Bluescope to Buy Cargill’s Stake in North Star for $720 Million

A deferral of $60 million in payroll tax for the next three years, plus $60 million in annual savings from BlueScope’s 500 job cuts and a pay freeze, have convinced the company to keep the country’s largest steel plant in operation.

Its workforce will be cut from 5,000 to 4,500, with a three-year enterprise agreement awaiting ratification.

Cargill has agreed to sell its interest in North Star Blue Scope Steel for $720 million, exiting the steel production business.

While prices of hot-rolled steel, the benchmark product used in construction and manufacturing, have dropped by 32 percent this year on rising exports from China, steelmakers in the USA are being boosted by rising demand in the domestic construction industry.

“We also thank the NSW government for deferring $60 million of payroll of payroll tax payments over the next three years, as well as reductions in other charges”.

North Star BlueScope, with 380 employees, produces about 2 million tons of hot rolled coil annually and consistently operates at full capacity.

BlueScope added that it exercised its right of last refusal under the North Star shareholders’ agreement, matching an offer received by Cargill from an unnamed third party.

BueScope will now move to 100 per cent ownership of North Star, an asset chief executive Paul O’Malley has previously described as the best steel mill in North America.

The NSW treasurer, Gladys Berejiklian, said the agreement showed the state government was committed to securing the future of the Illawarra.

“These measures will help BlueScope maintain its Port Kembla operations amid tough global business conditions”, Ms Berejiklian said. “Workers are now keen to get on with the job of improving the productivity of the operation and delivering a world-class product”, he said.

“I wanted to make it very clear that this was a specific package given the unique situation Bluescope finds itself in, and given the unique number and scale of jobs at risk – we’re talking 4,500 jobs”, The Guardian quoted Berejiklian saying.

The firm now expects approximately 40 per cent growth in underlying pre-tax earnings in the first half of the current financial year compared to the most recent six-month period.

He wants the federal government to step up and respond more proactively to steel “dumping” – the process whereby foreign competitors flood markets with artificially low-cost materials.