Govt nod to N.Z. Steel expansion

Press, 28 October 1981, Page 1

Govt nod to N.Z. Steel expansion

PA Wellington The Government has approved the expansion of the New Zealand Steel, Ltd, plant of Glenbrook, South Auckland. Work on the project is expected to start immediately and it 'is expected to be completed about 1987.

Cabinet approval for the project, which is a key element of the Government’s growth strategy, was given yesterday after’New Zealand Steel had given assurances that its product would be competitive outside Australasia in the long term. " The . Prime Minister (Mr Muldoon) said that stage one of the expansion had been approved and approval in principle had been given for stage two. He said, “We have been engaged ... in a series of discussions and negotiations with the company over several weeks and finally we have got all of the detail tidy and all the assurances that we have been seeking. We are going ahead on a basis that is not incompatible with the closer-economic-relations exercise with Australia.” The Government estimated earlier this year that the total capital cost of the expansion would be $7OO million but Mr Muldoon said yesterday that he could not give an over-all figure. The Government would provide “funding and certain guarantees" and would take an unspecified shareholding in a special company. The project was “many times the size of New Zealand Steel as it is at present.” “It is not just an expansion, it is a multiplication of New Zealand Steel involving new processes for the production of steel,” Mr Muldoon said. The development would to some extent be based on exporting. The big Australian steel producer, Broken Hill Proprietary Company, Ltd, had doubts about New Zealand Steel’s competitiveness outside the domestic market without tariff protection, Mr Muldoon said. But New Zealand Steel had given an assurance that the expansion was compatible with Australia: “That is to say they believe it is finally competitive ...” The company understood that it would eventually cease to be protected from Australian competition. The Leader of the Opposi-

tion (Mr Rowling) said that the expansion would probably cost about $lOOO million. The Labour Party would review the project when it became the Governments The Government was committed to spending at least $3OO million on the project. It was essential that the project was soundly based. It would "be a disaster if New Zealand industry was locked into buying high-cost steel: any import savings could easily be offset by cuts in exports from the rest of New Zealand industry. New Zealand Steel has said that the expansion will mean the - creation of 2000 extra jobs at the works, and at least 2000 extra jobs indirectly in down-stream activities. The managing director of the company. Mr John Ingram, said yesterday that although the world steel market was depressed, all forecasts were optimistic for steel demand by the time the extensions were completed. It was expected that 90 per cent of the then world capacity would be used and that the European Economic Community was expected to stop its support programme. Mr Ingram said, “This means that the plant will come on stream as the world market turns in our favour."

On hearing of the Government's approval, the company’s management wasted no time. Contractors are expected to start work on the foundations of the extensions later this week. Mr Ingram said that the foundations alone would cost about $3 million. The company had been anxious for work on these to begin to take advantage of seasonal conditions. The work involved removing 500,000 cubic metres of earth. In a statement to the Stock Exchange last evening the company said that in 1981 dollars, stage one involved the spending of about $430 million to manufacture steel. Stage two, which would be finished by 1986, involved the setting up of rolling plant for flat-steel products. On top of the combined $7OO million total, extra costs would be incurred in setting up an oxygen' plant and other associated equipment. Mr Ingram said that all of this would involve a large undertaking from the Government.