The Port Kembla steelworks will bear the brunt of a planned 500 job reduction in its Australian operations.
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The losses are part of Option A - a ‘‘game changing cost reduction’’ that is the company’s ‘‘preferred route’’ to keep the Port Kembla steelworks running.
More frightening is ‘‘Option B’’ - the mothballing of the Port Kembla steelworks with the loss of about 5000 direct and indirect jobs.
At Monday’s announcement of its 2015 financial year results - which was a profit of $136.3 million - it also outlined its plans to cut more than $200 million a year from its Australian operations over the next two years.
The 500 jobs form part of this ‘‘game changing’’ approach - and it’s not just employees who will feel the change.
Monday’s BlueScope presentation from CEO Paul O’Malley also looked towards reductions in payroll tax and WorkCover costs.
The presentation highlights the company spent $117 million in payroll tax from 2010-2014 when the steelmaking business was also at a loss.
It also estimates it could save more than $3 million in WorkCover compliance costs.
‘‘BlueScope has an industry-leading safety record and is self-insured,’’ the presentation states.
‘‘Nonetheless we are subject to three-yearly administrative audits not faced by most other businesses within the WorkCover system - external review indicates the cost of the OHS effort to ensure self-insurance compliance in NSW is up to $3.2 million per annum.’’
State and federal governments don’t buy enough steel to solve BlueScope’s woes and a procurement quota ‘‘doesn’t deal with the fundamental problem’’, the company’s boss says.
A union campaign, led by the South Coast Labour Council and Australian Workers Union, has called for governments to mandate the use of at least 50 per cent Australian-made steel in their major infrastructure projects, but BlueScope chief executive Paul O’Malley said there was more to the industry’s future equation.
‘‘I’m not sure that mandating Australian steel’s the right answer because we need a sustainable solution that has us competitive,’’ Mr O’Malley told the Mercury.
‘‘But, in their procurement guidelines, I think there’s a bust and the bust at the moment says if there’s steel from Korea that’s one dollar a tonne cheaper than steel from Australia you buy the steel from Korea. It completely ignores the fact that our employees pay $200 million a year in income tax to the federal government [and] Korean steel employees don’t pay federal income tax.
‘‘If the state government or the federal government doesn’t acknowledge that domestic companies make a contribution in their procurement guidelines then ultimately everything will be made overseas.’’
Mr O’Malley said government procurement policies needed to take into account domestic contribution.
‘‘Whether it’s mandated or not, we’ve got to get there on lower costs and improved guidelines, that’s the only way forward,’’ he said.
‘‘There’s not enough steel purchased by federal and state governments to actually solve the problem, but I would say that every single tonne of steel sold domestically is of benefit but we’re better off doing that because we’re competitive not because we’re subsidised.’’
When asked how much of the company’s steel was currently bought by the government, Mr O’Malley said little was used at a federal level, while the plate used in state-government bridges and overpasses accounted for less than 100,000 tonnes a year.
‘‘In the scheme of things when we’re selling 1.8 million tonnes, an extra 100,000 tonnes would be great but better we get it there by being cost competitive than because people have to buy from us,’’ he said.
‘‘If one just relies on a quota, one doesn’t deal with the fundamental problem, which is the cost competitiveness. So it is an unsustainable business and therefore you can’t justify the reinvestment, so you’d go straight to Option B.’’
Option B would see the closure of the Port Kembla steelworks and mothballing of its operations, resulting in the loss of about 5000 direct and indirect jobs, a position Mr O’Malley conceded would be ‘‘devastating’’.
Federal government decisions have already seen $30 million of costs come out of the business and Mr O’Malley said the state government could cut a similar amount by helping reduce costs associated with payroll tax, workers’ compensation and Environment Protection Authority ‘‘administrative burdens’’.
