Steel Making - in Australia !

Wollongong is synonymous with steel manufacturing and half a century ago the plant at Port Kembla employed over twenty thousand people.   That was a time when the union movement was at it's height and the job structure was heavily "feather bedded "   Today a work force of about five thousand makes more steel more efficiently that that huge past workforce, but a question mark hangs heavily over the future of steel making in Australia.

To keep the doors open Bluescope has to find a $200 million cost saving and they have sat down and thrashed out a deal with their workers.   Job cuts will see five hundred workers get a pink slip and the remaining four thousand five hundred have agreed to a three year pay freeze, reduction in overtime pay and a host of changed work practices.   Now the state government has chipped in and will allow deferred payment of payroll tax, which will amount to a saving of $60 million.  The plan calls for this to be repaid in instalments over a ten year period.

Like so many other industries, steel making is reliant on what is happening in China.   The great manufacturing boom in that country is subsiding and China is retreating from exporting and moving towards a consumption economy.   It no longer needs the huge inputs of coal and iron ore that fuelled that expansion and it's own steel manufacturing industry is producing a surplus - which is flooding into world markets.

By world standards, the steel plant at Port Kembla is minuscule and it suffers the disadvantage of being located in a high wage country.   We used to have a similar steel plant at Newcastle and this closed in 1999 with devastating job losses. It will be of concern to the Australian defence industry that Australia will lack the ability to produce this vital defence need if economic conditions drive the Port Kembla plant out of business.

Hopefully, the world economy will pickup from the deflation that is affecting some economies and Bluescope will be able to fine tune it's process to be competitive as a manufacturer.   The days of protecting Australian manufacturing with tariffs are over and today we live in an age of ever expanding trade agreements which expand a free trading concept.

Certainly the remaining workforce at Port Kembla have good reason to be uneasy.   The wolf is knocking on the door and at best this arrangement is a reprieve.  It would be a brave soul who would bet on this steel producer remaining in business a decade from now.

Australia's terminal car industry may be forced to close it's doors a year earlier unless a similar reprieve is granted.   New emission requirements are due to come into force on November 2016 and two thirds of the cars that General Motors produces at it's Holden plants will not meet this new standard.

Modifications to manufacturing to achieve compliance  would cost many millions of dollars - and that would be hard to justify when production will end just a year later.   The obvious answer is to keep those jobs delivering pay packets until the scheduled close down - and defer that new emission requirement for twelve months !