Australian steelmakers overstate effect of carbon tax, says analyst
Melbourne (Platts)--4Mar2011/140 am EST/640 GMT
Fears by Australia's two largest steelmakers that plans in Australia to
put a price on carbon will decimate their profits and cost thousands of jobs
are the "worst-case scenario" that does not factor in emissions allowances and
other assistance measures, a Deutsche Bank analyst said Thursday.
Australian Prime Minister Julia Gillard announced plans on February 24 to
introduce a fixed price on carbon from July 1, 2012, for up to five years as
the first stage of implementing an emissions trading scheme.
The proposal was released for community consultation while a
parliamentary committee thrashes out the details, including the price
Opponents of the plan, including the opposition Liberal Party, say it
will be A$25/mt ($25.40/mt).
On that basis, BlueScope Steel says it will be slugged an additional
A$300-400 million/year in taxes and OneSteel, an additional A$115
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"We note this is a worst-case scenario example by the companies
and assumes no free permits or any other assistance from the government,
pass-through of carbon costs from coal suppliers and no carbon price
pass-through to customers," Deutsche Bank research analyst Emily Behncke and
research associate John Hynd wrote in an industry alert issued late Thursday.
"The companies have assumed a carbon price of A$25/mt. If the Carbon
Pollution Reduction Scheme model was followed, BlueScope and OneSteel could
receive carbon permits covering up to 94.5% of the bulk of their carbon
emissions in the first year of a carbon price."
Former Prime Minister Kevin Rudd's Carbon Pollution Reduction Scheme,
which was put on hold in April 2010 after it failed to pass through
parliament, was built around permits being issued to companies to produce a
fixed amount of carbon before the tax kicked in, which they could sell any
unused portion of to another company wanting to supplement its own allocation.
The authors calculated that based on BlueScope's emissions in the July
2009-June 2010 fiscal year of 12.2 million mt, a price of A$25/mt and an
effective shielding rate or permit allowance of 90%, the company would pay
around A$30.5 million for carbon in FY2012-13, the first year of
implementation, or 7.4% of the profit they forecast the company making in the
For OneSteel, based on emissions of 3.9 million mt in FY2009-10, they
calculated a carbon cost of A$9.75 million in FY2012-13, representing 1.9% of
the profit they forecast for the year.
"While there is political uncertainty about the design of the carbon tax,
we think trade-exposed industries like steel will receive extensive assistance
under the price on carbon," the authors said.
"We highlight the outcome for the price on carbon is uncertain and still
needs to be passed in parliament late second half of calendar 2011."
--Wendy Wells, firstname.lastname@example.org