BlueScope Cuts Production, Jobs in Australia to Lower Costs

BlueScope Steel Ltd., Australia’s largest steelmaker, will cut production and jobs at its Western Port facility to lower costs amid weaker demand for steel.

BlueScope will reduce jobs at the steel plant by almost a fifth, or about 110 employees and 60 contractors, in the next few months, Michael Reay, a spokesman for the Melbourne-based company said by telephone today. The Western Port plant, located near Hastings about 80 kilometers (50 miles) southeast of Melbourne, produces cold rolling, metal coated and painted steel products used in construction, he said.

BlueScope has stopped most exports from Australia, shut a mill and a furnace and shed about 1,000 jobs in the past two years as a stronger Australian dollar, higher costs and lower steel prices hurt profit. The company, which booked A$1.04 billion ($1.09 billion) of losses in the year ended June 30, sold half of its coated-steel operations in Southeast Asia and North America to Nippon Steel Corp. in August to pay debt.

“Longer term, the sustainability of the Western Port operation is questionable,” Credit Suisse AG analysts Michael Slifirski and Sam Webb wrote in a report today. The plant, which has 1.4 million tons a year output capacity “serves predominantly the southern state and has seen demand decline from the demise of Australian manufacturing and construction softness.”

The stock added 0.3 percent to close at A$3.71 in Sydney trading. The benchmark S&P/ASX 200 Index advanced 0.2 percent.

Operating Costs

BlueScope expects the changes will cost about A$17 million, which it will be able to recover within a year by cutting operating expenses, it said today in a statement. The company will continue to produce the same portfolio of products and retain the capability to meet current and future demand, it said.

“This change will reduce production levels and provide significant cost savings,” BlueScope said, without specifying the size of the output cut. “We will keep all currently operating lines and assets open at Western Port, to provide flexibility and allow for additional throughput when demand improves.”

Before it's here, it's on the Bloomberg Terminal.