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Monday, 23 February 1987
Page: 480

(Question No. 1533)

Senator Jones asked the Minister representing the Minister for Trade, upon notice, on 19 November 1986:

(1) What has been the export in steel by BHP in the years 1984-85 and 1985-86?

(2) What are BHP's projections for steel exports in the current financial year?

(3) How competitive is BHP in steel exportation compared with-(a) Brazil, (b) South Korea, and (c) Japan?

(4) What measures are being taken by the Federal Government in conjunction with BHP to promote its products, and in particular steel, on the international market?

Senator Button —The Minister for Trade has provided the following answer to the honourable senator's question:

(1) According to BHP sources, the figures for the above two years are as follows

For 1984-85-1.103 million metric tonnes exported.

For 1985-86-1.240 million metric tonnes exported.

(2) Preliminary BHP estimates suggest that exports of steel will be in the vicinity of 1.3 million tonnes to 1.5 million tonnes in 1986-87.

(3) The answer to this question is dependent upon the market destination and the particular product being exported. However, more generally, BHP can sell all that is available for export to ``preferred markets''. In future, the voluntary restraints applying on the US market may limit BHP export expansion in that market.

Data compiled by the Steel Industry Authority (SIA) provide an indication of labour costs involved in steel production. The SIA estimated that in 1984 the cost per hour of labour in Australian steel works was around $A14, comparable to that in Japan (also around $A14) and considerably below that in North America ($A18-$A27). Labour costs in Korea, at less than $A4 per hour were considerably lower than those in Australia. No figures are available for Brazil. Given the estimated depreciation of the $A against the US$ and Yen since 1984, labour cost comparisons with Japan and North America are likely to have moved considerably in Australia's favour.

Unfortunately, despite considerable improvements under the current Steel Industry Plan, Australia's labour productivity still lags behind that of most Japanese, Korean and North American producers (again figures are not available for Brazil). SIA figures show that in 1984, BHP's Port Kembla plant produced 294 tonnes of steel per man year. Most of the selection of overseas mills surveyed by the SIA recorded productivity figures of between 350 and 390 tonnes per man year. Taken together, this indicates that Australian labour costs per tonne are likely to be well below Japanese and North American levels but above that of Korea. However, the SIA cautions that the labour productivity figures quoted above are indicative only, although it feels they provide ``a good guide to the orders of magnitude involved''.

The SIA report on Australian steel prices, published in June 1986, provides international comparisons of steel prices. It notes that in many countries actual steel prices differ from quoted ``list'' prices making price comparisons difficult. However, the SIA makes the general comment that while Australian steel prices were relatively high in the early 1980s the disparities between Australian and foreign steel prices have generally been reduced in recent years. In certain products (e.g. wire rod and hot rolled strip) Australia now has a price advantage over Japan, the Federal Republic of Germany and the United States. Furthermore, BHP's capital investment in new plant, processes and technology totalled $493 million for calendar 1985. This investment continues at more than $1 million a day and will amount to an investment of $1.4 billion for the duration of the steel plan, which will render the BHP steel operation amongst the most cost competitive in the world.

(4) The government offers a range of support services to assist the steel industry in its efforts to market its products internationally. For example, Austrade is closely involved with China in the identification of areas of specific activity intended to enhance the prospects for the long term complimentary development of the iron and steel industries of Australia and China. This program was formalised under the Iron and Steel Initiative, formulated during the Prime Minister's visit to China in February 1984.

Since the inception of the Initiative, purchases of Australian iron and steelmaking raw materials (including semi-finished product, pig iron, steel blooms and billets) have increased substantially.

Austrade has assisted BHP in negotiations regarding a long term contract for the supply of pig iron from Kwinana and has supported a number of steel industry related missions to China which have included representatives from BHP. In addition Austrade is currently assisting BHP in its investigations into the potential for investment in China's downstream steel processing facilities and possible avenues for technology transfers. In this regard, Australia has canvassed major steel processing firms in Australia who may be interested in developing a closer relationship with China's steel industry.

BHP has been actively developing existing and new markets for steel products, involving large investment programs overseas. It now has trading offices in Singapore, New Zealand, Hong Kong, Manila and the United States, and has made investments in complimentary processing facilities in the United States.