Smorgan Steel Group and OneSteel, the two dominant steel producers in Australia, have benefited from the strong demand and rising prices for steel products.
Announcing a 59 per cent increase in interim profit earlier this year, Smorgon managing director Ray Horsburgh said the improvement “was the result of better selling prices for all products that have been sufficient to substantially offset the adverse impact of higher raw material costs”.
Similarly, OneSteel said its 27 per cent interim profit increase was supported by price increases during 2004 to recover significantly higher input costs.
OneSteel said its sales margin in its Australian distribution business increased from 5 per cent to 6 per cent.
An industry briefing paper prepared by OneSteel has flagged the possibility that the current supply-demand equation could swing around to excess supply in coming years.
It notes that China has become a net exporter of steel in recent months following expansion of its steel production capacity.
OneSteel said another factor influencing the Australian steel market is the adoption of modular construction of resource processing plants, with the prime example being the North-West Shelf venture’s $2 billion train 5 project.
This approach means that ‘modules’ can be built overseas, reducing steel demand in Australia.
Australian Steel Institute state manager John Yeudall said train 5, which is expected to consume 13,000 tonnes of steel, was the “biggest single issue” facing his industry.
