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BlueScope Calls Australia Carbon Tax Plan ‘Economic Vandalism’

BlueScope Steel Ltd. CEO Paul O'Malley
Paul O'Malley, chief executive officer of BlueScope Steel Ltd. Photographer: Ian Waldie/Bloomberg

BlueScope Steel Ltd., Australia’s biggest steelmaker, said the government’s planned carbon tax will reduce its competiveness as it battles high raw-material costs and the stronger Australian dollar.

“That is clearly economic vandalism,” Chief Executive Officer Paul O’Malley said on Australian Broadcasting Corp.’s Inside Business program yesterday. “It clearly says we don’t want manufacturing in Australia.” Imports must also be taxed if the carbon tax is introduced to ensure Australian steel producers can compete, he said.

Australia will set a price on carbon emissions next year in preparation for a trading program that could begin as early as 2015 and is aimed at curbing greenhouse gases, Prime Minister Julia Gillard said last week. Revenue from the pricing plan will be used to assist households, help companies adjust to the changes and for future climate change programs.

“We will get to the end goal -- the most efficient mechanism I’ve always wanted and Labor has always advocated for, which is a full emissions trading scheme, a cap on carbon pollution and the market sets the price,” Gillard said on Channel 9’s Today program. “We have to cut carbon pollution. The best way to do that is price carbon.”

The Australian currency gained 13 percent in the past year, the best performer after the Swiss franc and Mongolian Tugrik among 172 currencies tracked by Bloomberg.

‘Bit More Pressure’

“More costs being thrown at us by the government just really do put a bit more pressure on the business than we’d like to have,” O’Malley said. The policy would cost BlueScope A$300 million ($304 million) a year if there was no assistance provided, he said. The Melbourne-based steelmaker last week reported a widening of its first-half loss because of higher costs and lower domestic demand.

“Anything that is going to be hard on BlueScope is going to be seen as an extra negative when there are so many other headwinds they are facing,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. While they have a fundamentally strong business in the long run, “the near-term warrants people staying away from the company.”

BlueScope’s shares have dropped 12 percent in the past year, compared with a 19 percent gain in the S&P/ASX 200 Materials Index. The stock closed unchanged at A$2.13 on the Australian Stock Exchange on Feb. 25.

‘Important Step’

Adelaide-based Santos Ltd., Australia’s third-largest oil and gas producer, said last week’s announcement was an “important step” to a well-designed price. New York-based Alcoa Inc., the biggest U.S. aluminum producer, said it supported a “carefully designed” carbon price that doesn’t damage the industry.

“Regardless of the approach taken, it is critical that the government’s climate change response ensures the sustainability and growth of what are world-class alumina and aluminum assets in Australia,” Alcoa Australia Managing Director Alan Cransberg said in an e-mailed statement.

The levy would need to be at least A$25 ($25.20) a ton to be effective, Origin Energy Ltd. Managing Director Grant King said last week.

Countries are already spending billions of dollars to reduce emissions and promote renewable energy. Low-carbon energy investment surged to a record $243 billion last year, Bloomberg New Energy Finance said on Jan. 11.

Gillard established a Multiparty Climate Change Committee, a measure proposed by the Australian Greens party, to consider how to reduce emissions. That committee still needs to discuss incentives to industries and households as well as setting the level of the tax.

Opposition leader Tony Abbott said his Liberal-National coalition wouldn’t support the laws. He said it would add A$300 per year to household electricity bills and that a voter backlash would prevent it getting parliamentary approval.

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