BlueScope Steel has defended a one-billion dollar investment in carbon-based steelmaking, while warning against changes to emissions reductions laws which could damage Australia's sovereign steelmaking capabilities.
Australia's largest steelmaker told shareholders the federal government's proposed changes to the safeguard mechanism could have a material impact on its business.
Under the proposed changes, Australia's largest emitters — including BlueScope – will be forced to reduce their emissions by 4.9 per cent a year until 2030.
BlueScope has committed up to a billion dollars to reline a mothballed blast furnace at Port Kembla where its current furnace is set to be decommissioned.
The project is the largest capital expenditure in the company's history and is expected to see BlueScope continue to make steel using coking coal for at least the next two decades.
BlueScope's CEO and Managing Director Mark Vasella said the company was consulting with the government about whether the mechanism would impact the viability of steelmaking in Australia.
"We are working encouragingly with the government around what we think is needed to maintain sovereign capability," Mr Vasella said.
"There is no value here in seeing carbon exported.
"If steel was to be produced offshore and shipped back to Australia because that capability was not here, that is actually a worse outcome for the planet."
BlueScope Steel is currently investigating removing coal from the steelmaking process, but believes commercial production of green steel is still decades away.
Mr Vasella said bringing the number six blast furnace back online was necessary to continue commercial steelmaking at current volumes in Port Kembla.
"The blast furnace is one of the best performing blast furnaces on the planet," Mr Vasella said.
"The re-line of the blast furnace will allow us to replicate that performance and build that bridge to when we think newer, lower emissions steelmaking projects will be available."
A billion-dollar drop in profits
BlueScope Steel's share price fell sharply as the company posted a half-yearly earnings after tax of $591 million — more than one billion dollars less than the same period last year.
Mr Vasella said a challenging labour market in both Australia and the United States, as well as the declining steel price, was behind the drop in profits.
"We've come off a period in the prior financial year where there were extraordinary levels of pricing for steel products both here in Australia and in North America," he said.
"We saw through the COVID period a lot of supply chain interruptions which is why we saw the extraordinary results.
"Steel prices went to unprecedented levels."
Mr Vasella added the strong position of BlueScope during the pandemic allowed it to continue to provide its products in challenging conditions.
"I think what we also learnt as we came through COVID with those supply chain disruptions is the value of sovereign capability and the capacity that we have," Mr Vasella said.
"Australia was able to continue to manufacture and produce steel, serve our customers, provide the supply chain necessary for the building construction industry in particular so it is critical we maintain that sovereign capability at facilities like the Port Kembla steelworks."
