Steel Profit Forecast

Press, Volume CIV, Issue 30768, 4 June 1965, Page 3

Steel Profit Forecast

(Parliamentary Reporter) WELLINGTON, June 3. Computer - checked estimates of the profitability of the New Zealand steel industry showed that in the sixth year of production net profit should be sufficient for the company to pay a dividend of 5 or 6 per cent, the Minister of Industries and Commerce (Mr Marshall) said in the Address-in-reply debate in Parliament tonight.

1 Such a dividend would be t payable after the retention of - more than half the net profit. “It would be indiscreet to be too specific in the fore- - casting of prices and profits - before the mill is built and 1 in production, but the calcu- - lations made on the best evis dence now available indicate a progressively increasing profit-earning capacity,” said Mr Marshall. The first stage of production will begin in 1967, By ’ 1970 the mill will be turning t out 189,000 tons. By 1973, i production is estimated at > 299,000 tons and 10 years . later it is planned’ to be 1 599.00 Q tons. s The provisional board of ; the company estimates the industry could begin earning - net profits three years after t start of production. 1 “It can be said with some r confidence that on the press ent estimates, the company r will produce steel at prices that are competitive with im--3 ports. 1 “The detailed costings of 1 the products of the mill pro--1 duced a figure for billets, based on present-cost calculations, whi,ch is lower than 5 they could be imported from ’ anywhere in the world. “A figure such as this can ’ only be taken as a guide at _ this stage and the company ’ will postpone the issue of a • price list until it is actually 5 producing steel.” , Mr Marshall said the con- . suitants in their economic . evaluations had not taken into i account the possibility of ex- . ports. s “However, the works will have some excess in the early

years and it will be possible to seek export markets for small quantities.” The New Zealand market for steel, he said, was relatively sophisticated and highly diversified. “Just over 75 per cent of the present market is in the North Island and just under 25 per cent in the South Island. Nearly 50 per cent of the market is in the Auckland province, where the mill will be sited. “It is conservatively estimated our total demand for steel will exceed 500,000 tons a year by 1970 and 750,000 tons a year by 1980.” Mr Marshall said the consultants claimed it would be

profitable for New Zealand to undertake the manufacture of most of the products now imported. “But other considerations have to be taken into account. There is a shortage in New Zealand of engineers and technicians trained in steelworks practice and traditions. Many of the key men will have to come from overseas and local men will have to be trained. “It was decided, therefore, that the prudent course would be to proceed slowly and steadily and not to try to do too much any one time. “These evaluations led to a decision to adopt the phased development programme.”