Steel push to secure local jobs

By Andrew Burrell and Matthew Franklin   

Desperate steelmakers are demanding Julia Gillard force companies to protect jobs by favouring local products amid evidence that 90 per cent of the steel used on Australia’s biggest resources projects has been imported from Asia.

But while unions, employers and the Labor Left have backed the call, the Prime Minister has rejected any retreat to protectionism after yesterday’s announcement that BlueScope Steel would scale down operations in the Illawarra in NSW and Victoria’s Mornington Peninsula at a cost of 1400 jobs.

The BlueScope decision, which means an end to Australian steel exports, came as Caltex put its two oil refineries under review. Closure of the Kurnell and Lytton refineries would force Australia to import more than half of its petrol needs for the first time.

Both companies have blamed the impact of the high Australian dollar, which Australian Workers Union national secretary Paul Howes says is causing “a major crisis in Australian manufacturing”.

But Ms Gillard, who announced a $30 million rescue package for the affected regions and brought forward $100m in steel industry assistance linked to her planned carbon tax, said her government’s policy settings were already configured to respond to the demands of the “patchwork economy”.

As BlueScope confirmed it would close one of its blast furnaces at Port Kembla south of Sydney, the Australian Steel Institute said the government’s lack of policy had allowed mining companies including Woodside Petroleum, Chevron, BHP Billiton, Rio Tinto and China’s Citic Pacific to import most of the steel used in the recent construction of big mining and energy projects.

The institute said this meant domestic steelmakers, distributors and fabricators were missing out on billions of dollars worth of contracts.

“These are real jobs that are being exported offshore due to a policy vacuum that does not occur in other countries endowed with natural resources,” ASI chief executive Don McDonald said.

His comments came as an independent report released by the National Institute of Economic and Industry Research showed local steel content in Australia’s major resources projects stood at only 10 per cent, with the rest imported from Asia.

Mr McDonald said the government could stimulate the steel sector by offering tax breaks to resources companies that used a certain proportion of local content and linking Foreign Investment Review Board approval for projects to the issue. But the resources industry argues

Australian steelmakers do not have the capability in many instances to work on huge projects, especially liquefied natural gas plants that are being built in lower-cost countries such as Thailand, Indonesia and South Korea and shipped to Australia.

Reserve Bank board member and BlueScope chairman Graham Kraehe accused governments and private companies of using foreign design specifications to exclude Australian steel makers from participating in local projects.

Steel makers are irate that Chevron’s $43 billion Gorgon project in Western Australia used Japanese standards for the LNG plant, which precluded local companies such as BlueScope and OneSteel from tendering for the project. The plant is being built in Korea.

Mr Kraehe said companies and governments should be forced to use local specifications.

“This is not about protectionism,” Mr Kraehe said. “But if you look at China, at the rest of Asia, at the US or Europe, none of them would contemplate what we have let happen here, where Australia steel is actually precluded from tenders by design specifications.”

Australian Industry Group chief executive Heather Ridout called for “full and fair” participation of Australian suppliers in government contracts and major commercial projects. She also demanded a “whole-of-economy” program to lift productivity, including by more-flexible industrial relations laws.

Ms Gillard said her $30m relief package would help sacked workers with retraining and relocation and to encourage the establishment of new businesses in the Illawarra and the Mornington Peninsula that could use their skills.

And she said she would bring forward BlueScope’s anticipated $100m share of payments under its Steel Transformation Plan, which is part of the package delivering its planned carbon tax, on condition the company remain committed to domestic steel production.

But the Prime Minister, who has frequently refused to amend her Fair Work Act, rejected mandated local content provisions. “Everything we do has to be compliant with our role as a great trading nation that needs to comply with the rules-based trading order– the World Trade Organisation rules,” she said.

The Prime Minister said she and Wayne Swan had made clear for months that they understood the pressure that the strong dollar was putting on manufacturing, tourism and education exports. The “foundation stone” of its response was the Mineral Resources Rent Tax, which would hit the booming mining sector and fund a cut in the corporate tax rate from 30 per cent to 29 per cent.

ACTU president Ged Kearney welcomed the assistance package but called for robust local content requirements, especially in government procurement.

“We cannot sit back and watch our manufacturing industry crumble under pressure from lost export dollars associated with the high dollar, coupled with a low steel value compared with high raw material costs,” Ms Kearney said.

Mr Howes predicted further job losses in manufacturing and renewed calls for the Gillard government to join international efforts to pressure the Chinese government to float their currency.

Ms Gillard also faced pressure from the Labor Left, with NSW senator Doug Cameron calling on the nation’s billionaire mining barons to pour their money into manufacturing to stave off further job losses.

“I think there is a responsibility on the mining industry — the Gina Rineharts, the Clive Palmers, the Twiggy Forests, the BHPs, the Rio Tintos — to actually stop lining their wallets and start making an investment in manufacturing jobs in this country,” Mr Cameron said.

Stephen Jones, whose electorate of Throsby will bear the brunt of the BlueScope job losses in the Illawarra, said only a fraction of mining investment went to Australian firms.

“There’s $400 billion worth of investment into developing mines over the next few years, but just a fraction of that going to Australian producers,” Mr Jones said. “We need to ensure Australian producers are at least on an equal footing in terms of bidding for that work.”

Despite the job losses sparking heavy debate yesterday, Tony Abbott made little comment, instead focusing the Opposition’s question time attacks on Labor’s planned carbon tax.

BLUESCOPE THE COLD, HARD FACTS BY THE NUMBERS

* 800 (out of 3100) Workers to lose their jobs at Port Kembla, NSW

* 300-350 On-site contractors to lose their jobs at Port Kembla

* 200 (out of 1000) Workers to lose their jobs at Western Port, Victoria

* 1 Steel furnace to close (out of three in Australia)

* 2.5m tonnes Revised capacity (down from 5m tonnes)

* $100m Carbon tax-adjustment funding brought forward for BlueScope

* $30m Package to assist NSW’s Illawarra region ($20m from federal funds, $5m from NSW government, $5m from BlueScope Steel)

Source: BlueScope Steel FY2011 Results and Business Update

Article from The Australian, August 23, 2011.