BlueScope Steel’s forthcoming 2018-19 results have been given a small whacking by the combination of Donald Trump’s steel trade/tariff war causing global steel prices to soften and the rise in global iron ore prices.
There is a delicious irony in this downgrade – last year BlueScope won exemption from Trump’s administration for the 300,000 tonnes of steel it ships to the US as the President lifted tariffs on steel and aluminium imports to 25%.
The steelmaker told the ASX yesterday that its full-year earnings before interest, tax, depreciation, and amortisation for the year to June will be around $1.35 billion, 10% down on the forecast made at the time of the February half-year report.
While it is 6% higher than 2017-18, there’s every chance the conditions that have caused the drop, will continue on into 2019-20.
The company said it will extend the current $250 million share buyback program by a further $250 million (which is to support the share price and nothing more).
BlueScope said yesterday since it last updated the market in February the price of steel has dropped by $US150 per tonne when it was only expecting a decline of $US130 per tonne.
BlueScope has two big steel mills – one at Port Kembla south of Sydney and the North Star plant in the US state of Ohio.
Demand in Asia and South East Asia and North America is softer than expected while building in North America is progressing slower than expected. All of this is impacting its North Star, Buildings North America, and Building Products Asia and North America divisions.
“Other businesses are performing generally in-line with the expectations set out in the February guidance – with Australian Steel Products seeing stronger realised steel spreads offset by weaker than expected domestic volumes,” the company said in the statement.
BlueScope was hailed as a major winner from the US trade war with China after it won an exemption for the 300,000 tonnes of Australian steel it ships to the US.
In fact, BlueScope singled out the positive market conditions in North America when revealing the company’s profits had doubled over the financial year to $1.5 billion, its best result in a decade, prompting chief executive Mark Vassella to declare it was a “good time to be a steelmaker in North America”.
No longer and looking back it was a silly boast to have uttered.
And the company’s shareholders and board and managers have been punished with the shares slumping 40% or so from the high of $18.43 last July to around $10.99 yesterday (down 1.4%). The shares hit their year low on June 3 at $10.305, hitting a most recent peak of $11.76 on June 14 – last Friday.
BlueScope is persisting with its near $1 billion expansion of the North Star plant. It said in Tuesday’s statement that the plan was “progressing well”.
BlueScope said it had now begun “detailed design and engineering” as part of its evaluation of a proposed expansion to add up to 900,000 tonnes of steel-making capacity at the North Star mill.