Arrium - Onesteel

[Smurf1976]

There's a few things that just about every business has as input costs.

Real estate (either buildings or just land), energy (particularly electricity, in some cases also gas), transport, labour, communications, financial services.

Over the past 20 - 25 years we've implemented policies (state and federal) which have thrown away the energy cost advantage we once had. First it was electricity but now gas is getting costly too. What should be a national asset, we've got just about every energy resource in our own backyard and were once highly competitive, is now a liability.

Real estate prices have gone through the roof that is well known.

Our interest rates are high by global standards.

Transport we have a natural disadvantage due to distance, compounded by lack of investment into strategic transport options (eg rail) so as to protect established operators (trucking, airlines) and then doing at unnecessarily high cost what investment we do make (eg private toll roads built at high cost and then needing to make a profit on top of that).

Communications we're way down the list of that one in terms of internet speeds and so on and we're not cheap either.

Add all the above together and it's inevitably we'll be uncompetitive with labour costs too. With workers paying such huge costs to simply live in Australia, wages need to be high.

It's pretty hard to run a business, any business, that competes in global markets when all of your key input costs are high when compared to competitors. If it was just transport (due to distance) or just gas prices then most businesses could work around just one problem, but once you add in high costs for everything else then it's no-go.

We're in for tough times once someone wakes up and realises that shuffling houses and digging holes isn't going to sustain Australia economically in the long term. We haven't got just one problem to fix, it's pretty much everything.

Who's to blame?

Energy - state governments initially but in more recent times the Australian Government has done pretty much everything it can to push things the wrong way.

Real estate - governments at all levels let it get out of hand and in many cases encouraged it. Deregulation of finance is surely a factor there (Australian government).

Interest rates - well they have to be high if we're to attract enough capital to keep the housing bubble going whilst productive industry fails.

Transport - natural factors are unavoidable but state and federal governments have added to the problems.

Communications - Australian Government.

Labour - Unions play a role, but if house prices are going to the moon then it's inevitable that workers will want higher rates of pay. Labour cost is both a cause and a symptom of the bigger problems.

How to fix it? I really can't see any solution that doesn't first require a major recession, asset price falls (especially housing) and a conscious decision to focus on making Australia economically competitive. That will require a reversal of many previous policy decisions. We need cheap energy not "competition". We need affordable housing not a "boom". We need economical transport not guaranteed profits for a few. We need modern internet that's affordable and actually built. We need wage restraint but it has to be in the context of also restraining costs, particularly housing. We need the banks kept in check not fueling bubbles. Etc.

 

[noco]

Of course you are right, the unions have to play their part, but imo a condition of any government assistance to Arrium should be that the current management depart the scene without any bonuses and repay half their salaries over the last 5 years as their decisions got the company into trouble in the first place.

So are you trying to tell me the unions have played no part in Arrium's downfall with their $160,000 salaries...High wages, high power costs and overseas competition is enough to send any corporation down the drain.

One would think with all the natural resources of coal and iron ore we should be competitive.

Tisme tried con me into believing those steel workers were on some ridiculous $26 per hour, then he realized they were quotes from Shanghai back in 2011....He then gave me some **** and bull story about Shanghai being used as a comparison and then it had to be indexed......LMAO.

 

[luutzu]

There's a few things that just about every business has as input costs.

Real estate (either buildings or just land), energy (particularly electricity, in some cases also gas), transport, labour, communications, financial services.

Over the past 20 - 25 years we've implemented policies (state and federal) which have thrown away the energy cost advantage we once had. First it was electricity but now gas is getting costly too. What should be a national asset, we've got just about every energy resource in our own backyard and were once highly competitive, is now a liability.

Real estate prices have gone through the roof that is well known.

Our interest rates are high by global standards.

Transport we have a natural disadvantage due to distance, compounded by lack of investment into strategic transport options (eg rail) so as to protect established operators (trucking, airlines) and then doing at unnecessarily high cost what investment we do make (eg private toll roads built at high cost and then needing to make a profit on top of that).

Communications we're way down the list of that one in terms of internet speeds and so on and we're not cheap either.

Add all the above together and it's inevitably we'll be uncompetitive with labour costs too. With workers paying such huge costs to simply live in Australia, wages need to be high.

It's pretty hard to run a business, any business, that competes in global markets when all of your key input costs are high when compared to competitors. If it was just transport (due to distance) or just gas prices then most businesses could work around just one problem, but once you add in high costs for everything else then it's no-go.

We're in for tough times once someone wakes up and realises that shuffling houses and digging holes isn't going to sustain Australia economically in the long term. We haven't got just one problem to fix, it's pretty much everything.

Who's to blame?

Energy - state governments initially but in more recent times the Australian Government has done pretty much everything it can to push things the wrong way.

Real estate - governments at all levels let it get out of hand and in many cases encouraged it. Deregulation of finance is surely a factor there (Australian government).

Interest rates - well they have to be high if we're to attract enough capital to keep the housing bubble going whilst productive industry fails.

Transport - natural factors are unavoidable but state and federal governments have added to the problems.

Communications - Australian Government.

Labour - Unions play a role, but if house prices are going to the moon then it's inevitable that workers will want higher rates of pay. Labour cost is both a cause and a symptom of the bigger problems.

How to fix it? I really can't see any solution that doesn't first require a major recession, asset price falls (especially housing) and a conscious decision to focus on making Australia economically competitive. That will require a reversal of many previous policy decisions. We need cheap energy not "competition". We need affordable housing not a "boom". We need economical transport not guaranteed profits for a few. We need modern internet that's affordable and actually built. We need wage restraint but it has to be in the context of also restraining costs, particularly housing. We need the banks kept in check not fueling bubbles. Etc.

It sounds weird and one of those conspiracy theories but it seem our own gov't, from both sides, are intentionally running the country to the ground

Maybe that's not fair, maybe they actually believe their policies of making the few very rich while the plebs poorer and less educated - ie. less labour costs, more profit for corporations, more "competitive"-ness... that if the few are very very rich, more cash will trickle down and the plebs will bloom and so better serve the national interests...

Maybe they believe they're doing the right thing, but history and basic economics just doesn't support such ideology.

Man, keep trying things that beggar the people and send the country broke long enough and if Uncle Sam are kept busy in other theatre/s... 22 million people living on a massive landmass with either fertile ground or other natural riches; with massive gas and oil reserves and one big massive untapped aquifer in a world where China and practically most of the neighbours could do with some of it... that's just asking to be liberated.

btw, when are you going to run for office Smurf?

 

[McLovin]

There's a few things that just about every business has as input costs.

Real estate (either buildings or just land), energy (particularly electricity, in some cases also gas), transport, labour, communications, financial services.

Over the past 20 - 25 years we've implemented policies (state and federal) which have thrown away the energy cost advantage we once had. First it was electricity but now gas is getting costly too. What should be a national asset, we've got just about every energy resource in our own backyard and were once highly competitive, is now a liability.

Real estate prices have gone through the roof that is well known.

Our interest rates are high by global standards.

Transport we have a natural disadvantage due to distance, compounded by lack of investment into strategic transport options (eg rail) so as to protect established operators (trucking, airlines) and then doing at unnecessarily high cost what investment we do make (eg private toll roads built at high cost and then needing to make a profit on top of that).

Communications we're way down the list of that one in terms of internet speeds and so on and we're not cheap either.

Add all the above together and it's inevitably we'll be uncompetitive with labour costs too. With workers paying such huge costs to simply live in Australia, wages need to be high.

It's pretty hard to run a business, any business, that competes in global markets when all of your key input costs are high when compared to competitors. If it was just transport (due to distance) or just gas prices then most businesses could work around just one problem, but once you add in high costs for everything else then it's no-go.

There are two steel companies in Australia. One is very profitable the other one is broke. How is the profitability of Bluescope explained if things are so dire? Is it not possible that bad businesses go broke, as has been the case since Jesus was playing fullback for Bethlehem?

I don't believe all the hype about Australia's insanely high cost of living. Sydney and Melbourne are expensive, but not compared to other global cities. Places like Adelaide have a CoL similar to second or third tier cities in America (Denver/Atlanta etc)

I really struggle with this doom and gloom stuff, it's just not what I see day to day. The economy has always had challenges, I don't see the ones at the moment as all that different to BAU.

We need economical transport not guaranteed profits for a few.

Which is exactly what protectionism created across the whole economy. Bloody awful. We'd be well and truly screwed if we went back down that road.

 

[Tisme]

I don't know where you derived your figures from but I would suggest you are way out from What I have learned....Can you quote a link or provide some statistics?......I think you are talking about some overseas steel mills.

US steel business

 

[Tisme]

So are you trying to tell me the unions have played no part in Arrium's downfall with their $160,000 salaries...High wages, high power costs and overseas competition is enough to send any corporation down the drain.

One would think with all the natural resources of coal and iron ore we should be competitive.

Tisme tried con me into believing those steel workers were on some ridiculous $26 per hour, then he realized they were quotes from Shanghai back in 2011....He then gave me some **** and bull story about Shanghai being used as a comparison and then it had to be indexed......LMAO.

No con Noco, you need to look at these things without the blinkers. I'll let you figure it out yourself.

And before you go off on your usual hate rants, the unions have probably caused me more heartache than you will ever dream of.

BTW Sky News is a Liberal Party hack c/- Murdoch

 

[noco]

No con Noco, you need to look at these things without the blinkers. I'll let you figure it out yourself.

And before you go off on your usual hate rants, the unions have probably caused me more heartache than you will ever dream of.

BTW Sky News is a Liberal Party hack c/- Murdoch

Tisme, you have been caught with your pants down.......I have well and truly figured it out and you as well.......You know you don't have the answers so stop trying to wriggle out from down under.

What has American steel and China steel got to do with the high rates of pay workers receive at Arrium.

 

[McLovin]

BTW Sky News is a Liberal Party hack c/- Murdoch

Is it ever! The pundits they have on there aren't even particularly interesting. Chris Kenny is boring as batsh!t and about as a smart. It's a shame because they had some good politics coverage (David Speers is excellent) but it's being swamped by News Ltd hacks.

 

[SirRumpole]

Tisme, you have been caught with your pants down.......I have well and truly figured it out and you as well.......You know you don't have the answers so stop trying to wriggle out from down under.

What has American steel and China steel got to do with the high rates of pay workers receive at Arrium.

Both the US and China subsidise their steel and other industries and we are fools if we try to compete with them on a level playing field.

Free Trade agreements are frauds, negotiated by Andrew Robb for the farmers while leaving the rest of our economy ripe for the picking, and also exposing our smaller farmers to cheap imports.

The only people who will benefit from these FTA's are a few very big agri businesses, the rest will find they are being dumped on in their own markets here by subsidised foreign manufacturers and farmers.
.

 

[McLovin]

Both the US and China subsidise their steel and other industries and we are fools if we try to compete with them on a level playing field.
.

The US hasn't since 2003. Adding a tariff just sends higher costs down the chain. If we have a problem with high energy and high wages then adding a steel tariff will mean we have a problem with high wages, high energy and high steel costs. OTOH, dumping is illegal and should not be tolerated. The Anti-Dumping Commission was introduced by Labor but seems to be chronically underfunded.

 

[noco]

Both the US and China subsidise their steel and other industries and we are fools if we try to compete with them on a level playing field.

Free Trade agreements are frauds, negotiated by Andrew Robb for the farmers while leaving the rest of our economy ripe for the picking, and also exposing our smaller farmers to cheap imports.

The only people who will benefit from these FTA's are a few very big agri businesses, the rest will find they are being dumped on in their own markets here by subsidised foreign manufacturers and farmers.
.

And what about the car industry?......It was going down the tube under Rudd/Gillard/Rudd long before the free trade agreements....Gillard pump in band aid taxpayers money which was supposed to guarantee the industry until 2022 and now we are expected to prop up another failing industry....FOR HOW LONG?

What happened under Labor 2007/2013.......not one new ship was built or planned.......I think from what I hear they bought a couple of ships from overseas.......If Labor had planned like a good government should have, Arrium steel could have supplied the required steel......Instead they let our defenses down to levels not seen since 1938 which was 1.8% of GDP.

Bloody hypocrites.

 

[Smurf1976]

There are two steel companies in Australia. One is very profitable the other one is broke. How is the profitability of Bluescope explained if things are so dire?

Bluescope have already shut down half the production at Port Kembla and there's a lot of speculation that it's only a matter of time until they shut the rest.

If you buy steel from Bluescope then pretty often what gets delivered is Chinese product with Bluescope being simply the importer and distributor. At least that's what they told me when I questioned the different appearance compared to what they had previously supplied.

It's similar with things like fuel. Over half the refineries we had are now shut and the big companies are simply importing and distributing fuel produced somewhere else.

In Tasmania I'm told that even LPG comes from overseas now because that's cheaper than getting it from Victoria. It has to be shipped in anyway being an island, so it's cheaper to use a foreign ship loaded at a foreign supply port than it is to just ship it across Bass Strait from Vic. Amazing and ridiculous.

 

[Smurf1976]

Which is exactly what protectionism created across the whole economy. Bloody awful. We'd be well and truly screwed if we went back down that road.

There's still plenty of it around in various forms.

Just last week WA decided that they'd shut some (publicly owned) power generation because the demand isn't high enough to have the private competitors also running their plants. Logically we'd do what's cheapest, but instead we're ensuring that certain very high cost privately owned plants get a run.

Then there's the streets they shut in Sydney to ensure the tunnel made a profit. That one's pretty blatant.

Don't get me started on "unsolicited proposals" and what that's code for. Noting "unsolicited" about it - and oh how convenient it is that such proposals just happen to be a nice workaround to tender processes.

There's plenty of things being protected still these days. It's just in a different form to what it used to be and somewhat concealed from public view but it has the same effect of imposing higher costs on most of the economy in order to benefit a few.

 

[qldfrog]

There's a few things that just about every business has as input costs.
....

Smurf, if you ever visit qld, I offer lunch, I could not add anything as I believe you hit every point;
Yet I am told I am too pessimistic, and when i suggest you need to create something/sell assets to add wealth to a nation, I am told services is the way..well I have some doubt on wealth creation by barristas...
I really thing Australia need a recession, and it will hurt.Everyone.
Sadly you do not build manufacturing from scratch easily be it high end or not.A lot of opportunities are lost forever; always remember the parallel between Argentina and Australia.As for Arrium, I am actually not sure i want my tax dollars to be send down that basket case adding more debt on our children's handicap.

 

[qldfrog]

There are two steel companies in Australia. One is very profitable the other one is broke. How is the profitability of Bluescope explained if things are so dire? Is it not possible that bad businesses go broke, as has been the case since Jesus was playing fullback for Bethlehem?

I don't believe all the hype about Australia's insanely high cost of living. Sydney and Melbourne are expensive, but not compared to other global cities. Places like Adelaide have a CoL similar to second or third tier cities in America (Denver/Atlanta etc)

But there are no job in Adelaide. RE price there should be compared to Detroit maybe ?
McLovin, May i ask:
in which field are you to have this sunny view of the economy?
Construction? Genuinely interested as i like the thrill of a boom, I was part of both the telco and mining boom so maybe i expect too much..
I wish i could be that positive but it genuinely does not match with my personal experience in Brisbane.

 

[Tisme]

Tisme, you have been caught with your pants down.......I have well and truly figured it out and you as well.......You know you don't have the answers so stop trying to wriggle out from down under.

What has American steel and China steel got to do with the high rates of pay workers receive at Arrium.

I'm not too sure about the marching of age and what it does to some people's minds, but giving it over, wholesale, to a spit and vitriol co operative of the sly and dodgy escapes me.

Strong minds discuss ideas, average minds discuss events, weak minds discuss people.... Socrates

 

[Tisme]

A lot of best practice and balls in the air suffocating the core business. This is like govt in a way ..... the basics never change, but to break the boredom of tedium the window dressings are expensive, the picnics are many and the non productive activities are wide and varied.

Corporate sustainability statements never seem to have P&L as the central theme anymore:


https://www.arrium.com/~/media/Arri...Files/Sustainability/12181_Arrium_SR_2012.pdf

 

[Tisme]

Reading the various articles from the press, it appears the news cycle is predicated on an article by Grace Collier (Feb 27)of News/Liberal Party Corporation back in February where she tries valiantly to scuttle the acquisition of Arrium by GSO Capital Partners, who apparently have no idea about business.

The self professed social conscience of Australia, Grace took it upon herself to warn the would be suitors off. It seems all four local banks are so bereft of talent that they couldn't understand the folly of them cumulatively lending $2.4B to Arrium. The impudence of the four banks and GSO not to consult Grace before throwing good money after bad must have galled her....she being a Titan of the international business world and all things good for Oz.

Kinda strange how this event, per chance, has surfaced just in time for the LNP election cycle and the union bashing ABCC bills, when it's actually been on the boil for quite a long time.

 

[noco]

I'm not too sure about the marching of age and what it does to some people's minds, but giving it over, wholesale, to a spit and vitriol co operative of the sly and dodgy escapes me.

LMAO........ROFL.....

 

[Value Collector]

Yes, the blame game again, totally ignoring the strategic need for a steel industry producing a quality product at a reasonable price.

Nah, we just need to focus the investment into industries where we have competitive advantages.

Claims are that Australia is an industrial wasteland are crazy, I see plenty of great businesses in Australia, and lots of opportunity for growth.

Check out this industry, there are many others like it.