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Australian manufacturing 'crisis' as BlueScope axes jobs

22 august 2011, 12:13
0
Paul O'Malley, BlueScope Steel's Managing Director and Chief Executive Officer. ©AFP
Paul O'Malley, BlueScope Steel's Managing Director and Chief Executive Officer. ©AFP
Australia's BlueScope Steel said Monday it will close one of its two blast furnaces, abandon its export business and axe 1,000 jobs as unions warned the country's manufacturing sector was in crisis, AFP reports.

The company, Australia's largest steelmaker by output, made the announcement as it reported a dire Aus$1.05 billion (US$1.09 billion) net loss for the year to June 30, compared to a Aus$126 million profit previously.

Export sales delivered a Aus$487 million earnings loss in the period.

"We are experiencing significant economic challenges and structural change in the global steel industry," chairman Graham Kraehe said.

He pointed to a strong Australian dollar, low steel prices and high materials costs as squeezing margins. This, combined with low demand due to the global financial crisis, meant change had to happen, he added.

"The restructure announced today will produce a more viable and sustainable Australian steel business and allow us to focus clearly on domestic markets and international growth opportunities," Kraehe said.

"We are committed to making steel in Australia and can now prioritise our resources and efforts towards even better service for our domestic customers."

The company will shut its number six blast furnace at Port Kembla, south of Sydney, with 800 jobs lost, and close its Western Port hot strip mill, east of Melbourne, at the cost of 200 jobs.

Australian Workers Union national secretary Paul Howes warned that Australian manufacturing was facing one of its worst periods since the Great Depression due to the soaring, commodities-linked Australian dollar.

"We are now facing a major crisis in Australian manufacturing," he told SKy News. "Base metal manufacturing, downstream manufacturing -- everything is under pressure at the moment."

He said more job losses would come.

"The next couple of weeks we are going to see huge numbers of jobs in the manufacturing sector go," he added in comments to the Sydney Morning Herald.

"This is one of the worst periods Australian manufacturing has gone through since the Great Depression."

The BlueScope announcement comes on the heels of another Australian steel giant, OneSteel, saying last week it would lay-off 400 staff due to weak demand and the soaring local currency.

The Aussie dollar breached parity with the greenback in October and has rallied consistently near or above the US$1.00 mark since, retreating only briefly in the immediate aftermath of Japan's quake and nuclear crisis.

It hit a record of US$1.1081 last month.

Australian companies have announced thousands of job cuts during the current reporting season, with Qantas Airways slashing 1,000 positions last week, signalling gloom for the government.

The nation's unemployment rate unexpectedly rose in July to 5.1 percent, hitting its highest level since November last year in a sign the mining-powered economy is slowing.

Coming on top of slumping consumer confidence and retail sales, analysts forecast unemployment, a lagging economic indicator, will soften further in coming months.

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