John Durie: As the price of steel rises 10%, tradies are at the mercy of a Bluescope monopoly

Home builders must have choked on their cereal this week to hear Bluescope CEO Mark Vassella say his Colorbond prices have only risen by 6-8% over the past year.

Vassella was responding to a post-results question about steel prices and correctly stated that Colorbond prices have been relatively muted in part because Colorbond steel roofs compete with tiles and other products.

He figured prices have risen 6-8% per cent, but dealers say it is more like 8-10% for the finished product.

Drop down the building to the TRUCORE steel frames, however, which compete with timber, and the prices have increased from $1400 a tonne to $2400 a tonne.

That is more like a 70% increase in prices. If you go down further to basic steel coils, the prices in the US have doubled.

In markets where there is competition there is some check on price rises. But where there is none, it’s a free run for monopolists like Bluescope. 

The US affects Australian tradies in a couple of ways. Firstly, importers must pay more for Asian sourced steel because it can find an easy alternate home in the US at much higher prices.

Local steel mills are running at excess capacity, which in turn increases prices.

Bluescope’s Vassella is happy because he supplies 5% of the US market through his mid west US-based North Star mill, which must rate as one of the company’s best acquisitions after it paid $US720 million ($1 billion) to Cargill to buy out its joint venture partner in 2015.

US steel is still under import controls dating back to former President Trump’s China trade wars.

Vassella is happy behind that trade wall and in Australia, his company is happily protected by the Anti-Dumping Commission.

Builders wear the higher costs

The losers are steel users.

Such is the demand for its product that Bluescope can’t meet the orders from its own mills, so it imports product from its own Vietnam mill.

As these imports are hit by duties imposed after Bluescope’s own import complaint, for the first time in its history Bluescope is paying dumping duties.

It knows how this hurts profit margins but the impact is minimised because of its own considerable size. 

This is utter lunacy because dumping duties are only meant to be charged when the local company is suffering from import competition and Bluescope is plainly not suffering.

The company has just reported record profits of $1.6 billion, or $1.3 billion above year ago levels, and the second half numbers will remain strong according to Vassella.

This means steel prices will remain high or higher for the foreseeable future, which in turn means higher costs for house building and other steel users.

Bluescope’s Vassella is still awaiting news on the ACCC’s Federal Court market manipulation case against his former employee, Jason Ellis, which is based around dumping threats to maintain price stability.

Irrespective of how that action lands, the lunacy of dumping administration was laid bare by Minister Angus Taylor’s dumb decision late last year on imports from Vietnam, among other markets.

It makes you wonder what school of business Taylor went to when you look at his steel price rises and lack of a holistic energy policy.

As the Australian economy climbs out of the COVID-19 recession, inflation is an ever present threat. And while Bluescope’s Vassella has called for affordable electricity, thousands of builders around the country are doing the same in the wake of his price rises.