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ChAFTA Case Study: Manufacturing - BlueScope Steel

Manufacturing - BlueScope Steel

BlueScope Steel Limited is an ASX100 company.  It is Australia’s largest steel manufacturer and its only flat steel producer.  The company’s well-known brands include COLORBOND® steel, ZINCALUME® steel and the LYSAGHT® range of steel building products.

BlueScope employs approximately 7,500 people in Australia. The company has operations in every mainland state, and is responsible for the employment of thousands more contractors and suppliers.  The company has an annual steel production capacity in Australia of 2.6 million tonnes and exports approximately 800,000 tonnes per annum to a range of markets including the United States, Brazil, Thailand, New Zealand and Germany.

BlueScope has extensive global operations with manufacturing plants in 17 countries, including China, ASEAN countries, India, New Zealand and the United States.  BlueScope’s businesses include a global building solutions business, which designs, manufactures and erects custom-engineered metal buildings for major multi-national clients, as well as a joint venture steel coating and painting business in ASEAN countries and North America with Nippon Steel and Sumitomo Metal Corporation.

How will ChAFTA affect BlueScope Steel?

BlueScope has had manufacturing operations in China since 1996 and is Australia’s largest manufacturing investor in that country. Today, the company operates six major manufacturing sites and has 1,550 employees in China.  The company’s plant at Xi’an, opened in October 2013, is China’s first ‘three star’ green industrial building.

BlueScope believes that ChAFTA has the potential to boost Australia’s exports to China across a range of sectors, thereby creating more jobs and increasing investment.  Anything that boosts Australia’s economic growth in this way will help firms like BlueScope.  The FTA will also encourage higher levels of Australian investment in China, allowing more firms to emulate BlueScope’s successful (20-year) history of investment there, and generating returns for Australian investors.

In recent years, the global steel industry and international trade landscape has changed considerably, particularly with the emergence of China as a global steel powerhouse. Since 2012, 104 anti-dumping and countervailing cases have been launched by G20 countries, including four successful cases by BlueScope. In response, the Australian steel industry has undertaken significant structural transformation.

Since 2011 BlueScope’s steel production in Australia has halved and its workforce reduced by 10 per cent. BlueScope also formally exited the export market of commodity steel (although exports continue due to weaknesses in key domestic markets). 

The focus is now on production of value-added steel for the domestic market. BlueScope must compete with imports with around 20 countries regularly exporting flat steel products to Australia, with imports supplying between 20 and 30 per cent of the domestic market, including subsidised steel imported into Australia.

Despite intense international competition, in 2014 BlueScope resumed investing in new markets and developing new products, including an update to COLORBOND® by adding a photo-voltaic laminate, resulting in a roof panel that produces solar power.

BlueScope is Australia’s fourth largest non-government IP developer. So, while BlueScope has formally ceased exporting steel from Australia, it continues to transfer Australian-developed intellectual property throughout its international network.  This provides important foreign revenue flows to Australia, employs skilled professionals, many in rural Australia, and makes a significant contribution to the diversification of the Australian economy.

For BlueScope, in addition to investment-related considerations, a highly commercially sensitive area in ChAFTA was a potential dilution of Australia’s rights and obligations at the WTO, particularly to have effective redress when dumping and subsidisation occur.  With around 300 MT of excess steel, China is seeking mechanisms to shift this capacity to other markets.  BlueScope requested that ChAFTA retain all available trade remedies available under WTO law, including anti-dumping measures, countervailing action, and the use of surrogate pricing.  This outcome was achieved.

Trade and Investment Minister Robb and his team at DFAT engaged frequently with industry, particularly in the final stages of ChAFTA negotiation.  The full maintenance of Australia’s WTO’s rights and commitments, a key outcome in ChAFTA, benefits all of Australian manufacturing – from food processors to advanced manufacturers.