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Steel Production


BlueScope Steel Ltd. engages in the manufacture of unique steel products. Their main business sectors include Australian Steel Products, North Star BlueScope Steel, Buildings North America, Building Products Asia and North America, and New Zealand and Pacific Islands.

They also produce and sell metal coated and painted steel building products in Australia, New Zealand, Thailand, Indonesia, Malaysia, Vietnam, North America, the Pacific Islands, and Asia.

The Australian steel industry is quite large, with several broad components and many participants. The major domestic participants are BlueScope Steel and Arrium Steel, which were originally part of BHP Steel. In 2000 Arrium Steel (then known as OneSteel) was "spun out" of BHP and in 2002 the remaining businesses in BHP Steel were spun out as BlueScope Steel.

The Australian Steel Products segment produces markets coated and painted flat steel products. North Star BlueScope Steel is an electric arc furnace producer of hot rolled coil. The Buildings North America segment includes building solutions and servicing primarily their non-residential customers. The Building Products Asia and North America segment offers metal coated and painted steel building products. The New Zealand and Pacific Islands segment consists of New Zealand Steel, Pacific Steel, and BlueScope Pacific Islands business areas. Bluescope Steel Ltd was founded in 2002 and is headquartered in Melbourne, Australia.

Key Fundamentals


Bluescope Steel also has a strong balance sheet, coupled with a high dividend, and quality assets. Its cash flows are strong especially when compared to its peers in the industry. Further to this, Bluescope also has a perfect Piotroski score of 9 which is the industry measure for the financial health of a company, and trades at a discount to its peers, with a Price/Earnings Ratio (P/E) of around 3. Taking all this into consideration we provide a BUY recommendation for Bluescope Steel with a target price of $28 as at the August 23, 2022.

Industry Outlook

Steel production is the key ingredient to almost all construction and infrastructure. It is vital for nation-building and essential for economic growth. The Australian industry ensures a secure, flexible, and high-quality supply of steel for everything from roads and bridges to skyscrapers and units

The Australian Steel Industry is one of the largest and most profitable industries not just globally, but in Australia specifically. Steel is the backbone of Australia’s construction, infrastructure and manufacturing sectors. It’s shaped the image of this great nation in the form of bridges, motorways, stadiums - where we play, where we work and where we live.

As of 2022, over 100,000 Australians are employed in the steel and steel alloy production industry.

With the current economic climate, it is important now more than ever before, to support your local steel industry. It’s helped our economy when times have been tough by creating jobs and according to the Australian Bureau of Statistics the industry employs 110,000 Australians. The industry generates $29 billion in annual revenue and is an essential part of the Australian economy.

The Australian steel industry is a vital and sustainable source of innovation, employment and capability in our cities and regional communications. It is now more important than ever to stand behind Australian industries. Across the private and public sector, cities and regional communities, we ask you to continue to support Australian steel. In doing so, you are supporting Australian jobs, communities and safeguarding our future. We are a resilient country and united, we will get through these challenging times.The Australian structural fabrication industry is characterised by a very large number of fabricators with a total output capacity of approximately 1.6 million tonnes per annum, including some product used in repetition manufacturing, including lintels, truck body and trailer fabrication.


The integrated Australian steel chain typically holds more than two million tonnes of inventory, made available through distributors located at over 300 sites across the country. Australia is recognised as a world leader in the use of high-tensile materials and coating technology. Over 5.3 million tonnes of steel is produced in Australia annually. Bluescope in particular as one of the most recognizable steel producers (and products) in the country are arguably the most well positioned company to take advantage of the increasing global demand for good quality steel.

Company Outlook

Bluescope Steel is one of the most recognized steel production manufacturers in Australia. The recognizability of their steel products in both residential and industrial properties poses a unique position for the company to further captialise on the quality of their product.

In recent years, significant global oversupply has resulted in an increasing amount of cheaper imported steel being used in Australian projects. In turn, these low-priced imports have pushed Australian prices lower.

However, steelmakers have taken significant steps to reduce their cost to make and sell to respond to Asian steel prices and Bluescope has been one of the most efficient company’s that have remained competitive in the current market.

Bluescope itself also boasts a flawless balance sheet and a consistent dividend track record. In terms of industry metrics, the P/E ratio of BSL is 3.9 which is significantly lower than their peers (17.5).

Coil Coatings Acquisition

Bluescope Steel announced on the 11th of April, 2022 that they have entered into a binding agreement to buy the second-largest metal painter in the United States. This US$500 million ($671 million AUD) acquisition of the Coil Coatings business from Cornerstone Building Brands, Inc (NYSE:CNR) has the intention of BlueScope to supply another 900,000 tonnes of paint a year to that market.

This acquisition according to the company also will provide cost synergies to their business that are already operating in North America. They believe this will generate cost savings for the company of over US$12 milllion by the third year. It is also consistent with its previously mentioned strategy of expanding painting operations into the eastern US region via a greenfield paint line.

BlueScope will fund the acquisition from its cash holdings and said the deal will be immediately earnings per share (EPS) accretive. If all goes to plan, the transaction will be completed in calendar year 2022.

The group has been aggressively expanding into the North American market. Following the takeover of Coil Coatings, it will have invested over $4.5 billion in the region.

Green Growth Strategy

During the first half, BlueScope announced collaborations with Rio Tinto Limited and Shell to work towards net zero. This partnership aims to see it working to create low emissions steel. With the latter, the company is exploring renewable hydrogen at Port Kembla.


Also at Port Kembla, BlueScope began a feasibility assessment to reline and upgrade the steelwork’s No. 6 Blast Furnace last half. The project will secure the company’s domestic ironmaking needs from 2026 and is expected to cost around $1 billion.


It also acquired MetalX – a United States-based two site ferrous scrap steel recycling business – for US$240 million. The business supplies 20% of the scrap material used at BlueScope’s North Star mini-mill. The first half also saw the company continue its expansion of the North Star mini-mill. The project cost BlueScope $165 million over the 6 months ended 31 December. 


Blusecope announced its Port Kembla Steelworks and its steel processing sites have been given ResponsibleSteel site certification as at the 22nd of Februrary 2022. The steelworks is the first site in the Asia Pacific and the fourth site in the world to be given the certification. BlueScope is only the fourth steelmaker in the world to receive the certification, placing it in elite company with global steel sustainability leaders Aperam, ArcellorMittal etc.

Fy2023 Outlook

Underlying EBIT in 1H FY2023 is expected to be in the range of $800 million to $900 million, driven particularly by significantly lower Midwest US HRC steel spreads and weaker Asian HRC steel spreads. Expectations are subject to spread, foreign exchange and market conditions.

For the purpose of the outlook, Bluescope made the following 1H Fy2023 assumptions:

  • US mini-mill benchmark spreads to be ~US$400/t lower than 2H FY2022

  • East Asian HRC price of ~US$590/t

  • 62% Fe iron ore price of ~US$100/t CFR China

  • Index hard coking coal price of ~US$240/t FOB Australia

  • A$:US$ at US$0.70

Relative to 2H Fy2022, Bluescope expects similar underlying net finance costs, similar underlying tax rate and lower profit attributable to non-controlling interests. 


Financial Performance

Full Year Results (Fy2022)


Bluescope reported an outstanding set of results for the 2022 financial year, announcing record underlying EBIT as the reopening from COVID-19 saw strong demand for the groups steel products and solutions. Highlights from the results include:

  • Revenue of $19.03 billion, up 47% on FY21

  • Record underlying EBIT of $3.79 billion, up 119% on FY21

  • Net profit after tax (NPAT) of $2.81 billion, up 135.49% on FY21

  • Net cash flow from operating activities of $2.47 billion, up 40% on FY21

  • Final unfranked dividend of 25 cents a share

BSL Fin Perf.JPG

The North Star segment saw EBIT up 181% on FY21 to $1.9 billion. Realised steel spreads were significantly stronger on record steel prices and spreads, whilst mill operation remained at 100% of available capacity. Conversion costs were also higher during FY2022 driven by utilities, refractories and labour, including higher remuneration expense linked to financial performance.

Australian Steel Products also reported EBIT up 92% to $1.29 billion while New Zealand and Pacific Islands recorded a 76% increase to $229 million. Realised steel spreads were stronger than FY2021, with stronger regional steel prices and spreads supported by an increased contribution from the downstream businesses. Conversion costs were higher than FY2021, including labour on higher remuneration expense linked to financial performance, and higher freight and consumables. The contribution from export coke continued strongly, exceeding FY2021. Unusually high, non-cash, underlying EBIT contribution of $56 million from the revaluation of the Finley Solar Farm Power Purchase Agreement (PPA) derivative which reflects a significant increase in forecast spot electricity prices.

Both North American (NA) building divisions delivered strong underling EBIT growth. Building and Coated Products NA saw an 11% increase to $97.3 million, with the core EBS business seeing recovery in margins, particularly in 2H FY2022, as steel feed costs reduced following a rapid increase in FY2021, combined with higher despatch volumes. There was a lower contribution in FY2022 from the BlueScope Properties Group due to project timing. Building Products Asia and NA saw 26% underling EBIT growth to $418.9 million. The North America business delivered a significantly higher result, primarily due to the greater rise in North American flat steel pricing than cost of steel feed given the business’ supply chain structure. The ASEAN businesses delivered weaker earnings, driven by lower despatch volumes, particularly due to pandemic related impacts in Malaysia, Vietnam and Indonesia. China and India both delivered similar results to FY2021.

Financial Position

Operating cash flow, after capital expenditure including on the North Star expansion, was $1.71 billion. From this, investments of $1 billion were made in the US acquiring the MetalX ferrous recycling business and the Coil Coatings business.

Bluescopes balance sheet still remains strong, with $367 million in net cash as of June 30. Working capital levels remain elevated in the context of strong demand and prices along with ongoing supply chain disruptions. During the year, BSL made nearly $1 billion in shareholder returns, with $344 million in dividends and $638 million in on-market buy-backs.


The Board approved an increase to the share buy-back program to allow up to a further $500 million to be bought over the next 12 months, and a final unfranked dividend of 25 cents per share. Having exhausted Australian tax losses in FY2022, the Company expects to be able to begin to frank dividends in FY2023.


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Stock Specialist Pty Ltd (ACN: 640 931 997) is a Corporate Authorised Representative (AFSR No. 001282827) of Australia National Investment Group Pty Ltd (ABN: 40 636 343 630) which holds an Australian Financial Services Licence (AFSL no. 522028). The information on this website is general information only and does not constitute personal financial advice. We have not taken the individual circumstances, financial objectives or needs of any investor into account when preparing this information. Investors should consider their circumstances and the relevant PDS for any investment and obtain professional financial and tax advice before making any investment decision. The information on this website is not a recommendation to make any investment or to adopt any particular investment strategy. You should make your own professional assessment of the suitability of this information, relying on your own inquiries, investments in securities, are subject to investment risk. Investment value may go down as well as up, and investors may not get back the full amount originally invested. Risks include: the investment objective may not be achieved, share market and other market risk, liquidity risk, and currency risk with international investments. Any past performance shown is not an indication of future performance. Commission and other costs charged by executing broker are not considered when calculating past performance. To the extent permitted by law Stock Specialist Pty Ltd accepts no liability for any errors or omissions in, or loss from reliance on the information in this website.

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