BlueScope shares hit multi-year highs in February last year when Trump’s 25 per cent tariffs on steel imports ensured a significant price, and profit, boost for the 3 million tonnes of steel it produces in the US.
Steel Dynamics had already made its first of four offers for the BlueScope business, details of which became public only on Tuesday.
“These approaches were rejected as they significantly undervalued BlueScope and its future prospects, and presented significant execution risk in relation to regulatory outcomes,” BlueScope said on Tuesday.
BlueScope confirmed that last year’s rejected bids valued the US business at around $24 a share and the rest of the group at just $9.
Steel Dynamics hopes to cash in on Trump’s grand hope that his tariffs will shut overseas producers out of the US and encourage more local manufacturing. Meanwhile, US-based producers such as BlueScope and Steel Dynamics are making a killing.
Donald Trump’s tariffs helped pave the way for this $13 billion takeover bid for Australian steel giant Bluescope. Credit: AP
As analysts from Morningstar recently noted, underlying earnings are expected to jump more than 40 per cent this year “driven by higher steel prices and volumes in its North America business, which comprises about half of our forecast. Tariffs have pushed steel prices higher than a year ago and increased demand for locally produced steel rather than imports.”
This is why US steel producers such as Steel Dynamics have BlueScope’s market-leading US assets in their sights.
The problem for the rest of BlueScope’s business is that all of that surplus of steel being churned out in China has not gone away.
The loss of the US market means the 110 million tonnes of steel China exports every year still has to find a home in places such as Australia, and in markets where BlueScope sells its products overseas, such as South-East Asia.
“We need a really strong, diligent, effective, quick-to-act anti dumping regime, or … we’ll see material flow from other parts of the world and come to our country and undermine our domestic manufacturing capacity,” BlueScope boss Mark Vassella warned last year.
Hot roll coils are formed during the manufacturing of steel at BlueScope Steel’s Port Kembla Steelworks.Credit: Bloomberg
Presumably it is all someone else’s problem now, with Vassella due to step down at the end of the month, to be replaced by BlueScope veteran Tania Archibald.
The big question to be answered is whether this is just step one of a much larger play by Stokes.
BlueScope is seen as a crucial contender for the failed Whyalla Steel business in South Australia which is expected to receive a massive government bailout to help upgrade its operations and make it sustainable and competitive in a global market.
Kerry Stoke’s verdict on Whyalla’s attractiveness as a business would be fascinating.
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