BlueScope to Raise Steel Capacity in China 33% to Meet Demand

BlueScope Steel Ltd. (BSL), Australia’s largest steelmaker that today reported A$1 billion ($1 billion) full-year loss, aims to raise output capacity in China by 33 percent to tap demand in the world’s biggest consumer.

“We have a business in China that’s going from strength to strength,” Paul O’Malley, chief executive officer of the Melbourne-based company, said today in an interview. “We’re building a new facility in Xi’an so that we can actually participate in the growth in Western China. I would say over the next few years we will look to add another facility.”

BlueScope’s China business had underlying earnings of A$50 million in fiscal 2011, compared with losses at the company’s domestic operations, which totaled A$292 million. The company plans to spend A$60 million building a new plant at Xi’an, adding to its 32 sales offices and eight facilities.

China’s steel output will rise 8.3 percent to 728 million metric tons, metals consultants MEPS International Ltd. forecast last month. The nation will maintain growth of 7 percent to 9 percent, BHP Billiton Ltd. Chairman Jac Nasser said this month.

BlueScope and smaller rival OneSteel Ltd. (OST), which is also reviewing its domestic steelmaking business, have been battling a record Australian dollar, higher material costs and lower steel prices. BlueScope said today it will close its export business, shut a mill and a furnace as well as shed about 1,000 jobs to curb losses.

“A decision to move back into the export business is probably a decision for the medium term,” said O’Malley. “It would only ever occur if the macroeconomic variables in Australia and the exchange rate or the raw material costs were materially lower and we’re not banking on that happening anytime soon.”

To contact the reporter on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net

To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net; Rebecca Keenan at rkeenan5@bloomberg.net

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