Message from the Chair

After nearly a decade of low inflation and near zero interest rates, many parts of the world are dealing with a series of challenges. The inflationary impacts of rising energy and fuel prices, tight labour markets and supply chain disruptions have not been seen in 20 to 30 years.

In Australia, and within our industry, we have seen rising construction costs, low unemployment levels and challenges with freight availability over the last two years. Many of us have been experiencing inflationary impacts for quite some time. So, it is not surprising that inflation is now permeating the broader economy.

The Reserve Bank, like many of its international counterparts, is endeavouring to temper inflation by lifting cash rates. Rising interest rates are impacting household discretionary spending. Although, we must acknowledge that interest rates are well below the long run average, and are not expected to break the long term mean.

Borrowing money is no longer ‘free’. We will remain in an inflationary environment for the mid-term. People who have entered the workforce in the last two decades have never operated within such an environment. So, it is timely that this edition of steel Australia magazine draws attention to the opportunities that we, as a steel industry, can contribute meaningfully to society during these times.

This edition highlights Australian steel Distributors and showcases the value-adding role they play in our entire supply chain. Historically, Distributors took large lot sizes from steel manufacturers, and broke down those bulk orders to meet the needs of customers without the same capacity. Australian Distributors have, and continue to, transform themselves into providers of value added products and services that improve the velocity of the supply chain, reduce material waste and shorten lead times.

In our feature article, your distribution network proudly shares the investments they have made in stocking locations, inventory levels, and advanced and automated processing equipment to transform manufactured steel products into the unique requirements of customers throughout the economy.

As we look at the value accretion that arises from partnership with our Australian Distributor network, we see clear benefits in an inflationary environment that each customer can leverage to provide value to their downstream customers. Inventory holdings provide a buffer against the impact of international exchange rate variation that impacts steel price stability.

Similarly, with international steel prices rising in the last year, our Distributors are aligned to steel manufacturers who tailor their offer of mass per metre being at the lower end of the Australian Standard tolerances. This provides customers with maximum linear metres of product per equivalent tonne of raw steel make. This reduces overall costs to the customer, and provides a less energy intensive solution (on a per linear metre basis) than provided by less focused supply sources.

Additionally, the investment in sophisticated processing equipment and skilled labour allows Distributors to offer exactly what customers require and minimise yield loss (aka provides cost savings). Our Distributors have sophisticated procurement teams and advanced quality assurance processes. They are demanding of their suppliers and are a catalyst for promoting steel manufacturers to innovate, to improve and to excel. One such example is the impact of steel chemistry repeatability and tightness of tolerances of elements such as silicon content which, amongst other factors, is critical in optimising the cost structure of hot dipped galvanizing.

From a service perspective, each of the Distributors that are presented in this edition are proud to serve and are committed to service improvement. When we deal with the Australian steel industry supply chain, we are dealing with people whose livelihoods depend on ‘getting it right’ and being empathetically responsive to any challenging situation.

In a period where money is no longer ‘free’, where exchange rates will move around abruptly as governments battle with their interest rate policies, and where freight and labour costs are

Tony Schreiber Chair, Australian Steel Institute

rising, the Australian Distributors are valuable partners to each of us in the supply chain. They provide a buffer from variability, cost optimisation, service and lead time benefits. They are experts in their field and are great people to partner with.

In May, your ASI Board of Directors participated in a structured strategy process led by our Chief Executive, Mark Cain. The intent was to take stock of the current economic climate, and to calibrate our strategic direction against the needs of members. Your Directors, coupled with the tireless work of ASI employees, are constantly availing themselves of priority issues and opportunities across the industry. We have refined our strategy and elevated three areas for particular focus:

1. Securing robust supply chains with strong local content 2. Promoting a sustainable and decarbonising steel industry 3. Creating a strong and skilled steel workforce

We will share our progress across these areas in future editions of steel Australia magazine.

In closing, and on behalf of the entire Board, we offer an invitation to our Australian Steel Convention in October. We look forward to seeing you all there.