Territory TS - AWD
Join Date: Feb 2001
Location: Kiama, NSW, Australia
OK. my 2c worth as an employee of BHP Steel.
It should be mentioned that I am no way in a position to influence these types of marketing decisions.
Many factors are at work here;
Steel prices are at an all-time low world wide due to over-production. BHP has done it's part to cull inefficient operations (Newcastle) and the remaining business is world class both in a technological sense as well as a low cost producer. Around half of BHP's Steel make is currently exported.
BHP-Steel is soon to part company with BHP (now BHP-Billiton) which will become a pure resources company (mining, oil & gas) arguable the world largest. So as BHP-Steel's new board is trying to win-over the financial market in the lead-up to becoming a stand-alone company it would be a good time for a large customer (Ford) to make some noise about prices. It would surely get noticed at the highest levels of the company.
Steel for the auto industry is highly specialised, especially the outer panels. Australia's auto industry is a relatively small market on a global scale. While BHP has demonstrated it's technological ability to produce steel for this market it needs to be realised that this has to be done on mills that also need to roll steel for the manufacturing industry (fridge/freezer/waching machine etc.), construction industry (roofing, fencing , gutters etc.) food & beverage markets (tin cans, drums etc.) and so on. Australia has only 2 hot rolling mills (1 in NSW the other in Vic). With multiple product lines being produced on each. On each change of product line there are associated ramp-up, ramp-down and change over losses due to this complexity which add to the final costs.
Japanese mills in comparison have such a large (global) market that they can dedicate whole mills to single product lines 24x7 with the associated effeciency and quality benefits. Also, the freight costs Japan-to-Aust is not a hell of alot different from moving steel around within Australia despite what you may think.
The action by the Bush govt. in America has restricted steel imports to the US from Japan & Korea as well as many other countries (BHP Steel has largely been exempt due to our demonstrated action to reform our industry and the fact that we are feed steel suppliers to US Steel mills). This leaves the Japanese and Koreans looking for alternative markets to place their steel at atractive prices.
In all likelyhood Ford probbaly never intended to source a great deal of auto steel from BHP but rather demonstrate to the Japanese that an Aust. alternative supplier had the capability. This allows Ford greater leverage in negotiations with the Japanese suppliers just as the above circumstances are allowing them greater leverage negotiating over price with BHP.
It's just business.
How about Ford grow their volumes by becoming an exporter and thus benefit my business that way.
Territory - WHEELS COTY