Sunday, June 25, 2017

Troubles in the Australian Steel Industry

There are many issues being flagged in Australia with imported Steel that are not just about meeting standards but also about unethical practices towards trying to meet conformance stipulations. To understand the issues, we need to take a look at the worldwide industry and develop an understanding of how quality is being given the go-by in a situation of economic stress.

Steel Production Data
In 2014, China produced over 800 Million Tonnes of Crude Steel followed by Japan at just over 100 Million Tonnes. The third and fourth positions were held by the USA and India each at just under 100 Million Tonnes with fifth-placed South Korea also at around the 100 Million level. Australia was 35th on the list at 4.6 Million Tonnes. Global production was close to 1700 Million Tonnes in 2014. Australian Crude Steel production had dropped from close to 8 Million Tonnes in 2008 to 4.6 Million Tonnes in 2014. The declining trend also occurred with Aluminium.

Australian Producers
The main Molten Steel producers in Australia, Arrium and Bluescope are both spun-off units of BHP Steel, the first in 2000 and the second in 2002. Last year, when making a submission to the Senate Economic Committee, Arrium which has 75 percent share of the domestic construction and infrastructure market stated that “China was continuing to run loss-making facilities through subsidies” and that China was “relying on export markets to accept marginally-costed products.” In Australia’s overall crude steel production, Arrium contributes 44 percent or 2.6 Million Tonnes.

Reported Issues in Imported Steel
Arrium referred to a previous submission made by the Australian Steel Institute (ASI) on non-compliant imported products. The ASI had raised issues such as substandard welding, laminations in plates that could cause major failures, substandard corrosion protection, The ASI had also submitted that sections of local fabricators were forced to compromise on quality in their pursuit of competitive rates. Very grave issues were also raised by the ASI on fraudulent behavior. These included manipulated test certificates and welds that were done with silicone rubber and then being painted upon.

Why is Steel from China cheap
The issue of cost is quite intriguing as locally made steel would be available at lower freight cost when compared to steel that is shipped from China or India. The answer is that Chinese steel is being sold at lower than its production cost because the country is producing far more than it consumes. However, there are substantial issues that arise over the product lifecycle which clearly show that procurement cost when looked over the long term is costlier when it comes to overseas Steel.

Range of Complaints
Participating in an ABC broadcast in 2015, Ron Barrington, Managing Director, Cullen Steel, revealed an instance where the company was contracted to repair a bridge in Penrith, Sydney. Barrington revealed that the bridge which had a design deflection of 100 millimetrers was actually deflecting about 600 millimetres. Barrington said Cullen Steel determined the bridge to be about to collapse, had it removed and cut up, and constructed it back again. Other issues raised in the broadcast were that Chinese Steel had a higher content of Boron towards getting over anti-dumping regulations around the world. This would cause the steel to become brittle when welded without knowledge of the extra boron that had been added.

Australian Steel meets Australian Standards
According to the ASI, Australian standards cover the entire chain from mechanical properties, chemical composition, dimensions and mass tolerance. The ASI warns that if any of these standards are not adhered to, then the finished product will not live up to its rated performance.
Listing the advantages of utilising Australian Steel, the ASI points out that benefits such as customisation for local environmental conditions are not available with imported steel. The ASI states that the quality and adherence to standards of Australian steel can be fully relied upon by users. The ASI also points out that the industry has been innovating and has become a pathbreaker in certain niches. Quality control is being achieved through the transition to automated processes whereby designs are applied on numerically controlled machines which facilitates identification and traceability.

Successful Australian manufacturers
A successful innovation example is that of Bisalloy which is based in Wollongong. The company specialises in Quench & Tempered (Q&T) Steel plate and is a stand-alone unit. The High-Strength steel has exceptional hardness and is built to withstand the toughest wear and tear. The company’s Wear Steel is used in cutters and cutting edges, dump truck wear liners, rock buckets and earthmoving buckets. It has developed the steel plates used in Australia’s Collins Class submarines. It also makes Light-Weight High Strength Steel.

Devising new mechanisms for Inspection
Writing in Steel Australia March 2017 issue, Peter Golding, Chief Executive of the Galvanizers Association of Australia says imported parts are galvanized to differing standards. GAA along with the other galvanizing association GANZ and the Australasian Corrosion Association have developed an Inspector Program. The Program looks into the quality of fabricated steel products as it is crucial in achieving a high-quality galvanizing result. The Galvanizing industry’s Sorel Awards for 2016 were awarded to an utilization based on standards developed by the GAA. The award-winner had convinced its client ALDI Australia to replace red oxide coating with hot-dip galvanizing. The awards have weightage for technical and engineering innovation and economic benefit for the user among other criteria.

Effect on Economy from Imported Steel
According to ASI data, there has been a 5 percent drop in domestic steel used in fabricated construction since 2010. The ASI also states that when Australian Steel slips in local utilization, there would be a similar ‘multiplier effect’ on all associated industries. The ASI’s “Making Steel Stronger” Report states that each employee in the Steel industry is equivalent to six employees in associated industries.

Anti-Dumping Notices
Taking a look at some recent Anti-Dumping Notices by the Anti-Dumping Commission, an investigation was initiated into alleged dumping of alloy round Steel bar exported from China. A ‘Statement of Essential Facts’ on the investigation is due to be tabled no later than 19 July 2017. An ongoing investigation into galvanized steel exported from India, Malaysia and Vietnam that was initiated in October 2016 is continuing to receive submissions from the countries and exporters concerned.

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