Government Veto of China's Minmetals Obliterated New Zealand Steel Innovations

Tuesday 11 November 2014, 10:00AM
By Manufacturers Success Connection

Government Veto of China's Minmetals Obliterated New Zealand Steel Innovations . . .

The Big Australian Smothered New Zealand Steel's Identity

The decision by the government in 1989 to overrule the statutory managers of New Zealand Steel was to have far reaching consequences for both the company and its international manufacturing reputation. A government veto then on selling the works to China's state owned Minmetals looks now increasingly as smothering the steel works chances of establishing New Zealand brands in the sphere of advanced minerals processing through to finished steel products.

We can see now clearly how New Zealand Steel was sold into a situation designed to obliterate it as a standard-bearer of New Zealand production engineering skills, and thus brands.

In the event New Zealand Steel against the decision of its statutory managers was sold to BHP. The Australian company was then in the process of branding itself as The Big Australian, a consolidated marketing strategy designed to camouflage the contribution of foreign subsidiaries such as New Zealand Steel had become.

Two other developments at BHP further clouded the New Zealand value:-

    · BHP joined forces with the Anglo –Dutch steelmaker Billiton rebranding itself BHP-Billiton
    · It proceeded to market its products under the brand of Bluescope

The government's intervention in ensuring the company was sold to BHP instead of to Minmetals can be seen as depriving New Zealand Steel of a much needed quality production engineering profile in Asia and indeed the rest of the world too.

Subsequent experience shows that the Chinese company, would have seen the value in preserving the New Zealand origination brand.

As it is the impression everywhere, and including New Zealand itself, is that New Zealand Steel simply installed a block of foreign technology and then implemented it on a modular or painting-by-numbers basis.

Elements of this are true. The Stelco-Lurgi process was selected as the underlying technology block. But it was chosen just because it was the simplest, and thus the most customisable process available.

It was now in those early days that the skill of the New Zealand production engineers became evident. They had to adjust the technique to New Zealand's ironsands and to the non availability of metallurgical grade coal.

In this quest the engineers, many of them drawn from the government's own ranks, successfully implemented the first large scale commercial steel making from ironsands.

In the seeds of this success though lay New Zealand Steel's demise as a New Zealand-owned entity. It became part of the Muldoon-era Think Big scheme and this expansion required a large state investment which topped out at almost 90 percent.

This public money had to be recovered. In 1987 the Labour government sold New Zealand Steel to Equiticorp run by Allan Hawkins.

As soon as the ink was dry on the deal there there came the 1987 property bust ' Equiticorp predominantly invested in property staggered on with New Zealand Steel for the next two years. Statutory managers were then appointed. Minmetals was their designated acquirer.

What happened to trigger the government overriding the statutory managers decision and sell it instead to BHP? The reason given was that events in Tiananmen Square that same year, 1989, had intervened. Yet there would have been another factor.

This centred on the Closer Economic Relations arrangement between the two countries and brought about by the previous National Government.

Now the Labour government would have been brought to heel by their Australian Labour government counterparts looking at capitalising their side of the 1983 CER treaty. The Australians and especially The Big Australian was looking at the biggest trophy in the treaty's entire six years of existence moving into the possession of a competitor.

They saw that the world's predominant processor of ironsand was about to slip away over the horizon to the East. So the CER treaty was invoked to block the sale and to ensure that New Zealand Steel would be controlled from Australia, and, in the event, subsumed into it.


By  Peter Isaac -  Specialist journalist for MSCNewsWire                                    © 2014 MSCNewsWire