2001 Annual Report - OneSteel

Australian ManufacturingTHE BUSINESS THE MARKET PERFORMANCE DEVELOPMENTSRod & Bar Sydney Steel MillWhyalla SteelworksWhyalla Steelworks is located inWhyalla, South Australia. It is anintegrated steelworks producing upto 1.2 million tonnes of steel perannum from iron ore sourced fromits own mines. Besides producingbillet for OneSteel’s Market Millsoperations, it also manufactures railproducts, structural steel and slabsfor external re-rolling.Situated in Western Sydney, theSydney Steel Mill produces up to500,000 tonnes per annum ofcommercial grade billet from steelscrap via the electric arc furnace.A Bar Mill rolls up to 35% of thesebillets into reinforcing andmerchant bar products, while theremaining billets are sent toOneSteel’s other rolling facilities.Produces a wide range of selectedrod and bar products in its threeBar Mills (Newcastle, Sydney andBrisbane) and a Rod Mill inNewcastle. These Mills are fed bySydney Steel Mill and WhyallaSteelworks.The market for structural steel wasapproximately 10% down whilerail sales were down 4,500 tonneson the prior year reflecting thecompetitive nature of the business.However, key rail contracts werewon with Queensland Rail for thesupply of nominally 73,000 tonnesof rail, and the Alice Springs toDarwin rail project forapproximately 144,000 tonneswhich will provide a sound basefor the Rolling Mill going forward.The majority of production outputis sent to OneSteel’s Rolling Millsin Newcastle and Brisbane.Demand for steel is thereforevery dependent on therequirement for billets from theseMills. Demand was mixedthroughout the year with somerecovery by the last quarter.A severe downturn in marketdemand was experienced fromSeptember 2000, particularly inthe construction and engineeringsegments. Demand in theautomotive market remained firm,due to steady domestic demandand increased exports by domesticvehicle and componentmanufacturers. In aggregate, totalvolumes were down in the order of15% on the prior year.Some operational instabilityoccurred at the steelworks in theSteelmaking and Pellet Plant areas.By year end, the Billet Caster wasexceeding its prior records with thePellet Plant reaching its highestproduction output for 18 months.Significant cash was generatedthrough cost reduction programs,which delivered $19 million inbenefits, and inventory initiatives.Safety also improved significantly.The Melt Shop consecutively brokeits monthly production recordduring the first quarter of thefinancial year. Rolling rates andyield were also at record levels inthe Mill. However, the downturn inthe market forced reducedproduction in the second quarter.The fourth quarter has seen theplant back at record levels.Business performance wasadversely affected by the marketdownturn. Mill operating levelswere adjusted accordingly throughprogrammed Mill shutdowns,changes in shift operating levelsand reduced overtime. Despite theneed for these adjustments, recordproductivity performance wasachieved in many areas, as well assignificant inventory reductions.Looking to the coming year, therewill be a relentless focus on costreduction and operationalexcellence. This will form a basefrom which such developments asthe successful delivery of the Aliceto Darwin rail contract, thecontinued pursuit of opportunities tomaximise the Whyalla low costiron ore advantage and theoptimising of the OneSteel valuechain, will be vigorouslyprogressed.During the coming year the rollingmill will take on additionalproduction transferred from theBrisbane Bar Mill which will closein April 2002 as part of therationalisation program. This willentail the addition of a fourth shift,minimal new capital equipmentand higher utilisation rates fromthe mill.During the year work progressedon completing the transition fromNewcastle produced billets (fromstock) to Whyalla Steelworksproduced billets. A review of barmill capacity utilisation resulted inthe decision to close the BrisbaneBar Mill progressively up toApril 2002. Production will betransferred to Sydney andNewcastle.Pipe and TubeManufactures pipe and tube for theconstruction, mining andmanufacturing segments forapplication in oil and gaspipelines, reticulation pipe,buildings, fencing, machinery,furniture, shop fittings, automotiveproduction, agricultural instrumentsand outdoor and material handlingequipment.The downturn in the construction,engineering and manufacturingindustries adversely impacted allsegments of the business. In thefinal quarter, demand within thestructural products business beganto improve. The oil and gasbusiness benefited from securingpipe sales associated with theTasmanian Gas Project.Operational measures such asyields, capacity utilisation andconversion costs were adverselyimpacted by the downturn in themarket. Several manufacturing siteswere shutdown for extendedperiods during the Christmas/NewYear period and overtime levelswere reduced to historical lows.An extensive review of productprofitability and capacityrequirements has been commenced.Activities remain focused aroundthe development of concepts (egmezzanine floors, flooring systems)to capture further end markets forthe DuraGal ® range of buildingproducts. Work associated with theestablishment of imperial sizes thatmeet United States specificationswas undertaken to further developexport potential for the DuraGal ®range.WireManufactures wire for use in theconstruction, manufacturing, miningand agricultural industries withproducts including springs,concrete reinforcing, strand andwire, industrial fine mesh, fenceand trellis posts and wires, netting,fasteners, mining rope,telecommunications, shop fittingsand shopping trolleys.The general manufacturing wiremarket was lower, with anoticeable improvement toward thelatter part of the year. Lower thanexpected demand for heavygalvanised and cablereinforcement wires was offsetby a stronger than expecteddemand for annealed baling,bedding spring and nail wire.The rural fencing market finishedthe year very strongly.Despite lower demand impactingsales volumes, cost cuttinginitiatives and pricingimprovements in some marketsegments provided a flat profitoutcome for the year. The cashgeneration outcome was strongerthan the prior year, reflectingimproved inventorymanagement. Safetyperformance significantlyimproved during the year.OneSteel has entered a three-yearTechnology Agreement with NVBekaert SA, the world’s leadingwire company. Agreement has alsobeen reached with Bekaert to beOneSteel’s agent for coated lowcarbon wires in South East andNorth Asia while OneSteel will actas Bekaert’s distributor for a limitedrange of wire products in Australia.BUSINESS ACHIEVEMENTS: Australian Freight Industry AwardsPhoto (left to right) Troy Peters, Quality, Safety, Environment and Training Officer, and Steve Hughes, Manager Tube Operations, OneSteel Market Mills.OneSteel BTM Kembla Grange has taken out the top award for its truck loading safety nets initiative at the Australian FreightIndustry Awards presented on 15th September. It is the first time this award has been won outside the transport industry. The truckloading safety nets were also awarded Best Workplace Safety Initiative at OneSteel’s Safety Excellence Awards held in July.18