BlueScope shelves midstream facility but still upbeat on US

However, the Australian steelmaker said in its half-year earnings report on Tuesday that it is shelving those plans for now while keeping all possibilities open.

“The planned US cold rolling and metal coating investment is being deferred with near-term priority being directed to the acceleration of our branded product offer using external metal coated steel supply,” the company said.

CEO Mark Vassella elaborated on an earnings call with analysts: “There’s an awful lot going on in North America right at the moment in terms of ownership of assets, structure of the industry, and I don’t want to commit too early if other opportunities emerged,” he commented.

He said purchasing material from other players, purchasing assets that fall out of rationalization, or investing and building themselves: “They’re all scenarios that are possibilities right now, given the structural changes and the state of the United States steel market.”

Vassella noted that President Trump’s support for the American steel industry has led to more confidence and restocking in the marketplace, as well as a firming up of prices.

Still, having recently visited the country, he said it “is in complete turmoil.” He thinks it will take a bit of time for things to settle down after the change in leadership.

“But if you look at the underlying demand that we see across the country, if you think about the potential for reinvestment and the confidence that will come from some of the policies that the new administration is putting in place, I still think we’re really well positioned for that,” he noted.

For example, when asked about the potential impact of tariffs, he pointed out that the company is well positioned to meet domestic ‘melted-and-poured’ requirements.

With over 3 million tons of melting capacity, the North Star BlueScope mill in Delta, Ohio, could very well be “the beneficiary of the potential steel price support these tariffs will provide,” he said.

He noted that BlueScope does export 200,000 to 300,000 tons of steel to North America each year. Most of that goes to supply West Coast subsidiary Steelscape, which then transforms it into a value-added product.

While the broader impact of tariffs is still unclear, Vassella expects higher selling prices in the US to support Steelscape’s margins.

“I’m still confident that the US is the best steel market in the world to be invested in,” Vassella stated.

North Star BlueScope

Despite election uncertainty and service center destocking, demand for North Star’s products was solid during the half. The mill operated at full capacity in the six-month period ended Dec. 31, with the expansion project reaching its full run rate, producing 410,000 tons.

An 8% year-on-year (y/y) rise in shipments to over 1.43 million tons in the period was partially offset by weaker realized spreads, resulting in a 49% decline in North Star’s underlying EBITDA of $91 million.

The company noted that North Star’s earnings performance is expected to double in the current period.

BlueScope Recycling and Materials (BRM) processed ~25% of the scrap used at North Star during the six-month period. With the mill’s scrap requirements increasing, the company is working to raise processing capabilities to be able to supply ~40% of its scrap needs. BRM operates three scrap processing facilities near North Star’s operations.

Building & Coated Products North America

In January, BlueScope became the majority owner of Steelscape, taking a 51% ownership position. Nippon Steel holds the other 49%.

The move is meant “to better support a coordinated national approach to our coated and painted strategy,” according to Vassella.

Steelscape’s volumes were down 9% y/y during the six-month period on soft demand and a pot reline project that reduced output in November and December. Customers maintained low inventories during the period due to high interest rates and slow construction demand, the company said.

Steelscape is expected to have a stronger performance and margin improvement in the current period.

Meanwhile, the performance of the BlueScope Coated Products group deteriorated further as the segment continued to face operational and sales challenges. While end-use demand for painted steel was steady, volumes declined due to rising imports and weak demand from key customers.

The Coated Products group was formed after BlueScope’s $500-million acquisition of metal painter Coil Coatings in 2022.

While turnaround efforts continue, the company expects the segment’s results to decline slightly in the current period.