity steel exports, balance sheet pressure and 10 years of adverse structural change will force BSL [BlueScope] to halve production through idling the No 6 blast furnace at Port Kembla and the Western Port hot strip mill," the report read. "In our view, the current commodity steel export losses can no longer be sustained by BlueScope. We've reached the point where temporary, or more likely permanent production cuts, must be taken."The report also forecast BlueScope's mill at Western Port in Victoria would be closed, at least temporarily, and BlueScope could leave the export steel business altogether.It questioned whether a 20 per cent workforce reduction could be achievable. BlueScope had exported about 60 per cent of about five million tonnes of steel it produced at Port Kembla last year, much of it into loss-making contracts under a high Australian dollar.Closing one blast furnace would halve production and bring output more into line with profitability. The human cost to Illawarra families who rely on steel jobs could be immense.Australian Workers Union branch secretary Andy Gillespie said any job losses would have to be negotiated."No-one's going to get a 'don't come Monday' letter ... nobody will be instantly stood down," he said. "I just want people to stay calm. There are a lot of negotiations with the employer that need to take place."He said a blast furnace would not be closed permanently but could be "banked" - filled with coal, kept hot and left to idle."It won't be the closure of the blast furnace - it might be banked," he said.The No 5 blast furnace was taken offline in 2009 for a major reline.BlueScope is preparing to release its full-year results on August 22 in a presentation that is expected to reveal the company is significantly in the red.It is also expected to announce steps to save the company, which employs about 3100 workers at Port Kembla plus contractors. Since July, work given to contractors has been slashed to save money.New BlueScope Australia New Zealand boss Mark Vasella is in Australia and has the task of rescuing the company from financial ruin.BlueScope will not comment on financial or operational matters until August 22 and would not comment on what a spokesman called "speculation".

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