Australia's BlueScope Steel said Monday it will close a blast furnace, abandon its export business and axe 1,000 jobs, as unions warned the manufacturing sector was facing its worst crisis in decades.
The company, Australia's largest steelmaker by output, made the announcement as it reported a dire Aus$1.05 billion (US$1.09 billion) net loss for the year to June 30, compared to a Aus$126 million profit previously.
Export sales, which have been hurt by fierce competition from China and elsewhere, delivered a Aus$487 million earnings loss in the period.
"We are experiencing significant economic challenges and structural change in the global steel industry," chairman Graham Kraehe said, with the company's share price diving 5.7 percent to close at Aus$5.70.
He pointed to a surging Australian dollar, low steel prices and high materials costs as squeezing margins. This, combined with low demand due to the global financial crisis, meant reform was needed, he added.
"I've been in manufacturing all my life and I've seen a lot, but nothing like what we've got at the moment," added Kraehe.
The company will shut its number six blast furnace at Port Kembla, south of Sydney, with 800 jobs lost, and close its Western Port hot strip mill, east of Melbourne, at the cost of 200 positions.
Australian Workers' Union national secretary Paul Howes warned that the country's manufacturing industry was facing one of its worst periods ever due to the soaring, commodities-linked Australian dollar.
"Today's tragic job losses send the clear signal that Australian manufacturing is facing the worst crisis it has seen since the Great Depression," he said.
The Aussie dollar breached parity with the greenback in October and Monday continued to trade near all-time highs at around US$1.04.
The BlueScope announcement comes on the heels of another Australian steel giant, OneSteel, last week laying off 400 staff, citing weak demand, with unions expecting more redundancies in the weeks ahead.
The latest cuts illustrate that while Australia's mining sector is booming, driven by demand for its raw materials from Asia, other parts of the economy, such as manufacturing, tourism and education, are hurting.
The nation's unemployment rate unexpectedly rose in July to 5.1 percent and coming on top of slumping consumer confidence and retail sales, analysts forecast it will rise further.
Howes pinpointed China's "undervalued" currency as a major problem, with the yuan's weakness blamed for suppressing the cost of Chinese exports and causing rival foreign products, such as BlueScope's, to lose market share.
"Estimates suggest China is undervaluing the yuan by up to 40 percent, which just drives export industries and jobs to China at the expense of Australian industry," he said.
Treasurer Wayne Swan has repeated warnings on the yuan in recent days, urging "large developing economies to put in place policies to boost home-grown demand and move towards more market-based exchange rates".
He said it was an "awful day" for BlueScope workers, but added the global economy was changing, and so was Australia's with demand for resources and strong fundamentals meaning a soaring local currency.
"What that means is cheaper goods for Australian consumers, but the higher dollar puts a lot of pressure on our trade-exposed industries, and BlueScope is an example of that," he said.
"What it means for companies like BlueScope, they do have to look for a sustainable business model, and we are seeing the harsh consequences of that."