Bluescope Steel - Hot Rolled Products

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Hot Rolled Products

This has been a record-breaking year for BlueScope Steel's Hot Rolled Products business segment. These businesses are Port Kembla Steelworks in New South Wales, Australia, and our joint venture interests in the United States - North Star BlueScope Steel in Delta, Ohio, and Castrip LLC. Most sales are to industrial customers.

In 2003/04, records were set in safety, production, revenue and profitability. During the financial year we saw very strong pricing for our steel products. By serving our customers well, we were able to capitalise on this market opportunity. Each business within this segment uses a different steelmaking technique, and each met with great success during the year.

PORT KEMBLA STEELWORKS

In 2003/04, Port Kembla consolidated its reputation as one of the world's finest steelworks.

Port Kembla Steelworks is fully integrated, which means all three major production phases - ironmaking, steelmaking and shaping - take place at one site. It produces steel in the forms of slab, hot rolled coil, and plate. The Steelworks provides direct employment for over 5,000 people, and occupies an 800 hectare site. It has its own deepwater seaport, road and rail infrastructure, which give it significant competitive advantages.

We use the Basic Oxygen Steelmaking (BOS) method, in which high-pressure oxygen heats molten iron, scrap steel and other additives to produce three forms of steel (slab, hot rolled coil and plate). Port Kembla Steelworks is placed at the low end of the international steelmaking cost curve. To help maintain our leading position, we are continuing to invest in the Steelworks.

Construction of a second Walking Beam Furnace, at an indicative cost of $100 million, will enable us to convert a greater proportion of slab to hot rolled coil. This will increase the value-added component of our output.

A range of domestic and export customers buy from Port Kembla Steelworks. Our own downstream businesses are a major buyer. Key customers include the other two listed Australian steel companies - OneSteel and Smorgon Steel - as well as other steel product fabricators, pipe and tube manufacturers and general distributors. Our customers benefited from strong economic activity in Australia during 2003/04. Prominent export customers include Steelscape and California Steel of the United States, Dongkuk Steel of South Korea, and Sahaviriya Steel Industries of Thailand.

During the year, the Port Kembla Steelworks produced a record 5.145 million tonnes of raw steel, up from 5.049 million tonnes in the previous year - a result of higher usage of scrap steel, improvements in plant reliability and increased iron production. The operation achieved an ironmaking record 5.024 million tonnes due to improved blast furnace technology and process control. The previous record of 4.985 million tonnes of iron was set in 1997/98.

New safety records were also achieved, with over one million hours worked without lost time through injury. And in 2003/04, Port Kembla Steelworks celebrated a number of milestones. We exported our 10 millionth tonne of slab, and marked 25 years of slabcasting.

As a result of improvements in furnace process speed and control, we also produced a record 2.501 million tonnes of hot rolled coil, beating the previous 1995/96 record by 2.6 per cent. A new, five-year Enterprise Bargaining Agreement, covering the majority of our workforce at the site, was concluded.

Progress was also made in environmental management - a priority area for Port Kembla Steelworks. A sinter waste gas treatment plant commissioned in July 2003, which captures and treats gas and dust emissions, has made a real difference to the environment of the Illawarra region.

We have continued building premium steel brands for our hot rolled products. The successful launch of XLERPLATE® (steel plate) and XLERCOIL® (hot rolled coil) has assisted us in capitalising on new opportunities - the steel plate used in the wind towers shown to the left is a good example.

NORTH STAR BLUESCOPE STEEL

This was also an outstanding year for North Star BlueScope Steel, the Ohio-based Steelworks of which we hold 50 per cent. Our joint venture partner is a subsidiary of Cargill Inc, one of the world's largest private companies. In 2003/04, North Star BlueScope Steel was able to capitalise on strong pricing and good customer relationships to achieve excellent results.

The business earned its third successive win in the coveted Jacobsen Survey, again voted 'number one flat rolled steel supplier in North America'. The customers of this business include Worthington Steel, which buys around one-third of production, Steel Technologies, Kenwal Steel Corporation and National Material.

Financial performance was helped by a healthy spread between the cost of scrap raw material and the selling price of finished steel products. A scrap related surcharge, introduced in January, helped compensate for the rapid escalation of scrap costs.

In 2003/04, the operation achieved record production of 1.669 million tonnes, up 3.8 per cent from the previous year. Capital developments have been completed which will allow annual capacity to increase to 1.724 million tonnes over the coming year.

North Star BlueScope Steel, known in the steel industry as a 'mini-mill', uses leading-edge steelmaking technologies and processes to produce new steel from scrap metal. The operation uses the Electric Arc Furnace (EAF) steelmaking method.

Inside the mini-mill's two furnaces, electrodes produce an arc similar to a lightning bolt. The energy from the arc melts the scrap to produce new steel. Cars are a significant source of scrap, but washing machines, refrigerators, bicycles and steel from demolished buildings can also be recycled using the EAF method. The process also utilises iron and other materials.

CASTRIP®

At the cutting edge of steelmaking is a new strip casting process, based on technology pioneered by BlueScope Steel and our Japanese partner IHI at Port Kembla Steelworks in the late 1980s and 1990s. In 2000, the technology was sufficiently advanced to attract Nucor, a large and innovative US company.

Nucor (47.5 per cent) joined with BlueScope Steel (47.5 per cent) and IHI (Ishikawajima-Harima Heavy Industries - 5 per cent) to form Castrip LLC - a joint venture company formed to license and commercialise thin strip casting technology.

The Castrip® technology allows direct production of thin hot rolled coil from liquid steel, bypassing slab casting and hot rolling. There is also potential to replace cold rolling. The process, if proven commercially, will be lower in investment and operating costs than current technologies, with smaller scale plants and environmental advantages.

Our partner, Nucor, is utilising the technology at its facility in Crawfordsville, Indiana, USA. In 2003/04, Castrip moved closer to commercialisation, with material from Nucor's Crawfordsville facility introduced to market. In June 2004, cumulative production exceeded 100,000 tonnes since the plant began operating in May 2002.

The Castrip® process produces ultra-thin hot band gauges that can compete with traditional cold rolled steel. During the year, a gauge record was set. The Castrip plant produced steel sheet down to a thickness of 0.84 mm.

1.5m tonnes of Hot Rolled Products sold to export customers

STRONG PARTNERSHIPS // Doug Kovach, above, District Sales Representative at our Delta, Ohio joint venture is responsible for servicing the account of Worthington Industries. Worthington, the largest customer of the business, operates on a neighbouring site and receives rail shipments of over one-third of the hot rolled coil produced each year.

Graph showing Sales Revenue and EBIT for 2002, 2003 and 2004

HIGH ACHIEVER // Brad Love, above, 2004 New South Wales Group Training Apprentice of the Year. Brad, a fourth year electrical apprentice, has worked at Port Kembla Steelworks since 2001. Assisted by a BlueScope Steel scholarship, Brad is now aiming for a university degree.

Port Kembla's Branded steel products - new opportunities, new innovative applications

HOT PERFORMANCE // Steel slab on a Port Kembla line. The Steelworks exported its 10 millionth tonne of slab during the year.

CLEAN POWER // Our XLERPLATE® steel plate is an essential component of towers at new wind farm projects such as the one at Lake Bonney, near Mt Gambier in South Australia, pictured above. Ted Lojszczyk, Sales Manager in our Adelaide office, manages the relationship with this customer.

North Star BlueScope Steel providing groundbreaking roles for expert people

AMAZING CAREERS // People such as Alison Halstead, Development Officer Ironmaking Technology at Port Kembla Steelworks, above, and Melissa Hildreth, Electric Arc Furnace Operator at North Star BlueScope Steel, below, are building careers in roles where, traditionally, women have not been involved.