North Star BlueScope Still a Star for Australian Steel Producer

Earnings before interest and tax (EBIT) slipped to $75.1 million in the second half compared to $114.6 million in 1H due to weaker realized steel spreads and demand. Revenue for the division in the half was $611 million (AUD 848 million).

BlueScope anticipates a favorable supply-demand environment for North Star in the medium term. New HRC capacity announced in North Star’s region is expected to be offset by long-term capacity closures, resulting in a net production reduction of 1.9 million MT by 2024.

The $700 million expansion of North Star is continuing on track and on budget for commissioning during the second half of FY 2022. The expansion will add 850,000 metric tons of annual capacity.

“We have been encouraged by North Star’s performance during the past six months and by the rate of capacity rationalization in North Star’s region and the broader U.S., further reinforcing our belief in the investment case,” said Managing Director and CEO Mark Vassella. “The project remains a key capital allocation priority given the long-term value we expect it will create.”

Regarding the outlook for the U.S. division, shipments are currently close to full capacity driven by solid demand in the construction and auto segments, said BlueScope, while spot steel spreads are significantly weaker than in the last half. Lead times are out to four weeks at North Star and service center inventories have come down, said Vassella.

BlueScope Steel Ltd. full-year results showed a consolidated net profit after tax of AUD $96.5 million, including a $197 million non-cash writedown of the New Zealand and Pacific Islands segments, compared to NPAT of $1,018 million in FY 2019.

“The company maintained high levels of business activity throughout the June half,” said Vassella. “The Australian Steel Products segment saw domestic despatch volume increase 3 percent in FY2020, and 2H FY2020 domestic despatches were resilient even with the emergence of the pandemic.

The New Zealand and Pacific Islands division has been struggling and will be restructured to improve profitability and sustainability, including possible staff reductions or closures..

Regarding the outlook for 1H FY2021, Vassella commented: “At the beginning of 1H FY2021, lagged steel spreads in North America and Asia are lower than 2H FY2020 averages; orders and despatches in Australia remain stable and North Star is despatching near full capacity. There is a high level of uncertainty in the current environment given the risks of COVID-19 events, which could disrupt demand, supply chains and operations, combined with broader macroeconomic weakness dampening demand.”

(Note: 1 AUD = 0.74 USD)