Glenbrook: six years to prove mill's value

By Libby Middlebrook

The future of the Glenbrook steel mill remains in doubt, even though the plant has been included in its parent company's restructuring plan.

Australian-based resources company Broken Hill Proprietary (BHP) announced a major restructuring programme yesterday which will see the company focus on natural resources and a downsized steel operation, concentrating on flat products.

While BHP will sell at least seven businesses, the company plans to hold on to BHP New Zealand Steel and its manufacturing operation at Glenbrook - in the short term anyway.

"It's certainly not business as usual," said Oscar Gregory, acting president of New Zealand Steel. "If we can demonstrate that we have achieved the cost of capital by 2005 then [BHP] will continue to invest in the business. We'll be concentrating on our financial performance and reducing costs."

In 1997 BHP said the steelmaking plant at Glenbrook was likely to close by 2010 following a downturn in international steel prices and dwindling domestic demand. At present 600 people work in the steelmaking plant with 600 others employed in the company's metal fabrication and painting operation at Glenbrook, which is likely to remain open in the long term.

Since the early 1990s New Zealand Steel has struggled to improve the performance of the mill and reduce costs. About 400 mill workers have already been made redundant.

But Mr Gregory said BHP had promised to keep the steelmaking plant open with a new $15 million melter by 2003 if the company could achieve specific financial targets. The melter liquefies iron sand before it is turned into iron.

He said the last year's $125 million write-down in the plant's capital value could allow the company to realistically reach BHP's financial goals.

But several steel buyers and importers said New Zealand Steel was not competitive compared with international steel prices.

A large New Zealand user of steel told the Business Herald that it purchased 95 per cent of the product overseas because it could choose from a larger product range at cheaper prices.

But Mr Gregory said Glenbrook's technology for basic steel products was as up-to-date as anywhere else in the world.

Meanwhile, BHP is still looking to sell its 50.1 per cent shareholding in Steel and Tube Holdings. Company chief executive Nick Calavrias said BHP was searching for a buyer through Credit Suisse First Boston.