BlueScope Steel Lowers Profit Forecast Amid Economic and Industry Pressures

Highlights  

• BlueScope Steel revises profit expectations due to global challenges.
• Focus on cost-efficiency initiatives to sustain long-term growth.
• Anticipates stable domestic demand despite international pressures.

BlueScope Steel (ASX:BSL) has revised its profit forecast for the first half of its fiscal year, attributing the adjustment to several challenging factors impacting the steel industry. The company points to record levels of Chinese steel exports, rising inflation, and political uncertainties in the United States as central issues that have reshaped its economic outlook. These factors are expected to influence BlueScope’s profitability through December, with underlying earnings before interest and tax (EBIT) now projected between $270 million and $310 million. This estimate is lower than the earlier forecast of $350 million to $420 million.

The economic headwinds have created a more difficult environment for BlueScope and the wider steel sector, pressuring both short-term operations and future strategic plans. Chief Executive Mark Vassella highlighted that, while these pressures are challenging, the company remains resilient thanks to a strong balance sheet, a diversified business model, and rigorous operational practices. He noted that BlueScope’s culture emphasizes resilience, adapting to challenges, and maintaining a focus on balancing current performance with sustainable growth in the long term.

To counteract these economic and market challenges, BlueScope is implementing approximately $200 million in cost and productivity improvements. This move reflects its commitment to operational efficiency and long-term growth, addressing near-term performance while laying the groundwork for future stability. 

In North America, BlueScope’s North Star division anticipates a notable dip in EBIT, with expectations at around one-third of its fiscal year 2024 outcome. This is primarily due to softer market spreads and postponed orders as US economic uncertainties influence demand. Additionally, the division expects the recent peak in US steel prices to soften, influenced by rising scrap costs and other economic factors. 

Back home in Australia, BlueScope projects steady domestic demand, despite weaker contributions from export coke and persistent softness in East Asian steel prices. These trends have had a pronounced effect on Australian Steel Products (ASP), with first-half EBIT for ASP estimated to be about two-thirds of its performance in the latter half of fiscal year 2024.

Across Asia, BlueScope reports subdued demand in China and operational disruptions in Thailand, which have since been resolved. The company has noted that these factors have collectively impacted its performance in the Asian market, reflecting broader regional challenges.

BlueScope remains focused on adapting to these economic and industry shifts, leveraging a strategic approach that emphasizes resilience, operational discipline, and future-oriented growth