Bhp Should Expand Steel Capacity, Says Broker

Sydney Morning Herald

Thursday December 4, 1986

By ROBERT KENNEDY, Investment Editor

BHP has been urged to accelerate its steel-making capacity, despite exceeding the amount it agreed to spend under the five-year Steel Industry Plan in just over three years.

Sydney broker Dr Ian Story of Meares and Philips told a meeting of the Metal Trades Industry Association in Brisbane yesterday that Australia's biggest company should double its steel-making capacity.

He said the devaluation of the Australian dollar and productivity improvements had presented BHP with an opportunity for a bold and imaginative expansion of its steel operations.

"BHP is currently the world's lowest-cost producer of slab steel and should now think big and consider doubling its existing steel-making capacity by building a new 6 million tonnes a year plant at Port Kembla," he said.

Dr Story said a major new profitable export-oriented steel plant would lock-in markets for BHP's Mt Newman iron ore and Utah coking coal, at a time when world markets for the commodities had been adversely affected in price and tonnage terms.

"From Australia's and BHP's point of view, it makes more sense to be putting these two major export commodities out into world markets as steel rather than basic raw materials straight from the dragline into the hull of a Japanese ship," Dr Story said.

Dr Story this week also urged BHP to outlay $100 million to recommission the No 2 blast furnace at Port Kembla.

He applauded the company's decision to spend $165 million on the reconstruction of the No 4 blast furnace, a move which would increase capacity by 8 per cent, but said BHP should follow-up on the No 2 furnace.