OneSteel Limited announced the restructuring of its bar mill operations to improve efficiency and focus its manufacturing efforts on securing growth within construction and resources markets. The restructuring follows an extensive six-month review of OneSteel’s steelmaking, casting and rolling mill operations and is expected to provide net synergy benefits of $20 million to $30 million per annum.
The benefits form part of the synergies from the merger with Smorgon Steel that was successfully completed in August 2007. Implementation costs are estimated at $35 million exclusive of any asset write-downs. These costs will be expensed in the current financial year, however the timing of the closures will mean most of the cash impact will be in 2008/09. OneSteel’s Managing Director and Chief Executive Officer, Geoff Plummer, said: “The restructuring is being undertaken to ensure OneSteel is positioned for success within rapidly changing global and domestic steel markets.
“OneSteel currently has significant overcapacity within its bar mills reflecting long-term shifts in the Australian domestic market. The restructure will enable OneSteel to focus its bar manufacturing predominantly on the growing construction and resources markets, and will eliminate around half a million tonnes of unutilised bar production capacity,” he said.
As part of the restructuring, OneSteel will consolidate bar manufacture within its Laverton and Sydney bar mills and production will be doubled at the Waratah Bar Mill in Newcastle. The Newcastle Bar Mill and the operations of OneSteel Martin Bright in Melbourne will be closed. OneSteel will continue to produce in excess of 1 million tonnes of steel bar products across its reconfigured bar business and will manage mill loadings to improve customer service and optimise manufacturing and logistics costs. OneSteel will maintain existing overall volumes in steelmaking and rod production.
As a consequence, OneSteel will exit the production of approximately 50,000 tonnes of primarily engineering bar which is currently supplied to manufacturers and steel distributors. This represents approximately 4 per cent of OneSteel’s current bar volumes and less than 1% of OneSteel’s total annual revenue. “The majority of OneSteel’s customers will be unaffected by this restructure. Where OneSteel is exiting the manufacture of products, we will work with customers to assist their transition to alternative sources of supply,” Mr Plummer said.
In total there will be a net reduction of approximately 180 positions within Newcastle resulting from the closure of the Newcastle Bar Mill and increases at Waratah Bar Mill. A further 90 positions will be lost at OneSteel Martin Bright.
Mr Plummer paid tribute to the ongoing efforts of employees at the Newcastle Bar Mill and OneSteel Martin Bright to adjust to difficult market circumstances.
“This has been a difficult call for us to make in light of the obvious impact it has on our employees. “The decision we have made to close these facilities needs to be seen as a factor of the changing dynamics of a now truly global industry and is in no way a judgement on the efforts of our people.”