New Zealand Steel Sees 88% Plunge in Half-Year Profit Amid Weak Demand and Global Oversupply
New Zealand Steel, which operates the Glenbrook Steel Mill south of Auckland, has reported a dramatic drop in its half-year earnings, with underlying profit falling by 88% to NZ$3.1 million. This is down from NZ$25.5 million a year earlier. The company's revenue also declined by 14%, to NZ$427.8 million during the same period. This drop is primarily attributed to the twin forces of softer steel prices and weak domestic demand, particularly from the building and construction sectors, which have significantly slowed.
As part of Australia’s BlueScope Steel, New Zealand Steel is a major player in the domestic steel market, but the company has faced difficult conditions that have led to weaker performance. The company reported that domestic steel sales volumes had declined by 13%, reflecting the slowdown in the local construction industry. On the other hand, export volumes showed some growth, although global oversupply, particularly from China, has kept prices low and restricted the potential for higher financial returns.
Chief Executive Paints Gloomy Picture: Weakest Demand Since the Global Financial Crisis
Robin Davies, the CEO of New Zealand Steel, pointed out that the current domestic demand for steel is likely at its lowest point in decades, with levels now comparable to those seen during the 2008-09 Global Financial Crisis. Davies, who has been with the company for over 17 years, described the current state of the steel market as the weakest he has witnessed during his tenure.
He emphasized that the demand for steel in New Zealand has been severely impacted by weakness in the construction sector, which typically accounts for a significant portion of steel consumption. Davies explained that while there has been some growth in export sales, the global steel oversupply — particularly from China, has kept prices low, which has limited the financial upside for New Zealand Steel.
A Gradual Recovery? Optimism for a Slow Rebound
Despite the dire situation, Davies remains cautiously optimistic about the outlook for the steel industry in New Zealand, especially for the remainder of 2025. He believes that the reduction in interest rates will likely improve confidence and demand in the building and construction sectors, which could lead to a recovery.
However, Davies tempered his optimism, stating that he did not expect a rapid recovery, but rather a slow recovery that might begin in the second quarter of the calendar year. He cited that lower interest rates should help restore some confidence in the construction market, leading to modest growth in demand.
Additionally, Davies expressed hope that the New Zealand government’s fast-track approvals process for construction projects might offer an additional boost to the demand for steel, particularly as the nation looks to recover from the challenges of the pandemic and build more infrastructure in the coming years.
Global Factors: Oversupply and Market Challenges
The steel industry has been plagued by global oversupply, particularly from China, which has led to lower prices across the sector. China, being the world’s largest steel producer, has been exporting steel at competitive prices, causing challenges for producers in other markets, including New Zealand Steel. While the growth in export volumes is a positive sign for New Zealand Steel, the low global prices have meant that the increased sales have not translated into higher financial returns.
These global market conditions have led to tighter margins for New Zealand Steel, as it continues to face stiff competition from international producers. The softening steel prices are compounded by a slower-than-expected recovery in the local construction market, which continues to face pressures from broader economic factors, including inflation, supply chain disruptions, and the ongoing challenges of the global economy.
The Path Forward: Focus on Efficiency and Growth in Exports
Looking ahead, New Zealand Steel remains focused on improving efficiency and productivity at its Glenbrook facility, with the aim of maintaining its position in both the domestic and international markets. The company is also exploring opportunities to expand its export sales further, particularly to regions where steel demand is still robust, and where competition from China may be less intense.
Furthermore, New Zealand Steel's parent company, BlueScope Steel, continues to monitor market conditions closely. BlueScope, which operates globally, may provide additional support to New Zealand Steel in navigating these tough times, particularly in the form of capital investment to modernize operations and reduce costs.
While the outlook remains uncertain, with weak domestic demand and lower global prices, New Zealand Steel is positioning itself to weather the storm by focusing on cost control, operational improvements, and strategic investments in growth markets.
