We asked General Manager, Andrew Garey what happened, why are they in this position and is it possible to make up the fifty million dollars they need?
He replies, there is no doubt in anyone’s mind that the Steel Mill is under pressure due to certain global dynamics that have shifted a lot in the last six months. At the centre of this shift is the Chinese steel market which has gone into massive over-supply and resulted in downward pressure on steel pricing across the globe. In explaining just how big the Chinese steel market is, Andrew says “China could produce New Zealand’s annual steel needs in about three hours in an afternoon”. This has forced the mill into loss making territory.
Andrew says they have two options; the first option is to cut costs (with a target of fifty million dollars) or the second option would be to look at asset closures or a restructuring of assets.
Andrew says the team is really focused on delivering on the savings they need and is confident that they will get there.
If they are not able to deliver that plan then the only alternative left to New Zealand Steel would be to close parts of the mill. Andrew says he is passionate about the mill and believes it is a great business and is an icon across Franklin and New Zealand. The team will be doing everything in their power to ensure the mill is here for another 50 years.
Andrew says the next ten to twelve weeks will be critical for the project team to implement a cost saving plan.
Pictured below is Andrew in better times during the Steel n Wheels festival where the steel mill continues to play an important role in the hearts and minds of thousands across Franklin.
With the community in mind we asked Andrew what part of the mill would be most affected or closed should the team not be able to deliver on the needed savings within the ten to twelve weeks.
Andrew acknowledged that it was not an easy answer, however, the mill would most likely need to look at the steel making part of the business with a view to importing hot rolled coil rather than manufacturing it – this would affect basically half of the mill’s production facilities. However, if you start mothballing steel making, you start putting pressure on other facilities downstream.
The team is still reviewing exactly what the alternatives could look like, but there is no doubt any change that involves mothballing sections of the mill will be dramatic.
At a minimum, 500 people at the mill could be displaced but, as mentioned, there may be implications for other parts of the mill that mean the changes could be bigger than that.
Andrew’s goal at the moment is to chase the fifty million dollars as hard as he can and, in so doing, get the mill into a stable position in a very low global pricing environment. The steel mill will need to compete with China on price and at levels that could be around for a number of years.
Andrew acknowledges that the staff at the mill are nervous because whatever path is taken, there will be jobs lost.Since you’re here… we have a small favour to ask. More and more people want the Post than ever but advertising revenues across the media are falling fast. And unlike many news organisations, we haven’t put up a paywall – we want to keep our journalism as open as we can. So you can see why we need to ask for your help. The Post’s independent, investigative journalism takes a lot of time, money and hard work to produce. With investigative reporting, we often don't know at the beginning how a story will unfold and how long it might take to uncover. This can mean it is costly – particularly as we often face legal threats that attempt to stop our reporting. But we remain committed to raising important questions and exposing wrongdoing. And we do it because we believe our perspective matters – because it might well be your perspective, too. If everyone who reads our reporting, who likes it, helps to support it, our future would be much more secure. For as little as NZ$5, you can support the Post – and it only takes a minute. Thank you. Support The Post