Save Illawarra’s Steel

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The Greens are campaigning to secure a future for steel-making at Port Kembla in the Illawarra by mandating that government infrastructure projects use locally manufactured steel.

Currently, the last remaining blast furnace at Port Kembla is at risk of closure due to a downturn in international steel prices and ‘dumping’ of below cost steel by foreign manufacturers.

If the last remaining blast furnace at Port Kembla were to close, approximately 4,500 jobs would immediately be lost with a large negative knock on effect in NSW and Illawarra economy.

On 17 March 2016, the Steel Industry Protection Bill 2016 was introduced into the Legislative Council of NSW Parliament. Key provisions in the bill include:

  1. A mandate that all NSW government-funded infrastructure and housing projects using more than 2 tonnes of steel must only use steel only from an Australian blast or electric-arc furnace.
  2. Preventing price gouging by the mill owners by imposing a price limit, set by IPART but not less than 20 percent above international steel prices.
  3. Exclusion of products that cannot be reasonably made in Australia or from Australian steel
  4. A range of reporting and auditing requirements.

A full copy of the bill can be viewed here: Steel Industry Protection Bill 2016

 

Background:

The international steel market is experiencing a glut, fuelled in particular by below-cost steel exported from China.

This is undermining the economic viability of the local steel manufacturing at Port Kembla and Whyalla in South Australia, as the steel is being ‘dumped’ in the local market at prices which are below the cost of production.

This has placed significant pressure on the viability of local steel manufacturing. As a result the industry is at risk of collapse.

The economic and social impacts of the closure of the Port Kembla mill would be severe. The plant employs 4,500 people and contributes $3.3 billion every year to the Illawarra economy.

In October 2015, workers at the Port Kembla Plant accepted a three-year pay freeze and 500 job losses in order to assist Bluescope to reach their target of $200 million in savings necessary to keep the plant operational. At the time of the cuts, the company did not commit to keeping the steelworks open.

On 18 November 2015, the NSW parliament unanimously passed the Payroll Tax Deferral (BlueScope Steel) Bill 2015 which provided BlueScope Steel with a structured deferral of payroll tax of up to $60 million over three years. After the three years deferral period, BlueScope is expected to repay the full amount to the state in addition to their normal payroll tax payments. The bill was intended to assist provide BlueScope Steel with some time to secure its Port Kembla operations.

Neither the company cuts nor the payroll tax deferral secures a long term future for the industry in NSW as they fail to provide a buffer from the dysfunctional international market.

Implementing a public sector procurement policy is a cost-effective measure that would provide the local steel industry with certainty and help secure the employment of 4,500 workers.

A BIS Shrapnel report commissioned by the Australian Workers Union and published in September 2015 estimates that less than 50 percent of steel used in Australian public sector construction is produced domestically. The share is forecast to fall to 43 percent by 2019/20 as government contractors increasingly turn to cheaper imported steel. A full copy of the report can be found at http://j.mp/BIS_steel

The BIS Shrapnel report estimates that an Australian wide government sector procurement policy requiring 90% local steel to be used in government infrastructure projects would cost on average $61 to $80 million annually, or an extra 0.2% of total construction costs. In New South Wales, this would add an extra 0.2% to the cost of infrastructure projects, or $34 million each year.
The Australian Senate Standing Committee on Economics is holding hearings on the future of Australia’s steel industry and is due to report by 30 June 2016.

The Steel Industry Protection Bill 2016 is an opportunity for the NSW Parliament to lead the way in securing the future of the local steel industry and safeguarding employment and economic activity in the Illawarra.