The argument that there is little the steel industry can do to radically cut greenhouse gas emissions in the next few years is valid. Australian steelmakers have used it to ensure that the proposed carbon tax there has only a minimal effect on the industry in its first phase. However, the protections are intended to run out in time, and the industry will have to begin looking for radical solutions to its emissions now if it wants to avoid heavy costs at a later date.
SBB 12 JulyAustralia’s steel industry has emerged relatively unscathed from Canberra’s new A$23/tonne (US$24.6/t) carbon tax, which takes effect in July 2012. Both BlueScope Steel and OneSteel welcomed the government’s decision to protect the sector from 94.5% of the new carbon price.
As part of a new steel transformation plan (STP), the Australian government will commit A$300m to the sector over four years to help steel companies transition to the new carbon tax. Canberra has also called for an independent review to assess the impact of the tax and other factors on the country’s steel sector.
BlueScope chief executive Paul O’Malley said the STP on carbon “removed one significant hurdle” for the steel producer, which is already battling high raw materials prices, weak domestic demand and the high Australian dollar. O’Malley lobbied furiously against an earlier version of the tax, saying it would have cost BlueScope some A$500,000 to A$1m over the first eight years.
OneSteel chief executive Geoff Plummer said steelmaking technology constraints meant there was little the sector could do to reduce emissions. He said the STP would allow the company to remain competitive for the next four years.
The $300m compensation package still needs to be signed off by the Greens, who hold the balance of power in the Australian senate, but is likely to be passed in its current form.
CLSA steel analyst Scott Hudson told Steel Business Briefing that the financial impact on the steel companies in the near-term looked “negligible.” However, there was some uncertainty around how coal producers may eventually pass on tax-induced cost increases to their customers, he said.
The move by the Australian government to introduce a carbon tax, to be followed by an emissions trading scheme, has been met by even more vociferous opposition from steelmakers than Europe’s ETS. As this article suggests, the actual costs remain unclear.
SBB 3 May BlueScope Steel has rejected claims from Australian federal treasurer Wayne Swan that Canberra’s proposed carbon tax would only add an extra A$2.60 (US$2.70) to the cost of a tonne of steel.
Swan said at the weekend that a carbon tax would have around 1/20th of the impact on the price of steel that Australia’s soaring dollar was having. He noted that the Australian dollar – which briefly passed the A$1.10 versus the US dollar barrier on Monday – had cut Australian steelmakers’ earnings by A$50/t in 2011.
Movements in the dollar “have a far greater impact on these industries than a potential carbon price,” Swan said.
But the country’s largest steel producer accused Swan of trivialising the impact a carbon tax would have on its business, with chief executive Paul O’Malley calling the “latest attack” on Australia’s steel industry “simply unacceptable.” He said the total estimated cumulative cost to BlueScope over the first eight years of the scheme – due to begin in 2012 – would be between A$500m and A$1bn.
“It is nothing like the incorrect A$2.60 per tonne of steel which is based on very selective use of data that counts only part of the cost, in only the first year,” said O’Malley on Monday. “According to the government’s own data, in the first year alone the cost could be up to $39m,” he said.
BlueScope has been reeling from soaring raw materials costs, the high A$, a flat domestic construction sector and import competition, Steel Business Briefing notes.
As the Australian Labor government pushes forward its green agenda it has come under fire from industry, in particular the steel industry. Debate on the issue continues and the impact on the industry is not yet completely clear. However, BlueScope’s assessment is certainly bleak.
SBB 18 April Australia’s proposed tax on carbon dioxide emissions could cost BlueScope Steel $400m and end steel production in Australia, claims Paul O’Malley, ceo of the country’s largest steel producer. However, proponents of the tax say the added cost will be minimal.
Australia intends to impose a carbon tax from 1 July 2012 as a prelude to an emissions trading scheme three-to-five years later. Although no price has yet been announced, the government’s top climate advisor has suggested A$20-30 (US$21-32/t) per tonne of CO2, Steel Business Briefing understands.
The success of Australia’s mining industry has blinded the government to the country’s weak manufacturing sector, O’Malley says. “If you tax the local steel producer, you are basically saying we want to encourage imports of steel and hide the carbon overseas.” A tax on steel imports into Australia would be necessary to ensure domestic steelmakers can compete locally, he added.
However, the government suggests the industry is overestimating costs. Imposing a A$20/t tax on carbon dioxide emissions would add only A$2.60/t to the cost of steel, claims climate change minister Greg Combet.
The Australian Workers Union argued on Friday that the steel industry should be exempt from the tax and has threatened to withdraw support from (Labor) prime minister Julia Gillard if any steel jobs are lost. The Greens, which hold the balance of power in the Australian senate, have acknowledged that the carbon tax is likely to result in job losses.