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ARTICLE

Australian industry steels for new era

Win-win consolidation.

Win-win consolidation. Photo: Craig Abraham

Philip Hopkins

THE steel industry has completed a major rationalisation, with the competition watchdog allowing the merger of OneSteel and Smorgon Steel, and BlueScope Steel's acquisition of a key Smorgon business.

The Australian Competition and Consumer Commission said it would not oppose the $1.1 billion merger between OneSteel and Smorgon, respectively the country's second and third-biggest steel producers.

Both make and distribute steel long products in Australia, such as steel rod and bar, wire, pipe and tube.

The ACCC will also allow BlueScope, the nation's largest steel maker, which dominates the flat steel market, to buy Smorgon's distribution arm for $700 million.

The watchdog's conditions also require OneSteel to compensate importers that have incurred expenses or losses as a result of OneSteel's unsuccessful anti-dumping applications.

This provision will be in place for at least five years, and an independent expert will be appointed if OneSteel wants to challenge any claims.

ACCC chairman Graeme Samuel said the merged entity was likely to face strong competition from the importation of steel long products, as long as speculative anti-dumping applications did not disrupt the supply of imported products.

"The ACCC has formed the view that undertakings accepted by the ACCC will ensure that import competition is not impeded by speculative anti-dumping applications," he said.

Smorgon expects to send details of the deal to shareholders before the end of June, with a shareholder meeting to be held before the end of July.

The ACCC's action ends more than a year of protracted activities. OneSteel made a $1.6 billion offer for Smorgon last June, but BlueScope mounted a market raid in August and grabbed a 19.9 per cent stake to stop the takeover and gain a seat at the table.

Smorgon managing director and chief executive, Ray Horsburgh, who will now retire, said the outcome was good.

"The value to the Smorgon shareholders is very good," he said.

"They're going to get something like $2.70 a share, which is an outstanding return for them.

"I think the OneSteel share price is going to be very good, because it's going to be a very sound company.

"It's lowly geared, it's only 40 per cent gearing."

BlueScope and OneSteel were spun out of the old BHP steel division several years ago. Smorgon is BlueScope's second-largest domestic customer.

Smorgon shares closed 2¢ higher at $2.71 and Blue- Scope was up 9¢ to $10.75.

However, OneSteel fell 5¢ to $6.59 SITE VISIT with sophie trist and david shanasy The first picture shows a Concrete UC connection to a steel UB. Secured by a ridgid plate and screw system. You can also see the floor joists running perpendicular to the UB with a steel sheet (concrete) floor The second picture shows tempory framing to hold the UC in place whilst in construction

Portal Frames - Detail Sections

Detail (sheet roofing / concrete panel) Box Gutter SectionGutter Section Gutter Section ARICLE

Housing slump hits construction industry

The Australian construction industry remains in a subdued state with a leading indicator showing the sector contracted in May for the second month in a row.

The Australian Industry Group-Housing Industry Association performance of construction index fell 2.8 points in May to 45.1, to be 4.9 points below the base level of 50 that separates expansion from contraction.

The fall in activity was underpinned largely by a slump in the residential housing sector, the Australian Industry Group (Ai Group) said, with a marked reduction in the number of houses being built after a short-lived recovery in April.

After expanding in April for the first time in seven months, the housing segment contracted with the housing sub-index falling by 11.8 points to 39.2.

Builders also reported that low housing affordability was having a major impact in constraining demand.

A fall in the number of commercial and infrastructure related projects, and continued weakness in apartment building activity also impacted negatively on total construction activity.

Apartment building activity, although steady, remained the most subdued segment in May with the sub-index at 35.3 points.

While weaker activity across the construction sector and lower levels of new business led to a marginal fall in employment in May, with the employment sub-index at 48.8, the figure was 1.4 points higher than the previous reading, suggesting the rate of employment decline was easing.

Ai Group associate director of economics and research Tony Pensabene said the index results confirmed the Australian construction market was in a subdued state.

Mr Pensabene said a recovery in the housing market was yet to emerge and the apartment segment remained stagnant, but that the situation was more positive elsewhere in the industry.

"Despite slight activity falls in engineering and commercial construction, both remain the strongest performing sectors and have, up to this point, enjoyed a long period of almost consistently strong growth," he said.

The performance of construction index is a seasonally adjusted national composite index based on the diffusion of indices for sales, orders and new business, deliveries and employment with varying weights across the residential, engineering, non-residential and apartment segments.

The separation from 50 is indicative of the strength of expansion or decline.

THE AGE.

Portal Frame Section no.3

Portal Frame Section no.2