Talks between BlueScope Steel and unions about the future of steelmaking in the Illawarra was a conversation that had to happen, Australian Industry Group regional manager Leanne Grogan said on Tuesday.
Ms Grogan said she did not expect BlueScope would put off hundreds of workers in the near future.
The situation at BlueScope was one of several challenges facing the region which was beginning to struggle because of the relatively higher wages people had become accustomed to earning, she said.
With every steelworker supporting more than 2.5 other jobs in the community, Ms Grogan said any job losses would be significant, but it was important to look at the present discussions in context.
"BlueScope are in negotiations with the unions with regard to their enterprise bargaining agreement," she said. "Realistically because of the position BlueScope are in, in terms of the global market ... they do have to find savings.
"One of the big things we're talking about at the moment is our workplace relations system [which] was great while everyone was making a lot of money and it was easy to keep handing out 4 or 5 per cent [wage increases] every year.
"But now we are in a situation where companies can't afford to do that. This is just typical of what is happening across that whole manufacturing sector and just about any industry with global competition," she said. "We have been very lucky in this region. Because we have had such a successful manufacturing sector people are used to getting good wages.
"And what I am seeing at the moment, not just in the manufacturing sector ... is there are a lot of outside companies winning contracts.
"It is because they are coming off a lower cost base to where we have been. So we have not just got the BlueScopes of the world with global pressure on them.
"In this region we are actually facing another challenge and that is from other lower costs regions."
Ms Grogan said BlueScope had seen for some time it was not going to be possible to keep doing the same thing the same way year in, year out.
"BlueScope are looking long term," she said. "You have only got to see the work that is being put into the innovation areas such as the new Steel Haven Research Centre (at the University of Wollongong).
"That is just kicking off and is going to be doing nothing but looking at alternative markets and smarter ways to use steel.
"So BlueScope are not going to sit back and just close down. Any process and improvement takes time. But things have to change."
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