BlueScope will spend $1.15 billion on restarting blast furnace No. 6 securing 10,000 jobs for the Illawarra and creating 250 more during construction.
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But CEO Mark Vassella said the ironmaking machinery may not even reach the end of its 20-year life before it is replaced with low-carbon technology.
On Monday, August 21, BlueScope announced the company's board had formally approved the company's plans to reline blast furnace No. 6 at a cost of $1.15 billion.
Work will now begin in earnest to ensure that the currently mothballed blast furnace is ready for first firing in mid to late 2026.
CEO Mark Vassella said there was an immediate need to replace the ageing blast furnace.
"We need our ironmaking asset to be replaced by 2026, our educated guess is that there is no solution other than replacing the blast furnace by 2026," he said.
While global steel bodies had pushed BlueScope to adopt green steel technologies instead of investing in a coal-fired blast furnace at Port Kembla, Mr Vassella said the "key enablers" for low carbon steel, such as access to consistent and reliable renewable energy, were not yet present in Australia.
"It's not just a technology solution, this is very much dependent on renewable energy, it's dependent on hydrogen - depending on which technology you use - the availability of raw materials and public policy."
Australia missing 'key enablers' for green steel: Vassella
The approach in Port Kembla stands in contrast to the company's approach in New Zealand, where BlueScope, along with the New Zealand government, is accelerating a pre-feasibility study into replacing coal-fired steelmaking with an electric arc furnace, running on renewable energy.
"If you look across the ditch, we actually have some of those enablers in place, there is renewable energy that is reliable - hydro power, geothermal - there is an availability of scrap and that's led us to invest in the electric arc furnace."
Back in Australia, Mr Vassella was effusive in his praise for Illawarra federal MPs Alison Byrnes and Stephen Jones for their support in changes to the safeguard mechanism and investigating green border tariffs on imported steel, but said when it came to energy policy there was still significant work that needed to be done.
"Energy policy is still troublesome, there's no question about it, you look at the prices that we pay, the issues around gas," he said.
"I'm not as confident on energy policy."
To provide the kind of reliable, consistent energy needed for green steel making, Mr Vassella said projects such as Snowy 2.0 and offshore wind farms were key.
"We're a 24/7 baseload company so when the wind stops blowing and the sun stops shining, we need to be able to draw down power from somewhere," he said.
"Things like Snowy 2.0 and offshore wind will help in terms of the dispatchability."
Project Ironman begins in earnest
As federal and state governments tackle this challenge, local leaders welcomed BlueScope's definitive commitment to local steelmaking, with Business Illawarra executive director Adam Zarth saying the project was one of the largest ever single investments in the region.
"This project is vital to supporting up to 10,000 jobs, and will create 250 new jobs during construction."
The cost jumped to $1.15bn from previous estimates of $1bn, largely due to rises in the cost of labour and materials, much of which would be spent on local businesses and contractors, Mr Vassella said.
"This is a lot of money that's going to be put back into the local economy."
Chair of Illawarra industry group i3net David Bridge said the investment was a "strong endorsement" of manufacturing in the Illawarra and that local businesses were already preparing to be involved in the project.
"Early engagement by BlueScope with industry has given industry the certainty to start planning and recruiting," Mr Bridge said.
BlueScope currently has 100 staff working directly on the project with the team expected to scale up to 150 and Mr Vassella said company was somewhat insulated from staff shortages felt by other employers in the Illawarra due to the marquee nature of the project.
"Projects like this, this is one [staff] want to have on their CV," Mr Vassella said.
Masterplan nearing completion
The company is continuing to work on its masterplan for the 200 hectares of surplus lands in and around the steelworks in Port Kembla.
Mr Vassella said that work, conducted by Danish firm Bjarke Ingels Group would be released publicly before the end of this year, but said at this stage BlueScope was looking at manufacturing, education and community uses for the land - and ruled out turning the site over for housing.
"It's not residential, it's industrial and commercial," Mr Vassella said.
With the company previously having indicated it was in talks with TAFE about locating part of the vocation education provider's campus on the site, Mr Vassella said he recently visited the former Mitsubishi factory in Tonsley, south of Adelaide and said that was a project that BlueScope could "learn from" for Port Kembla.
"There's both a university and a TAFE as anchor tenants," he said. "That's all part of this master-planning process, identifying the areas and buildings that are available and then we can start to think about who we get in as tenants and what pull they have for other people who want to come and get involved."
Financial results
The company's underlying earnings result of $1.61 billion for the 2023 financial year was down on last year's record result. Net profit after tax came in at $1.01 billion.
The company's Australian division reported a 59 per cent drop in underlying earnings on last year's figures, with a final result of $537 million in 2023.
BlueScope expects earnings for the first half of next year to be slightly lower than they were for this year.
Mr Vassella said this year's result was a testament to the company's performance during volatile economic climates.
"The continuing strength in both our financial results and balance sheet have set us up well to simultaneously invest for a low carbon future, long term sustainable earnings, and deliver shareholder returns."
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