BlueScope Steel to buy New Zealand company

Melbourne, Australia-based BlueScope Steel has announced plans to purchase the assets of Fletcher Building’s Pacific Steel for NZ$120 million (US$100 million). BlueScope already owns New Zealand Steel, which operates an integrated Glenbrook steel mill near Auckland, New Zealand. The company is seeking to complete the deal by the middle of 2014.

The deal is expected to result in the closure of Fletcher’s Otahuhu, New Zealand, electric arc furnace mill by the end of 2015.

The closure of the Otahuhu mill is likely to see a jump in exports of scrap steel that used to be melted at the mill. BlueScope's Glenbrook plant uses iron sands sourced locally as its primary feedstock.

BlueScope will pay $60 million for Pacific Steel's long products rolling and marketing operations and pay about $60 million for its working capital, according to a statement from Auckland-based Fletcher, which expects a one-time net gain of about $19 million.

BlueScope will pay half the $60 million price of the assets upfront and the remainder once it has commissioned a new billet caster, expected to be operational by the end of 2015.

BlueScope, through its New Zealand Steel subsidiary, will spend around $50 million to build a billet caster at a site in Glenbrook. Until then, Fletcher will in the short term continue to operate the Otahuhu mill and supply BlueScope with billet on commercial terms. Fletcher also owns 50 percent of Sims Pacific Metals.

The sale includes Pacific Steel’s rolling mill and wire drawing facilities at Otahuhu and its Fijian rolling mill. Once BlueScope’s billet caster is running, NZ Steel will supply billet to the rolling mills at Otahuhu and in Fiji.