B.H.P. report outlines steel-market problems

Press, 2 September 1977, Page 10

B.H.P. report outlines steel-market problems

NZPA Melbourne The world-wide steel recession hit the Broken Hill Proprietary Company Ltd, both at home and overseas during the year to May 31, and the annua) report gives a wide-ranging review of its effects. The overseas recession has resulted in several changes: to the company’s investment programme, including the! abandonment of the proposed steel rolling mill at: Jeddah. Saudi Arabia. “The current world-wide; depressed demand for steel products, leading to an over; supply position, has reduced] fhe landed price of steel into; Saudi Arabia to a point where the project under the; terms required ceased to be: commercially attractive and; has been abandoned,” the! directors of B.H.P. said. The recession has also caused delays in two major export projects in Australia, the S3OOM Deepdale export iron-ore project and the Bargo export coking-coal project, which the company ] |is investigating in con- [ junction with Coal and Allied Industries, Ltd, and Peko Wallsend, Ltd. “The group continued to promote development of the , Deepdale iron ore project, but Japanese and European steel mills have shown an; unwillingness to undertake! additional long term ore purchases while the outlook! [for substantial future growth! in steel demand remains un- ! certain. I “Development of the] Bargo export coal project' has not commenced because; of the lack of demand and ! uncertainty about the availai bility of a coal shiploader,” the report says. Consideration is being given to expanding, by 5.1 M tonnes the capacity of the Mount Newman iron-ore mine.

The expansion would involve construction of a heavy media benefication plant to upgrade ores currently being stockpiled, the partial duplication of the railroad, and a third shipping berth at Port Headland.

. Mount Newman’s capacity was expanded during the year to 40.6 M dry tonnes a vear.

The partners had been hoping to sign new contracts earlier this year, but have not done so, and so far the contemplated expansion in capacity has been limited to engineering studies.

B.H.P. exported a total of; 2,777,000 tonnes of iron and] steel during the year, up oni the previous year’s 2,550,0001 tonnes.

The company shipped n steel and iron to 38 coun-| tries during the year, which in itself is a measure of the! company’s hunt for markets) and sales. However, the group’s abil-l ity to compete on international markets is being! eroded by Australia’s inflation rate, and the cost of] [sea freight, in comparison] [with other countries. “The devaluation of the] Australian dollar made it; possible to secure some] .additional export orders, but; the advantage gained was .subsequently negated by re-1 duced world demand, and a; ; further fall in international; I steel prices,” the directors! jsaid. ; “The level of steel imports] •has had a considerable effect lon some of our subsidiary and associated companies in particular, and their loss of market-share affected us because of their reduced feed requirements,” the directors said. They also expressed conicern at the growing level of finished steel and component imports. They could see no immediate improvement in the domestic or international steel markets. “Overall local demand has been considerably short of productive capacity of most of our mills, so that continued efforts have been imade to place large ton- [ nages of semi-finished products on the international ! market. I “Throughout the period I the international market

continued to be depressed in i t [both demand and prices and ; :is now at its lowest level 1 I for many years. Early im-| [provement does not appear [1 'likely,” the directors said. )1 | As reported, the steel divi- i ision lost SI.6M more at|< ]553.2M in the year to Mayit 31, which kept the com-] jpany’s profit at 563.6 M. |l Since the accounts were]’ [prepared the company tax- t rate was increased to 46 per 'cent which reduces the com-Is Ipany’s declared profit of t |$73.OM. 11 I The biggest success fori I I the group during the year]' [was the winning of a S3OOM ! coking-coal export contract It [for the Gregory coal project,] [Central Queensland. The] contract was for the] [shipment of 27.2 M tonnes of !< coking coal, beginning ini April, 1980. Negotiations fori additional contracts for Gre-|i . gory coal are continuing. j I Gregory will produce at] an annual rate of 3M tonnes for the life of the existing . contract, 14 years. B.H.P. also acquired ownership of Peabod;' Coal at ' cost of S9OM, which gave the company a 58 per cent [ shareholding in the central : Queensland coal mining group, Thiess Peabody Mitsui. I (The name has now been ; changed to Thiess Dampier Mitsui). The takeover increased 1 B.H.P.’s after-tax result • $12.5M. Installation of production] I. facilities on the Mackerel platform has been finished! i and development drilling! . started in July. Production is l

expected to start early 1975, and full production the following year. Production from the Tuna field should also start in 1979 with the installation of mechanical and production equipment being well advanced. Construction of the: Snapper production platform will start by the end of this, year. At May 31 remaining re-1 serves in Bass Strait were! estimated al 1,647.000.000 barrels of liquids, and 7.212 trillion cubic feet of gas. 1 The reserves included the’ Mackerel and Tuna oil fields: and the Snapper gas field. B.H.P. spent 5396.4 M on! I new capital works, and in- [ : vestments, including 5258.3 M • [on natural resource projects [such as North West shelf i natural gas, and Queensland] | coal. I The revised section results [before extraordinary items were a $53.2.M loss for| steel ($2.6M greater than in 1975-76), a $30.3M profit for minerals (up $6.3M) an $84.9M profit for petroleum (up S4.BM) and a S9.BM profit for other subsidiaries and investments (down $2.4M). Industrial disputes caused the loss of 1.46 million man hours — or 1.8 per cent of the total man hours worked in the group. Mount Newman disruptions continue to be a particular cause for concern. ! Australian ownership of B.H.P. increased further, and [89.8 per cent of the 220.8M] I shares on issue were held by [ ! shareholders with addresses [ 'tn Australia. :[