Steel demand down

Press, 23 July 1986, Page 35

Steel demand down

PA Auckland Domestic demand for products of New Zealand Steel, Ltd, are about 70 per cent of the level last year because of the depressed economy and import competition, say directors of the company. The volatility of exchange rates makes predicting export prospects difficult, they said in the annual report. They said the costs being incurred in the new plants during the commissioning phase, together with higher energy and remuneration costs and the high value of the dollar, do not allow costs to be recovered in full from export markets. As a result, the company was reviewing its

cost structures in several areas. The managing director, Mr J. H. Ingram, said that over the next four years, NZ Steel would face increasing import competition on the domestic market as quantitative protection was phased out. Already, more than 10 per cent of the market was available to imports, and by 1990 all steel will be exempt from import licensing and subject only to a tariff of 10 per cent. This year, NZ Steel expected to produce and sell about 220,000 tonnes of semi-finished steel products as stage I of the expansion project climbs towards its eventual peak

of about 700,000 tonnes a year. Cold commissioning of the second iron stream at the slab casting machine was continuing, but hot commissioning and regular operation had been deferred until nearer the start-up of the hot strip mill at stage 11. The general rrianager of the steel operations division, Mr G. P. Crawford, said the delay will produce cost savings and will allow maximum concentration on bringing the first iron stream to required production levels as quickly as possible. At the existing iron plant, production of reduced primary concentrate was lower than forecast, mainly because of the five-week strike last August. Billet production from the existing steel plant totalled 121,000 tonnes — almost 11,000 tonnes lower than forecast. Domestic sales of billets were nearly 27,000 tonnes lower as the rural recession weakened demand for products manufactured by downstream customers. Billet exports rose to 50,000 tonnes, much of the volume being arranged by NZ Steel’s first offshore marketing company, New Zealand Steel Ferrostaal Pte, Ltd, based in Singapore. In the coated products division, formed by combining the galvanising and paint lines, Colorsteel enjoyed buoyant local demand, and was the only product to increase domestic sales. Despite operating at 21 shifts a week for the second consecutive year, the galvanising line’s output was about 14 per cent lower because of the stoppage and an extended maintenance shutdown. Sales of galvanised steel dropped by 19,000 tonnes to 101,000 tonnes, including 17,000 tonnes of exports. In the hollow sections division, sales of pipe products and rectangular hollow sections dropped 5000 tonnes to just over 34,000 tonnes. Sales of hot rolled plate dropped about 25 per cent to 17,500 tonnes through increased Imports, especially from Australia. The total cost of the steel mill expansion is now estimated at $1672 million, excluding financing charges, compared with an estimate a year ago of $1528 million. The latest figures include $972 million for stage I and $7OO million for stage 11. Following reconstruction moves, term liabilities at March 31 were $500,368,000, against $12,727,000. Current liabilities are

up from $76,669,000 to $200,744,000, while current assets rose from $155,005,000 to $305,368,000. Interest charges were $103,048,000, compared with $4,051,000. The 38 per cent lower tax-paid profit of $21,898,000 represents an earning rate of 12.2 per cent on average ordinary shareholders’ funds (on a pre-reconstruction basis). Government refinances Petrocorp and N.Z. Steel — Page 36