BlueScope Steel Limited (BSL.AX) Earnings Call Transcript & Summary

All right. Good morning, everyone, and welcome to Glenbrook. It's the heart of steelmaking and COLORSTEEL in New Zealand. On behalf of the team, my name is David Fallu, I'm the group CFO. I just want to welcome you to site. And for those joining on the webcast, really appreciate your interest. So we'll be holding a session split across 2 pieces today: one, covering New Zealand property and sustainability. And then after a break, we'll have an opportunity to walk through the site with some really exciting investment that's happening here as we transition to the EAF. Just from a housekeeping perspective, in the unlikely event of emergency, please just follow your host, hear the evacuation alarm. The gathering point for those on site today will be the grassfield just behind this building. You'll be with members of the BlueScope team at all times. So please just follow instructions. We'll be providing instructions around walkways, mobile phones. Safety is the #1 paramount importance for us here. We want everyone to be going home safely. Just on that topic of safety, you will be aware that last week, we had a tragic incident, a young man at our Port Kembla Steelworks was fatally injured. We're working with our contractor partners to support the family and our team members are deeply impacted by that event. There's a full investigation that we're working with, with the regulator and our contractor partner through the course of that. It's important for us to go through that process. We will be transparent where we can be, but we won't be providing additional details given where we are in that process at this time. But just to reinforce that every moment, every shift, every site to just follow instructions and manage with the team accordingly. I'm really glad that we're actually holding our ESG Day here in New Zealand. That's not just because I have a deep affinity. My daughter was born here. There's investments that we're undertaking that have application across our portfolio, which we'll talk to. I'll provide a brief overview before we get started, just for those who are a little bit newer to the BlueScope story. In terms of -- we've had our purpose, our bond and our Transform, Grow, Deliver strategy has been in place, and we've been executing against that for some time. The investments that I say that we're making here have a high degree of application to that. If we think about the EAF that we will be taking coal commissioning at the end of this year, hot commissioning at the beginning of next year. It has an opportunity for us to manage that highly cyclical New Zealand steel market to move us from a very rigid operating model to one with far more flexibility to help us manage at the bottom of the cycle conditions that we're experiencing today. The EAF investment is the single biggest industrial decarbonization opportunity that's happening within the New Zealand market and being supported by the New Zealand government. It provides a technology that we're utilizing here in New Zealand is one of the key pieces of attraction that our joint venture partners in Western Australia are seeing with the NeoSmelt investment opportunity where we're looking at the decarbonization options for hematite Pilbara ores. Sue will talk to the market opportunity that it creates for decarbonized product within the New Zealand market in addition to the success that we're having with COLORSTEEL product in New Zealand in soft market conditions, similar to what we're being able to achieve with COLORBOND product within the Australian market. And finally, from a property perspective, the adjacent lands at Glenbrook will give you a good insight as to what the team are trying to achieve across our surplus property portfolio across Australia and New Zealand, which we've got Michael Yin joining us, who will take you through that information as well. So by the end of today, you should have a much better appreciation, not just for what the team are driving within the New Zealand market, but also from an ESG and property perspective as well. Our investment proposition really remains unchanged. We combine top-tier irreplaceable assets, premium brands and a disciplined financial management approach to deliver resiliency and growth. has enabled us to manage throughout a soft Asian pricing environment across Australasia, a volatile environment across the U.S., all whilst undertaking a once-in-a-generation investment program, which sees us at peak CapEx levels being concluded this year. And as we work through this year's program, it really sets ourselves up for cash flow generation that underpins our investment proposition moving forward. Now that portfolio of assets that we have provides us with diverse regional exposure with our multi-domestic strategy of in-country production for in-country consumption. And that's proving even more important as we go through a period of elevated geopolitical issues. Across Australia and New Zealand, it provides us with a clear focus on building and construction segments given the regions that we're operating within there and the products that we're offering. And our earnings profile is increasingly moving to that more favorable North American market with now over half of our earnings coming from that region. Now a couple of weeks ago, we did make a refinement to that portfolio, where you will have seen that we've agreed to the sale of our [indiscernible] BlueScope joint venture in India. And whilst it's sometimes disappointing to see an investment in a particular region come to an end. I think it's a good outcome for our business, for our shareholders, reflects the value that have been created within that region over the course of the last decade, but probably also reflective of the respective joint venture priorities and enables us to focus on the priorities in the portfolio that we're driving and we'll run through today. In terms of those priorities, we set out at our half year results last year and updated at our full year results, the short- and medium-term focus that we have, particularly around the areas that we can control. In the short term, that cost and productivity program remains on track, focusing on that $200 million improvement position. Just as importantly, the investments that we're talking about and that peak CapEx period is really about underlying some growth investments, the majority of which conclude this year, set us up for expanding that domestic sales, setting up for expanding those domestic sales into value-added and premium branded products, which enables us to get more of that product outside of the export market and away from the commodity swing of low pricing. Now I said last night to some of you who I was able to catch up with that kind of today, I really encourage you to put your models away. We've got great representatives from the Investor Relations and treasury team here who can work through with you around some of those specific modeling areas. But this is really an opportunity to engage with the who and the how of the activities that we're having on site and really put our ESG, property and operational transformation in context. But rest assured, underlying everything we do is a very robust financial model that guides us from a business performance perspective and guides us around the initiatives that we're prioritizing and really sets our focus for how we manage the balance sheet and investor returns. So in terms of the team today, we've got a diverse and experienced team that, again, I'd encourage you to engage with. From the executive team, we've got Robin Davies, Chief Executive of our New Zealand operations; Michael Yind, who's leading our property aspirations; Deb Cordal, Chief Executive around climate change and sustainability. And from the New Zealand team, [indiscernible] will take you through both the market and the operational side. We've got respective team members across the board here today as well. So again, I really encourage you to take the opportunity to engage with what these leaders are achieving in the marketplace because there's some really exciting activity that's being undertaken. So maybe with that, I'll hand over to Robin, Chief Executive of our New Zealand business. Thanks, Robin.

Thanks, David. Welcome to New Zealand Steel. We're really excited to have you all here today. It was great to catch up with a number of you last night and kind of share some perspectives and get a warm up for what's coming today. I'm looking forward to catching up with the rest of you today during the course of this morning and also excited to share the progress on the electric arc furnace project and perspectives on the market. So just a quick bit of background on myself. As you can tell, I'm not from New Zealand originally, joined from Tata Steel Europe in 2008. So I've been with BlueScope coming up for 18 years. So it's kind of a 30-year sort of industry career. Worked in most parts of the operation at New Zealand Steel, steelmaking, rolling and finishing, became the GM of Pacific Steel when we acquired that from Fletcher Building in 2015. I was also the President of North Star between 2017 and 2020, where we started the expansion project that you'd all be pretty familiar with. So I was lucky enough to come back to the New Zealand business and then start as a Chief Executive 4 years ago. So I've had a strong history within BlueScope, seen some of the cycles and been part of the difficult cycles and also part of the significant growth story that you have seen over the period. We've got, obviously, [indiscernible], General Manager of Sales and Marketing, which will be able to share some of the perspectives of difficult economic conditions, but also some of the great growth story that we have. And [indiscernible], who's got a long steel -- iron and steelmaking track record within New Zealand Steel and South Africa. He's the Project Director for the Electron project, and we'll continue to run that facility going forward. So I think we've got some great talented people within the business. And the rest of the New Zealand Steel lead team are here for you to kind of continue the conversation over lunch and during the course of the plant tours. So just a quick reminder of the segment overview, flat and long product producer, long products being reinforcing through the Pacific Steel acquisition, bought that business in 2015 from Fletcher Building. And really, there was a play around reducing that export exposure. As you can imagine, as a flat product producer entirely previously, we had a very long hot-rolled coil exposure into the commodity markets, and I was able to kind of turn export product into a domestic kind of margin. So it was a great success as an acquisition. You can see the broad sort of footprint. We've got the Glenbrook steel manufacturing facility, the mine site at [indiscernible] North Head, which is about 20 kilometers away, and the rolling mill facility at Odahoo was part of that acquisition. We also have supply chains reaching into Fiji, New Caledonia and Vanuatu and they're sort of more typical of the sort of [indiscernible] pre-engineered building type businesses where we have color steel and color bond supply chains and [indiscernible] and what have you into those kind of market segments. They're pretty small, but they are strong kind of margin contributors in their own right from in-country margin and what we realize in the specific region. And we do have a reinforcing -- a small reinforcing business in [indiscernible], which is also part of that acquisition from Fletcher Building in 2015. So employees around 1,500 across the whole footprint, around 1,200 employees at the Glenbrook steel manufacturing site that we're on today. A little bit of the history. Obviously, we celebrated 60 years this year, and it's got a very kind of interesting kind of time line from the early 60s slightly unconventional, some would say we had some mining operations and a metallic coating line back to the 1968. So our metallic coating line today is actually the same metallic coating line that we had then, gone through many upgrades since then, a pipe making kind of facility and a color steel, we had a paint line commissioned in the early '80s, which is obviously very significant for us. You'll get to see where that paint line is today in a quick tour. And essentially, the sort of mid-80s saw us commission what we know today as the integrated iron and steelmaking operation and rolling mills. So that's essentially the footprint we have today was sort of commissioned in the mid-80s. So an interesting kind of history. Government sort of started by the government, really pioneering difficult kind of period through this period and then the mid-80s where it kind of turned into the facility that broadly is today. You'll see the point at which BHP Steel acquired New Zealand Steel, a dual pot metallic coating line to adopt the BlueScope kind of technology, galvanized steel and [indiscernible] as it was the first generation. And then obviously, the BlueScope spinout from BHP the Pacific Steel acquisition in 2015, which is very significant for this business. We were really able to turn 200,000 tonnes of hot-rolled coil exports into about 200,000 tonnes of domestic reinforcing, which was very significant in terms of margin improvement at the time. And then 2023, we were able to kind of strike up the strategic partnership with the government. As David mentioned, very significant decarbonization project, 800 to 1 million tonnes of carbon reduced. It's about 1% of New Zealand's total footprint. So we're able to kind of strike that kind of arrangement with the government just over 2 years ago, time flies when having funds about 2 years ago. And we've been able to kind of execute quite strongly since then, and we'll be able to get a sense of that as we kind of go through today's presentation. And in 2024, we essentially adopted the next-generation technology for COLORSTEEL, which essentially is the COLORBOND DNA. So we commissioned that in our metallic coating line and relaunched [indiscernible], and Suzanne will share a bit more of the detail of that. And again, back to that milestone, 60 years. So it's a very interesting kind of history. Some of what we're doing in some ways is back to the future. This early mining and iron making operation and billet production used an electric arc furnace ironically in a very rudimentary kind of way and was unsuccessful, but some of what we're doing sort of goes back to some of the early kind of stages of how New Zealand Steel was formed. Just a quick update. This is -- it's a unique kind of iron-making process in a global sense. So this is what makes this particularly interesting and relevant as BlueScope and other steelmakers around the world contemplate the decarbonization options. So we've got iron sands. We've got titanium magnetite that occurs on the West Coast of New Zealand. So essentially, it's a low-grade iron ore. We use thermal coal, which is typically used in power stations. It's got some specific requirements from a calorific value and sort of reactivity perspective. We put it through 4 kiln multi-half processes. So this is the DRI process essentially is referred to as a fluidized bed and coal is the reductant essentially rather than what we know today natural gas or hydrogen. So that is how this DRI process was formed back in the '60s. And again, this footprint was built essentially in the mid-80s to what it is today. Then we have 2 melters or electric smelting furnaces as they're known globally. And obviously, that's an important technology as various parts of the world consider their kind of feature. So this is essentially the modular nature of this has allowed us to kind of contemplate the change the electric arc furnace because it's not just one of something we've got. We've actually got 4 kilns and 2 melters. So you can quite efficiently contemplate using 2 kilns in a melter and halving this kind of process essentially, which is where the large carbon emissions reduction comes from, essentially halving the coal input in a total sense. We recovered vanadium. The iron sand is rich in vanadium, and we sell that as a byproduct on the global kind of market, and it's very volatile from a pricing point of view, but it does get some cost recovery at certain points in the cycle. We consume internal scrap, and we use basic oxygen steelmaking, which is fairly typical. It's got some nuances, but fairly typical of what you might see at the [indiscernible] Steelworks or other basic oxygen steelmaking sites. And then in 2015, we installed the billet caster. So we cast slabs and billets in the same kind of facility, and you might be able to get to see that today. That was part of the capital investment in 2015, where we bought the Pacific Steel business, installed the billet caster and label metallurgy furnace. And then that's how we service the flat products market and the long products or the reinforcing kind of market. So that's kind of an overview of what is still a unique kind of process. And why does it work? It relies on historically low-cost iron sand input, historically low-cost coal. Coal has become more expensive over time and been disturbed by Russia-Ukraine conflict and that sort of stuff. So it's kind of become a bit more volatile. But the economics are low-cost inputs. There's a lot of energy required to convert that raw material, which makes this quite a carbon-intensive, energy-intensive kind of process, hence, the opportunity or the need for change. So in terms of why did this EAF project come about? I guess there's an obvious imperative to reduce our carbon emissions footprint, a very high intensity level compared to our international kind of peers. There's obviously regulatory pressure from the emissions trading scheme in New Zealand where we're under carbon price pressure over time, and that is starting to escalate. As you can imagine, whilst carbon price is volatile, when we get into $60, $70, $80 a tonne of carbon and industrial allocations start to fade away, you model the business in its current configuration and looks very challenged into the future. So there was an opportunity to consider an electric arc furnace conversion. Why is that? Because it is a modular process, so we could drop half of the process out, install electric arc furnace. New Zealand has a 500,000 tonne scrap market that's exported. It's got renewable energy on the grid. And there was an impetus from government to make significant reductions in its carbon emissions footprint. So there was a, let's call it, a meeting of minds where we needed to do something about the steelmaking operation, certainly in the short to medium term. And essentially, there's an opportunity with a willing government to support that sort of change. So we approved that project just over 2 years ago. And obviously, you'll see get a sense today where we are from an execution point of view. So it's sort of quite fortunate in terms of configuration, and it's got some enablers. I guess, from a BlueScope point of view, we talk a lot about the enablers that you need to make a change. Obviously, you need the scrap you need the energy inputs, and we were able to kind of secure those as part of the project upfront. And whilst it wasn't kind of seen as a directly value accretive as such other than it provides, as I explained going forward, much better down cycle kind of performance where we haven't got this fixed -- complete fixed cost and exposure to the selling -- the international selling prices. So I'll explain a little bit more about that as we go through. So just in terms of some of the benefits, we talked about a very difficult trading performance in FY '25. And essentially, based on the improved electricity kind of costs, and the raw materials benefit in the down cycle between the coal iron ore input versus scrap, that would have had a much better performance or resilient performance in the bottom of the cycle. So as you will have seen, we're entirely exposed to the international hot-rolled coil price. And when your costs are fixed, you've got kind of nowhere to go in that down cycle. And that was exacerbated by extremely volatile energy kind of pricing, which we'll talk a bit more about going forward. Flexibility to match production demand. So really, when you've got a much higher proportion of variable cost, you can more confidently scale down the operation when the market is weak and scale it up when it's stronger. So having the benefit of working at North Star, I was able to kind of see that higher percentage of variable cost and you're able to kind of -- whilst North Star sold out all of the time, you are able to, from time to time, variabilize your cost base very quickly because it's largely scrap and electricity. So you're able to kind of move your cost base around and match the demand more accurately. We do have the ability to adjust the raw materials mix going forward. You can imagine there will be periods where the iron sort of input is cheaper than scrap, and you're able to kind of flex the ratios to optimize the business. That's quite a neat opportunity for us that's yet to be kind of fully modeled, but you can imagine that's a real advantage to be able to switch the raw material kind of mix. And some would say, why not go 100% to start with? 500,000 tonnes of scrap domestically arising is barely enough to maintain the kind of domestic demand overall. So we felt it's an important kind of option to maintain a cost-effective iron-making operation at this point. And then I guess, going forward, we do see there's a real opportunity where we'll have a differentiated product offering for low emissions product in New Zealand. So the low global warming potential product is being specified. It's being preferred and ultimately should start to command a premium either in the New Zealand market or globally. I think that's yet to be determined fully. But there's no doubt that the price of carbon will ultimately find its way into the price of steel. So again, just relating to the sort of BlueScope strategy, the transformation for us, obviously, the EAF model, whilst it's the new steelmaking technology, for us, it's a complete business model change. So it's a real transformation. 40 years ago, we installed the steelmaking technology we have today. So this is a bit of a once-in-a-generation kind of change for us. And as well as we've got a number of artificial intelligence and asset intelligence programs underway to focus on new technology and much better customer experience initiatives from a digital point of view. In terms of growth, we still see real opportunity to kind of grow premium branded products in New Zealand and particularly where the low embodied carbon offering kind of plays its part. And I think, again, how we interact with the energy market, having fixed price contracts help to sort of manage to shed load when it makes sense. I think that's -- we really have the opportunity to kind of lower the weighted average cost of electricity going forward with these power contracts that we have in place. And again, just safe and resilient business with strong returns. This business has been very volatile through the cycle. It's been difficult to understand how the kind of cost base works. And I think this model -- this business model provides a much more consistent earnings profile over time and just kind of help us build confidence to keep reinvesting. The global safety refocus, I think that applies in all parts of BlueScope to varying degrees. We've got to really sort of double down on what has got us to a very good safety performance and maintain and improve that. And again, optimizing the kind of the [indiscernible] model and the EAF model going forward is pretty key. And I guess the license to operate, that really is a comment about how we interact with the community in a broader sense and the New Zealand Inc., but also be able to work with the government in a constructive way and provide solutions -- we have found it difficult over decades to really have constructive meaningful discussion in that sense. But I do think we were able to kind of find a sweet spot and sort of improve our, let's say, perspective in a New Zealand -- from a New Zealand government perspective and how important domestic manufacturing is. So that's been work of decades to try and break through that paradigm because typically, I think the New Zealand government has got a lot of work to do in terms of how it supports its industrial base as we all know. Just back again to the business performance, you'll see the Asian hot-rolled coil price and the shape of it, and it essentially follows our earnings profile. You can kind of see what -- when you've got a fixed cost and you get price exposure, what happens, but you can kind of see that, that volatility creates a lot of uncertainty for us and investors and everybody. So you can imagine trying to break this cycle has been a key driver for me to find a way to how do we kind of flatten out that profile because I'm sure it's very frustrating and confusing for lots of people. So a way of doing that, of course, is trying to protect this downside with a scrap spread business that we've sort of described. So you've got a much stronger correlation between scrap and hot-rolled coil, obviously. And then the other aspect was the electricity cost. We've experienced horrendous power pricing over the last couple of years. We've got cogeneration on site and some hedging, but the spot price volatility, which we've sometimes been exposed to has been horrendous in the last couple of years as experienced by lots of industrials. And we've been fortunate enough now as part of electric arc furnace, gain confidence in the business model and secure those contracts over 10 and 11 years with Contact Energy, as you probably will have heard. So we think those contracts are quite innovative. They're not just straight fixed price contracts. They have knockout periods within there that allows Contact to monetize high price periods and allows us to kind of take load off. So I think we've been able to share some, hopefully, benefits there and get an internationally competitive power price that makes -- that is obviously a ticket to a game to run electric arc furnace. We essentially had to have those contracts even contemplate moving into this business model. And you can kind of see as the economics and the cycle has kind of changed, volumes have reduced because the margins of those export markets get weaker and weaker, particularly when your cost base is challenged. And you kind of see how weak the domestic volume has been recently, and Suzanne will talk a little bit more about the specifics of that. So at this point, I'll hand over to Suzanne McKandry, our GM of Sales and Marketing, to give you a bit more color on the specifics of the market.

Hi. For those of you that I didn't meet last night, yes, I'm Sue. So I'm the GM of Sales and Marketing. I've been here 5.5 years. Our team's remit in sales and marketing covers our customer service team, sales, marketing, our product application development, our pricing team and our data insights team. So it's great to have the opportunity to share a little bit about our market and our product suite. So you'll see for the New Zealand domestic market with our combination of flats and our long products that our product ends up largely used in the construction market. Alongside kind of our heavy plate product, Pacific Steel and the Ls product actually adds positively to our presence in the infrastructure market. Unlike some of our other BlueScope counterparts, in New Zealand, we don't have a downstream presence. So our sales strategy is completely upstream, supplying to our major distributors with Fletchers, EZ Steel, steel and tube distribution and Vulcan and our network of roll-forming partners, [indiscernible], Steel & Tube, Roofing Industries and Freeman to name a few. As Robin has already said, the New Zealand trading environment has been super tough in the last 3 years. And you'll see from the graph on the right-hand side there, our metal coated and painted products, whilst down have actually held reasonably well with kind of the detriment being in our flats and our longs product. Now some people might say, that's quite interesting because if we're looking at our economic indicators, consents coming off the high of COVID, residential consents are actually holding quite well versus the past. And even though we've got some ups and downs in our nonres, the graph shows that it's kind of growing. What we're seeing in New Zealand, though, in the last few years is extreme inflation. You would have seen we were kind of in that 5% to 7% range, significant interest rate rises as well. And so we're seeing a lack of completion to those consents within the 2-year period. So anecdotally, in great kind of trading environments, we would see completion rates to consents around the 80% to 90% -- and there are reports of our completion rates against consents to be in that 60% to 70% range. So that kind of helps explain some of the declines that we've been experiencing. At New Zealand Steel, we offer a full suite of products covering our base commodity products, hot rolled coil, plate products through to our metal coated products and obviously, our significant flagship value-added premium brand in COLORSTEEL, our painted offering in the domestic market. Pacific Steel, our longs product. And Pacific Steel gives us a really unique opportunity in the New Zealand market. We can supply product from the ground up, which is very exciting, particularly as the EAF comes on to board with low-emission steel products and [indiscernible]. So [indiscernible] is probably the closest business, we would have that would be kind of downstream. So they take the plate from New Zealand steel and make custom designed and manufactured optimized beans for the construction market. Taking a deep dive into our flagship brand, COLORSTEEL. COLORSTEEL has been New Zealand's favorite roof for 40 years, market-leading in New Zealand. With our very unique coastal environment, coastal and geothermal environment actually, the attributes of high durability, enhanced corrosion resistance and low maintenance means that those attributes are really desired by consumers in the New Zealand market. For our kind of more moderate environments, we offer a market-leading 50-year warranty as well. Unique to New Zealand is another product range we have called [indiscernible]. Basically, we add a condensation kind of ventilation fleece to the back of the color steel product. And it actually negates the need for roofing paper. So for the trade, it actually means that they can install roofing and cladding quicker because they don't have to wait for the paper to go up and then the steel on top. It actually means they can work in all weather conditions as well because you're not having downtime for the rain and wind with the paper. And from the consumer's point of view, it actually creates drier, warmer homes. So as condensation rises, the fleece absorbs the water and then releases it in an environment when it's fit for that. And it creates warmer dry homes. It's sensitive choice asthma society approved as well because New Zealand actually has one of the highest per head of population incidences of asthma in the world. Like Australia with COLORBOND, we compete in New Zealand with tiles as well. Uniquely, though, for New Zealand, these tiles are actually metal-based with a coated technology on top of them. And we also have a prepainted long-run competitor but that's through Fletchers, Pacific coil coaters through Color coat. So we actually have quite a competitive roofing environment in New Zealand. And through really strong sales and marketing leadership, we have great strength of brands, 85% brand awareness, strong conversion rate at 90% for those people that consider the brand through to more than 50% that would have color steel as their preference for roofing against our competitive set there. And as Robin also alluded to, during the very tough economic cycle we've had, actually Color Steel has gone from strength to strength. So that kind of sales and marketing leadership, both B2B and B2C has meant that during that cycle, when our commodity products has been declining, we've seen the opposite in COLORSTEEL with very strong growth. So what's next for us in terms of continuing to kind of keep that growth in COLORSTEEL going? In August '24, we launched COLORSTEEL [indiscernible] And as Robin also mentioned, that was where we introduced the COLORBOND DNA through the Activate technology, the AEM. What we also did at that time, though, was take to really differentiate our product in the New Zealand market. The AEM introduction has allowed us to have just one substrate that now can go across almost all environments in the New Zealand market. So it's so easy for specifiers to specify us because they just need to name COLORSTEEL. The roof is too, there's no question what they need to put on their roofs. It can just be COLORSTEEL. And that's been game-changing for us with our roll formers as well. One substrate, one set of colors means they can reduce their working capital. So it's a really strong benefit for them to be partnering with us. You'll hear a little bit more from Rob today and the [indiscernible] team on our paint line expansion so that we make sure that as the market returns, we're ready with the extra capacity we need to supply the market and definitely continuing our strong focus on sales and marketing leadership across the market. But I say wait, there's more. The other opportunity we really have is with our low-carbon, low-emission steel products, understanding strength of brand, understanding what value-added premium brands bring to our performance for our high scrap products that we'll be producing both across the board actually, but starting with our longs product and our reinforcing product, we've created a new brand called [indiscernible]. Pacific Steel will lead the launch of the decarb range. And I'll just explain a little bit about that. So with our reinforcing product today and the way we manufacture our products today, it has a very high GWP at 3.95. To achieve a Green Star 5 or 6, we need to be halving that number. So any product supply to achieve a Green Star Building 5 or 6 would need to be under 2. When we go live with the EAF, our standard blend, which is a blend of scrap and liquid iron will achieve a GWP of 1.89, which is pretty phenomenal. So off the bat, we can be supplying that product, which today would be fully imported because we can't supply those numbers. And then incredibly, when we produce using 100% scrap, the longs product will achieve a GWP of 0.489. And actually, we have to say when you're considering A1 to A4, it will be the lowest rebar emission product available in the New Zealand market. And as Robin said, that will have some premiums to it, which we're working through now, but it goes back to that, what can we add, how do we differentiate ourselves. And on that note about all things EAF, Conrad is going to come up and take you through the [indiscernible] story.

Thank you, Suzanne. Good morning again. And I think just a quick introduction. David did a great introduction, but I'll just add a few notes. I started my career in 1991 as a graduate as part of the Anglo American graduate program in South Africa, and I was then employed after my studies until 2008 at Highford Steel and Vanadium, which is a very similar operation to this in that it is also quite a low-grade magnetite ore that we mined and process at that facility, and we also used to extract vanadium very similar to the New Zealand steel arrangement. So I started my career here, worked in the front end at New Zealand Steel in the iron plant and then also at the mine site for a short stent and then lately in our steelmaking department. So I joined the project right at the start during the concept stage, and I was the operations leader in the project and then the opportunity came up to become the Project Director. And Robin was kind enough to offer me the role, and it's been a great journey. Right. So I think enough of myself. So what -- the first thing I want to show you is a 3D model that we've developed, and that is really to show groups and interested parties of what the general arrangement of our new EAF facility will look like. So I'll just talk through that. So you can see there's a conveyor leading into the plant. So we will feed shredded scrap onto that conveyor onto the main feed system to the EAF. You can see there's the main feed system. And right where those yellow hand starts is the post-combustion chamber, where we actually preheat the scrap as it travels through that chamber before it is deposited into the furnace. We will preheat the scrap around about 500 degrees on that conveyor, so -- which really gives us good energy efficiencies. That's really the reactor or the crucible, the arc furnace with electrodes. And then this is our hot metal addition system, the hot metal from the iron plant, which we will decant into the electric arc furnace. This building there is the transformer volt. That's the Q1 system. 5 transformers will be installed in that area, which will power up the furnace. And this really is just a bird's eye view of our fuel extraction system plus our bag filter. To the left there, you can see a water treatment plant as well. All right. I think we've covered most of these. We can carry on. next slide. Thank you. I just want to point out some of the key features of the furnace. So that's the scrap feed system. This is the open-end system where we will load scrap with a magnetic crane as well as this external feed conveyor, which you saw in the 3D fly-through. This is not a conventional conveyor system. It's actually a vibrating feed arrangement and the scrap travels towards this area where it enters the post-combustion chamber or the preheat tunnel. Now this preheating is done by the post-combustion, which is an exothermic reaction of our off-gas, and that's mainly CO that's generated inside the furnace. And the scrap, so it's a counter current flow, the scrap travels towards the furnace over there and our off-gas travels in the opposite direction before it exits through there to our back filter system. The good thing about this as well, besides the energy efficiency, it's about -- you need to scrap up to 500 degrees before it is deposited into the furnace. It also drives off moisture. So in the wet season, it's actually quite a safety feature as well. If you compare it to a conventional bucket charge where you discharge 80 tonnes or 86 tonnes of scrap in our case, you do have some reaction during the wet season or like in areas where it snows and there's a bit of a reaction when you charge that. There can also be like sealed containers, undetected going into the system, and that will actually -- that will react in that chamber and it is an enclosed area. So from a safety point of view, that is pretty good. I'll just point out our hot metal additions. So the energy that we get from the hot metal, it's obviously because it's in the region of about 1,400 degrees when we discharge the hot metal into the furnace, and it contains around about between 3.5% and 4% carbon. Inside the furnace, we inject oxygen at supersonic speeds to actually burn off the carbon and oxidize other impurities to then be dissolved in the slag. The carbon that burn off is obviously the exothermic reaction again, and then that means you require less electrical energy. Just as approximate numbers, if you melt 100% scrap without hot metal additions, our power consumption will be roughly about 350 kilowatt hours per tonne. If you add hot metal and scrap in the ratio that we are going to do, which is close to 50-50, it's about 182, 183 kilowatt hours per ton. So obviously, a big advantage. The other advantage of that, conventional arc furnaces, if you produce flat products from arc furnace steelmaking, you need to add a certain amount of virgin iron units to dilute residuals, especially copper. Because when you do flat steel production and copper levels are above the high and it's extremely sensitive to the copper levels, you get what is called in metallurgical terms hot shortness. It's basically just the process of copper precipitating on the grain boundaries, which causes surface defects on flat products. Not really an issue with when you do reinforcing bar because of the -- it doesn't really affect the mechanical properties of the reinforcing bar and the surface qualities in the specifications aren't that demanding in terms of rebar. Right. So 1 power system, I'll quickly go through that before I go to the furnace itself. There's 5 transformers. It's basically a giant inverter you invert from AC to DC back to AC. Now the advantage of that, it's a modular system. We've got 5 smaller transformers, 515 MVA transformers. It is also future-proofed. In the future, if we have to start to -- in the absence of iron have to start to add BRI or HPI, this power system is designed that we can still maintain our tap-to-tax cycle time of 38 minutes should we need that. It's also building redundancy. It's basically N+1 system. We will run all 5 transformers, but we can still maintain full production on only 4 transformers in the case of a breakdown. So there's quite a bit of future proofing that went into that design as well. The furnace, you can't really see inside the furnace here. The 3 electrodes, that's electrical energy. And then we've got 3 burners on the side wall, which will inject the oxygen, natural gas as well as carbon. Now the oxygen is actually -- it's injected to oxidize the impurities in the furnace, which floats out in the slack and you drain the slack off. Electrode consumption in terms of the Q1, another benefit of the Q1, very low electrode consumption. It's a major conversion cost for our furnace steelmakers is electrodes, very low electrode consumption. So that is really very, very comparable to world best sort of standards in terms of electrode consumption. High level of automation. So in terms of our safety, there's a lot of thinking that went into the design as well because we will have robotic sampling and temperature measurements on this facility, also tapping from the control room rather than out on the floor. And we've actually invested significant money in terms of the safety features of this furnace, which were basically. If you look at the tender submission that we've got from [indiscernible], which is our OEM provider, those are additional extras, and we decided to invest in that as well. So just in terms of our time line on the project, we are on track. In fact, we're starting cold commissioning next week. The cold commissioning process is a stage process, and that will take us right through to about mid-March when we expect to make the first heat of steel from the electric arc furnace. Just some pictures there to the left, that's the arc furnace, it's the bottom and the top shell that we installed, some more pictures at the bottom of the furnace. And then this is just the stack on our back filter. All right. So just to give you an idea, so we've done a bit of a fly through. So last year, on the 6th of June, we broke ground for the first time. We drilled the first bearing pole. And that was the first contractor that we engaged. It was a really good solid performance from that contractor. And that was followed by the -- our civil contractor who started with all the civil construction, really good performance from that contractor. I guess we were very lucky as well in terms of timing of our project. Due to the construction downturn in New Zealand, the availability of those contract resources were really good. And I think it's fair to say that for our major contracts, the pricing that we got was fairly sharp. So I think we were really in terms of that timing of our execution, it was really good. And you can just see how that landscape changed, and that started on the 6th of June last year. And I think you'll have an appreciation for that when we take you through the area later today. This time lapse video is not 100% up to date up to yesterday. I think the last -- the last footage on this is probably start of September. So you'll see a bit of a different landscape out there today. The other thing I will add, and I think you will see that when we're out there today, this is a brownfield project, and it is right in the middle of our existing ongoing operations. So credit to my team and also the operations team in the steel plant that made it work. It is -- it's got its own set of unique challenges. But I think we came through that in pretty good shape. Yes. So this is -- again, that is the -- on the right-hand side, that big precast concrete building is the transformer vault. And then you can see towards this end year, that's the whole feed system. And there, you've got the furnace. This is before the shell was installed. That is just a to frame for the furnace. In terms of our -- just maybe a quick fact while we look at the time lapse, contractor presence at the moment is we sort of peaked at around 260 contractors on site on a daily basis within our construction boundary. And that's besides our projects support team, which is about 40 people. Thanks, Ron. I'll hand back to you.

Thanks, Conrad. Look I think it's the time lapse and what you'll see today really kind of brings it to life. It's a very significant activity, particularly those you might be expecting a brand-new building in kind of in a flat paddock building it in the middle of an operating plant is quite the challenge. You need to do that from a capital efficiency point of view. It creates complexity in the short term, but it's certainly the right way to do it to integrate it with the existing steelmaking facility. So just in terms of transition, as you can imagine, it's been a complicated kind of period, as you'll see when you go there in terms of building it inside the running facility. And then we've also -- you've got a quick drive past some of the existing iron-making operations. As you can imagine, we're very conscious of managing those assets to end of life. We're trying to be very careful about capital spend on assets that are getting turned off in 6 months' time. They tend to underperform as we try to optimize that kind of R&M and capital. So it's been an interesting kind of period from that perspective. So there's been additional kind of downtime in terms of the changeover and commissioning process. And of course, the ramp-up sees us -- we don't turn one steel facility off and it went on in the same day. There's a kind of progressive process over 3 months where we start making a bit through electric arc furnace and a bit less through the basic oxygen process. And of course, we have to be very confident about switching certain assets off because some of these things are one-way doors once you turn certain things off. So we have to be very confident that we can service our customers in domestic market before we turn equipment off. So it's an interesting kind of time from that perspective. And then you can kind of see some of the impact on the operations and the impact on yield losses. And obviously, we're holding higher working capital in the form of scrap and finished goods to help us kind of take some pressure off that kind of 3- to 6-month kind of process in the second half of this financial year. So we're carrying high steel inventories. We actually imported some slab from Port Kembla to kind of make sure that we could kind of manage through that sort of period. So we are carrying higher working kind of capital through that sort of period. And on paper, financial year '27 should be a full electric arc furnace operation. But the next 6 months post commissioning is going to be a very challenging kind of period for this business. But certainly, in terms of capability, we've had the North Star team heavily involved in the inception of this project. They'll support us on commissioning and training. So we're able to kind of reach into the rest of BlueScope and kind of leverage off the experiences that we have across the globe. Just in terms of the enabling factors, I think we've covered some of this before, but you can imagine a good electricity contract and scrap contracts were ticket to the game before kind of progressing with this. [indiscernible] contracts in place, 300,000 tonnes using some quite cost-effective rail solutions, backloading billet, we make billet steel in the form of billet. We send that with a train to [indiscernible], and we'll do a backload of scrap. So it's about as efficient as you can get with the backload from the Sims yard, hopefully, of 100,000 tonnes will travel in that direction. It takes trucks off the roads, and it's just fundamentally the right thing to do. So we're trying to get that up and running for the starting process. And I think we think we have a very innovative set of power contracts with Contact Energy. The first one starts next week and then the second one starts in full in December '26. So we think we've got a pretty competitive commercial rate for electricity. And it's just this graph is trying to show, I guess, what is the volatility, I guess, of power pricing and then the kind of what the averages have been. You can kind of see that the average is $200 a megawatt hour. You cannot run a steelmaking facility long term on $200 energy. It just doesn't work. So we've been able to contract power back to what I would describe as FY '18 sort of levels without -- you can kind of see I'm just moving my mouse around kind of carefully there. But it's -- there are decent prices in the context internationally and domestically. And I think we've been able to provide value with our demand response because of the technology we're putting in. And I think the likes of Contact Energy see value in that interaction with the large industrial like New Zealand Steel. So hopefully, it's a valuable partnership going forward. And I guess get scrap. It's just reemphasizing the scrap spread relationship over time. And this will just give us a much flatter earnings kind of profile as we kind of go forward and more predictable for external parties in terms of how we manage a sort of operation going forward. And again, as complicated as this business has been to describe sometimes when you've kind of got this kind of thermal coal and low-grade iron ore, it's complicated and it doesn't follow the normal trends. We're trying to give you some sense here of -- we've got a hot-rolled coil for 75% index for 75% of our product. Color steel is obviously priced in a very different way. And then scrap. Scrap will be a fairly substantial proportion of our mix. So hopefully, that gives you a sense of the kind of moving parts in our cost base. We've got the Newcastle index for thermal coal and broadly what our consumption rate. So hopefully, it just gives you some sense of what the economics of the business looks like. But I would imagine this is a conversation that develops over the next 12 to 18 months with the help of the Investor Relations team to kind of firm up what the economics of the business look like. Just a quick wrap-up. Obviously, the only steelmaker in New Zealand. I think it does give us a strong in-country for-country kind of position, flats and longs, and we have the opportunity to kind of grow domestic premium branded kind of products. Suzanne has given you a good sense of examples where we've got good positions, particularly in COLORSTEEL. And I think that sort of the COLORSTEEL growth story in a weak market, I think, is a good representation of that. Much better flexibility and resilience of the electric arc furnace kind of model and gives us all sorts of options going forward. And then really kind of how do we optimize scrap electricity and just get the best out of the kind of technology. And as Conrad has explained, we've got some quite a neat technology package. We're not first in the world doing it, but we're sort of getting -- there are other tried and tested technologies now that are showing some real competitive advantage. advantages for that electric arc furnace operation. And I guess, 60 years of operating experience within the country and also able to kind of draw on BlueScope's capability for project execution, electric arc furnace operations. So we've got a strength within the group of this sort of work that's, I think, very valuable. Okay. I think that's it. All right.

Fantastic. Thanks, Robin. We'll just get ourselves set up for a session of Q&A. For those, we have a webcast running at the moment. So just for the benefit of those online, I'm Don Watters, the Group Treasurer. I'll ask David Fallu, Robin Davies, [indiscernible] to join us up here at the front. We do have microphones here. Again, just for the benefit of those listening on the webcast, when you put your hand up for a question, we'll just wait for the microphone arrives so that people have the context for what you are asking, and we will flip between questions in the room and questions coming through online. Again, for those online, now is a great opportunity for you to post questions, so we can make sure that they get asked here with the group on stage. I'm going to throw to the floor here now.

Owen from RBC. Just a quick question on that EAF models benchmark spread that you just presented there, Robin. I know that there's no iron sands in that mix that you've got there. Just wondering how we should try and include that within that spread or broadly within your EAF cost modeling here. Is that -- I'm assuming that forms part of the raw materials bucket, but just wanted to confirm where that is.

The biggest movement in our raw materials change between scrap is really the coal. If you look at ratios of cost, coal will be a significantly higher proportion of that iron cost as it compares to the iron sand. So the thermal coal, let's say, MU index today would be USD 110 exchange rate delivered freight into New Zealand, that's a large chunk of that sort of cost. So it's probably of the order of 4 or 5x the iron sand delivered cost. We've still got a pretty cost-effective delivered cost of iron sand into that model.

Okay. And then just another question, I guess, with regards to the scrap component within that EAF spread that you provided. You did highlight there's quite a degree of internally generated scrap. So I just wanted to get a sense of your scrap mix proportionately, I guess, either today or as we go forward, how much of that scrap is internally generated?

Yes. So today, Owen, we've got about 90,000 to 100,000 tonnes that's generated through internal kind of yield processes and recycling. So if you said today, we look to -- we've contracted -- they are contracted minimums of 300,000 tonnes and about 100,000 tonnes of internal scrap, and we propose to be able to make 300,000 tonnes of liquid iron. Obviously, as you can imagine, they've all got yield, you've got to yield some of that down to convert back to sales tonnes, but that's the raw materials mix that we'll have available. And ultimately, then we'll optimize that to suit the market conditions. We do think the electric arc furnace has a nameplate capacity of about 800,000 tonnes. if we choose to sort of push that far either because the domestic market is strong or we've grown our domestic position or there's some export opportunities that are compelling at the time.

Harry Saunders at E&P. Firstly, just one for Robin or David. I appreciate you've said there's $80 million of EBIT upside at the bottom of the cycle with EAF. Can you just give a sense of any potential upside for mid-cycle in New Zealand from the projects and perhaps what the existing mid-cycle EBIT is for the business in your view?

Yes. So look, in terms of that comparison is effectively to the FY '25 operating position, right? So it's not just the market cycle. It's also the position that Robin was referring to in relation to energy. So kind of from a pure like-for-like, that will be sort of different depending on all of the underlying. Moving forward, the ambition that we have for the project is effectively at mid-cycle that enables the New Zealand business to achieve effectively our ROIC target for those businesses, and that's effectively sitting at just above 14% return at mid-cycle once we've fully ramped up through to production, and that's the ambition for the business. And you've kind of seen that in history. And as Robin has mentioned, this is really taking away the volatility on the downside.

Great. Just a follow-up as well. Can you just talk through the transitional earnings impact that was flagged sort of the timing of this and maybe potential ballpark? And have we seen any impact already as you're sort of managing existing assets down within that first half guide that we had?

Yes. So look, the short answer is that there will be a degree of operational impact. Some of that impact is being felt already, as Robin mentioned, we're now managing a production process that's effectively end of life. And that comes with a degree of uncertainty in terms of the operational performance of those assets and the energy that goes into it. The quantification in terms of the impact of that, I would not describe at a material level for BlueScope. It's obviously at a material level for New Zealand given the level of earnings that are existing within the business today, but something that we'll work through, through the course of this half and next.

[indiscernible] from Bank of America. Just a question on one of the slides. It looks like you don't need the furnace, the blasting, but just replacing by EAF. Why can't we just convert everything by using scrap to EAF from a cost perspective? I guess it looks like iron sand is very expensive as well as thermal coal 3 to 4x cost versus sand. So what's the thinking behind that if you have enough scrap in New Zealand?

Look, I think if you look at the export market, the export market for scrap is somewhere 450,000 to 500,000 tonnes depending on the economic activity. That obviously is exported from all over New Zealand. So you can imagine probably, say, 300,000 tonnes of that is available in this region as in, say, north of Central North Island. So you can imagine, as you kind of start to look to secure the whole scrap market, which is actually what you would do because we can imagine that domestic market can get to 500,000 tonnes. So you are starting to really stretch the domestic in a market in that scenario and potentially your freight cost to achieve, say, the bottom of the South Island, your freight costs will start to increase in that scenario. So you'll start to stretch the domestic available scrap market. And of course, once you turn that iron sort of operation off, it's off, right? So there's no going back there. And we are confident that we can get a cost-effective iron-making operation that at periods of the cycle is probably significantly cheaper than scrap. So you do have that ability then as you can see that, that model in itself can perform pretty well. The scrap gives you the resilience in the bottom of the cycle and a much more flat earnings profile. But we do think that iron operation is valuable in the long term because we do have a very low delivered cost of iron sand still relative to international kind of benchmark. So we think it's still cost effective and it gives us a raw materials mix that allows us to flex the capacity up significantly because the New Zealand scrap market is about 500,000 tonnes and 300,000 is available with low freight cost, it starts to increase if you're coming from the bottom of the South Island. So it's really -- it's an option as we kind of do the transition. And we may well reflect on that going forward that scrap only is the most sustainable kind of model in the long term, but it's certainly how we plan to transition the business today. We think we can have a cost effective. We're not running an uneconomic kind of model. We think it's still through the cycle has got its place to play, particularly when new power contracts are in place and we've optimized the [indiscernible] operation. So we think we can get that cost base into good shape.

And this effectively refers to the lack of rigidity in that new model. And so we talk to value and use as part of the optimization of inputs into our facilities, and that gives the New Zealand team a greater opportunity for effectively that value and use process.

Just one, just in the context of a very weak domestic backdrop, I guess, how are you thinking about the ramp profile of the EAF given domestic looks like it's about 320,000 tonnes at the moment.

Look, it's a good question. I think it's the ramp profile is as much around managing that kind of cost base of the whole operation as you point out, a weak market. Look, there's no doubt that you can kind of see how weak the market is in the graph that Suzanne put up. Clearly, there's some upside there in the recovery. You have to assume there's an upside there in the recovery. So hopefully, our timing is actually quite good there in terms of ramping up the new technology and then the domestic market is kind of following that. So it's about managing steel inventories. Yes, to your point is, is it compelling to make a vast amount of steel today given those economics? The answer is no, clearly, both domestically and internationally with tariffs in all sorts of places. So -- but we will have a pretty cost-effective steelmaking model once we transition. So we will be more competitive, margins will improve. So you will get the benefit of those fixed cost recoveries by running the volume that we'll find the sweet spot, I suppose, in that sort of ramp-up. But again, we want to dial the technology in as quickly as we can and get it commissioned. And as you imagine, we are running some assets at the end of life. So we need to make a call because we can keep investing in assets. And if you invest too much, then you have to write them off or they fall short. So we're trying to kind of optimize that kind of turning the kilns on the melter off. And they are big decisions, but we need to be pretty confident that the new configuration is working well before turning those assets off because they are essentially off then permanently.

And one final one, just on the power contract, the new power contract that starts in December. Should we assume a $10 million or so benefit in the second half, I guess, from that power contract given some of the figures you put up today? And then David, is that sufficient enough to offset some of those costs? Or do you expect a bigger net cost impact in the second half given with that power contract?

I think in terms of the second half impact, that would be of the order, I think, to manage the sort of cost that we've seen in terms of the interruption to operations through the pre-commissioning period.

Lee Power from JPMorgan. David, just maybe going on the power contract. I'm not that familiar with renewables and what's kind of driven the run-up in recent times. Is there any kind of pass-through mechanism or anything else that's going on around the power contract that we need to be thinking about if it were to keep going up?

I guess probably that relates to 2 aspects. One is in terms of the electricity cost within New Zealand, high degree of hydro renewable base generation within New Zealand. as a result, a degree of intermittency when that translates to a drought environment, which has been relatively rare if you look at the beautiful green environment outside, but was something that we experienced through the course of FY '25. That resulted in the significant increases in electricity pricing that the team were referring to. In relation to the specific power contract that we're undertaking, it's a geothermal contract, so effectively a firmed renewable source. So therefore, much greater certainty around the pricing side of things. And so that's effectively a contract regime that gives certainty over a longer time frame. But as Robin mentioned, with gives and takes around the modulation that we're able to offer into that contract as well.

Yes. So those contracts are essentially fixed price with small escalation for 10 to 11 years -- so we will have in that contracted kind of level, contracted to 80 megawatts, which is probably 80% to 90% of our total load will be contracted. So we won't experience any of that kind of volatility that we've seen previously. So they are starkly different to the arrangements we've had previously.

Okay. And then for Suzanne, can you maybe talk a little bit about how you actually price the painted and coated product here? Like, I guess, in Australia, there's a clear substitute product that you could look at in clay [indiscernible], but you don't -- you have a bit of a different dynamic given there's a steel feed for that. So is it IPP? Is there something else going on? Just trying to...

Yes. For about 75%, 80% of our products, the flat products, that is IPP based. I mean it's kind of a combination of metrics in terms of pricing that, steel indices, IPP, freight metrics, what's happening in the raw materials. So we take combination view in terms of pricing those flat products. In New Zealand, they're priced kind of bimonthly for longs, quarterly for the majority of the flat commodity products. There's a few like Axis Steel for framing and our [indiscernible], which have a bit still based on that profile, but a little bit longer in terms of fixed pricing for group homebuilders and the likes in terms of how those contracts work. In terms of COLORSTEEL, similarly priced to the way COLORBOND is priced in Australia in terms of kind of that 12 to 24 months, taking into relation kind of market conditions, cost base, CPI and the likes, but certainly premium in its price position.

Scott Ryall from Rimor just over here. My questions, I think, are mostly from for [indiscernible], but maybe Robin jump in if you need. Could you -- the implication, I think, of what you said in your presentation is you're actually missing out on low carbon steel sales at the moment. Could you just quantify roughly how big that market opportunity is just in volumes? And then how much time do you spend talking to the Australian folks about some of the value-add products there? You mentioned the framing product. I don't know if that's the same as [indiscernible] as an example. But is that something where you will go both ways in terms of this product is going gangbusters here, why don't you try it there and vice versa? Just talk through your integration with the Australian team.

So I'll start with that one. Then in terms of integration with the Australian team, well integrated. We have a kind of a global sales and marketing group. So we're meeting monthly, sharing all of our learnings. The ASP and New Zealand team are meeting kind of -- well, actually all the time, but formally 4 weekly sharing kind of exactly what's happening in the market, what initiatives we are undertaking and the success we're having with those. In terms of steel framing, particularly, yes, we definitely engage with the team in Australia around the learnings that they've had in terms of the route to market, particularly the route to market. The New Zealand market is quite fragmented in terms of the supply chain for that, but we certainly see a huge opportunity for steel framing. Steel intensity in New Zealand has grown dramatically since the Christchurch earthquakes. So there's a massive opportunity for steel framing in New Zealand, but still at its infancy. So we definitely take the learnings from the Australian team that have built an incredible market in TUC. In terms of lower emission steel coming into the country, definitely in the rebar, that's exactly where we're seeing it, not so much in plate product yet, although there is a huge interest in that. It's hard to quantify exactly. We do get the information from stats, but it's not obviously always clear. So maybe in the 5% to 10% range of product coming in of our tonnes.

5% to 10% of imports.

Yes, of our value. Yes. Sorry, of our tonne base. So we're probably talking, I don't know, maybe even 10,000 tonnes of product is already coming into the country for low-emission rebar. So if you thought of the reinforcing market today might be 120,000 tonnes in a weak market. So you might say, 10,000 tonnes out of that would be in that low GDP sort of area. So the market is weak today relative to what it would normally be. So I think it's -- yes, that's about right. I think 10,000 tonnes.

I think -- did you have a question down the back there?

[indiscernible], Westpac. The question around the transferability of this new exciting technology into other markets. How important is it that the electricity that you procure is 100% renewable. So for example, is this technology attractive and beneficial from an emissions perspective in an environment where perhaps the grid electricity or the source of electricity is not 100% renewable? And where does it tip over? I guess in terms of how we talk about our emissions intensity, we are using the grid factor to kind of determine that, even though we have got a contract with -- contract for difference that is theoretically associated with the geothermal power station, we still take the grid average. Now the grid, of course, is in New Zealand anywhere between 85% and 95% renewable. So it's reasonably good in the first place. So you're starting to get into diminishing returns in terms of carbon intensity because the grid moved by 1%, you just -- so we don't sort of count that it's 100% renewable electricity in those numbers. So that's the number with the grid the grid factor. So it's -- and obviously, the technology then because of what Conrad explained with -- we are 100% scrap, high renewable energy and a very -- as efficient as energy consumption as you can get, then it's pretty low -- very low on an international comparison level. So does that answer your question? Absolutely. So on parts anyway. So good on you for taking a conservative approach on the grid electricity, but I think it's quite interesting to understand where -- at what percentage. So like how would it work in Australia, for example, and so on. So that's the answer.

To your point, it is conservative. We're not claiming those electrons came from the geothermal power station if that's what -- yes. Okay.

I think the other aspect in terms of the applicability of the technology and the benefit from a decarbonization perspective, which we'll talk to is -- that electric smelting technology, we're trying to see how that applies to hematite ore production, which is the predominant ore body in the Pilbara, and that would enable the utilization of DRI and potentially gas-based DRI. So it's not so much the benefit from the electricity that's utilized in the smelting component, but the decarbonization opportunity in the iron making from the DRI process that it enables.

Yes. And I think that geothermal generation because of its firm nature is a real advantage in New Zealand because of its -- David pointed a hydroelectric, solar, wind has got the intermittency, which makes it very hard to firm, but the contract is a firm contract because it's backed by a geothermal power station. So it's quite a neat in-country advantage in that sense.

Okay. We don't have any questions on the line. We might take one more question off the floor before we go to. I think, Tim, you had over the Okay. All right.

Sorry, [indiscernible], just again on the green steel pricing, like the imports, is there any material difference between what green steel is getting now versus nongreen? I guess it's rebar, obviously. So it's a little bit of a different piece, but it would be kind of interesting to hear.

Yes. I think across the very low emission steels, we're not talking about our standard blend, but like the 0.4 blend. Anecdotally, we are hearing of the premiums that have been coming into the country. I think it's -- we're at the phase of kind of testing those premiums in the market and socializing our service offer. I think it's not for Pacific Steel and also New Zealand Steel. The premiums that we can attribute to Color Steel and other brands we get just isn't from the product alone though. It's actually from our service offer as well. So short lead time stock, drawdown stock, cut to length. There's options that the large mills actually can't do. So we kind of take that total view alongside the low-emission steel as to how we price that.

Just quickly, Ram, I think you had one more question.

Just one for David. Just the 14% ROCE mid-cycle, what are you assuming there for domestic tonnes at mid-cycle, what should they be?

So in terms of that would be a sort of mid-cycle performance in end markets as well. And I guess to the point around some of the comments that were made around the opportunity of low-carbon product, a lot of the infrastructure projects that were put on pause, those are the sort of programs that we would expect to see sort of reengagement from a volume perspective and from a government project perspective, an expectation that, that's going to have a requirement for a lower carbon and local content requirement as well. But in terms of construction activity, again, a bit like our assumptions when we put up the growth initiatives and earnings expectations coming from those, they're effectively set at mid-cycle construction levels across Australia and New Zealand.

Very good. Thanks. Great questions, and thanks, team. We're going to take a 15-minute break for some morning tea. We'll get going in 11:05, we'll jump into the property and push up a piece at that point in time. For those on the line in Melboure and Sydney, that be 9:05 Melbourne Sydney time. [Break]

We'll start in a couple of seconds. We've got Michael Reay, who leads Property and Infrastructure. So I'm sure you'll be all really interested to hear about what Michael has got going on. So we'll bring the webcast back on in a tick. [indiscernible] finished charging his computer, which is handy. And yes, feel free to jump up, use the bathroom, obviously, as you need to through the thing. But thanks. I'll bring Michael up now.

Good morning, everyone. So my name is Michael [indiscernible]. For those of you I haven't met, hello, and we can have a chat a bit later on this morning. I'm not a steelmaker, unlike a lot of the other presenters here by background. My background is actually in civil construction and property development. So I'm a civil engineer by background. civil engineer by background, and I've worked -- I started my career out in construction, civil construction and infrastructure and also property and then transitioned into property development fairly early on in my career. So I've done property development in the U.K. at some of the large REITs, Stockland, [indiscernible], I was the Head of the Industrial Origination before joining BlueScope, and I was also at Qube for nearly a decade, doing a [indiscernible] role where it was a property and infrastructure development role in Harmony with an operational business. So the function that I've been brought on to do for BlueScope is to look at the nonoperational land holdings, which are significant. There's about 1,250 hectares of the nonoperational land holdings and look at unlocking that value for the business. So the value is fairly broad, obviously, the commercial value, but also the value to the adjoining operational businesses, and we'll have a bit more detail on the sites and where these nonoperational land holdings sit and it will hopefully make a bit more sense on how the property strategy and the development strategy links in with the operational businesses. So the nonoperational land portfolio, we have Glenbrook that we're at now. There's about 450 hectares that surround the site at Glenbrook. We have 2 sites in [indiscernible]. First being the Port Kembla site that's adjacent to the operational steel works. We have a site at West Aapptto that's also in the Illawarra a bit further inland, and we have the Western Port site also known as Port of Hastings. Now all these sites have fantastic infrastructure connectivity, so power infrastructure, port, de port infrastructure, rail infrastructure. Some don't have the ports. Obviously, the port infrastructure at Port Kembla and Port of Hastings. West Apto, Glenbrook doesn't have the port infrastructure, but all the rail connected, all are power connected. The West Aapo land is in a growth area, a residential growth area within the [indiscernible], which has -- gives it certain -- leans towards certain attributes for property development. Glenbrook site pretty much surrounds the operational steel business and the Western Port site, as I said, on the Port of Hastings. So when we've put together the strategy on what do you do to develop these sites to unlock the value -- we've looked at particular asset classes, what are the synergistic assets that will be complementary to the steelworks that will add value to the steelworks as well as unlock the commercial value that you can get out of developing the land. Primarily, there's 4 use cases or asset classes that these areas will be master plan to be able to develop energy and energy-related assets. So we have a good example that we're going to talk about today being the BES at Glenbrook. So that's a battery energy storage system, a grid battery, grid-connected battery and other energy-related assets such as high energy users, data centers and any other industrials that have a high power consumption need. The reason why they are a logical asset class is because of the zoning and also because of the connectivity with the power infrastructure, grid-connected power infrastructure at Glenbrook, grid-connected power infrastructure at some of the other sites as well. Logistics, logistics infrastructure, as I said, the port assets, rail assets, obviously, developing assets that can then leverage off those bits of infrastructure and utilize them to give them that additional logistics value of the type of tenants that you would put in the sites there. Downstream businesses, manufacturing, so there, whether they're industrials that are either upstream or downstream of the seal business, where they provide services or products for our operations or downstream using our products. Those type of industrials, again, pretty clear synergies by having that co-located with the Seal Works. And then we have more of a softer educational R&D type function of asset classes. These sites, they're enormous. So there's plenty of room to be able to master plan and accommodate all these different uses on the sites. So the value unlock, the potential benefits, obviously, the commercial benefit of developing this land and getting that commercial return out of it, but then also some of the other indirect benefits that will be adding value to the operational business. Power cost, power reliability with some of the energy-related assets, supply chains and getting additional volume through those supply chains and you can get an optimized utilization of supply chains that will reduce logistics costs. The diversity of workforce that we can get in the areas that we actually employ people that then will also give us a deeper pool of employees that we can actually bring into the business. So these sites, as I said, fairly sizable. For those of you that don't appreciate what 200 hectare looks like, so the 200-hectare Port Kembla, 450 hectares here, 200 hectares is about the size of the Sydney CBD. So these are enormous landholdings that will take time to master plan and develop out. So to be able to actually develop this land because they are so large, we need to do it, look at multiple different delivery models. There won't be a single model on how we will deliver and unlock the value. So there's a bit of a spectrum, low-cost development model. So where we are fairly passive role doesn't require a significant amount of capital. We can then unlock and increase that value without too much involvement by externals and whether it's through ground lease structure or a minimal capital investment from BlueScope. The middle scenario will be partnering with developers and capital partners to be able to develop out a higher capital-intense development out of those different asset classes. And then a direct land sale, which is kind of at the far end of the spectrum, which is ones that we don't see a synergistic benefit having a long-term holding in the land. Most of it will be somewhere between the low cost and partner and develop. There may not be a lot of land sale. We'll do that on a case-by-case basis, but it will depend upon the development as to exactly which model we would utilize. One of the key considerations in any of the models we use is to make sure that the development use is complementary to the operational business isn't going to create a problem in the future for that operational business and ideally make the operational business a higher value, more resilient because of having this development co-located to it. I've got a couple of examples to -- which are almost at different ends of the spectrum. [indiscernible] land sale that we've already earmarked, so that is in our residential growth corridor area. The land is already zoned as residential. This is the only part of the current land holdings that we have that has a residential zoning. Majority of all the other land holdings are already zoned as industrial. Because this is in that growth area and the nature of the residential to be developed on that land is large lot subdivision. The best way for us to add value to BlueScope is to go through and put that into the development market for large lot subdivision that will then obviously support the use of our products and then also unlock the value out of that land. So we are going through a process on that now to be able to release that into that development market, which for those of you that are from Australia, which I think is the majority, obviously, housing supply is a very big issue in Australia. So being able to get this zone land into that development market is obviously in the interest of the government, in the interest of the community and obviously, interest of BlueScope to be able to have more houses getting built. The Glenbrook example, which is a little bit different. This is a ground lease to Contact Energy. It's linked in through and was done in parallel negotiations with the energy contracts that were discussed earlier. So this is looking at as an infrastructure play. It is a ground lease for the development of a BES. They lease the site. They've put the capital in to develop the BES, but now we have that energy infrastructure co-located on our site, which quite obviously adds value and resilience to the energy infrastructure that then our energy needs are a little bit more fortified as far as the electric arc furnace into the future. They're in the process of commissioning the first 100-megawatt battery with then plans to be able to then expand that to 300. They have resource consent, which some of you believe are aware of as recently as I believe it was this week to be able to extend that through to a 500-megawatt hour battery, so which is a pretty significant grid battery to then connect through. The attraction to the site for Contact Energy, fairly obviously, the power connectivity, which I discussed earlier, zoning and the fact that, obviously, we're a big power consumer. So if you colocate the energy assets with energy consumption, it makes sense for all parties. I might hand over to Deb for climate and sustainability.

Thanks, Michael. Good morning, everyone. My name is Deborah Caudle. [indiscernible] joined BlueScope earlier this year as Chief Executive of Climate Change and Sustainability. My background is from the mining industry, where I had a 25-year career initially as a metallurgical process engineer working in direct reduced iron and then in investment banking and CFO roles. In September this year, we published our FY '25 sustainability report. In that report, we outlined a revised framework, providing an overarching view of what sustainability means at BlueScope. We moved from 5 outcomes to 4 sustainability focus areas. And today, I'll be focusing on safety, climate and our products. Firstly, just to touch on a couple of the other aspects of sustainability at BlueScope. On inclusion, we're very much focused on cultivating an inclusive culture and diverse workforce. We have a gender-balanced ELT and Board and female participation remains at 25%. On social impact or human rights, we've made good progress within our business and our supply chains, including undertaking targeted worker assessments, particularly focused around the contractor migrant populations, -- and that's both at our own sites as well as undertaking supplier third-party audit programs as well. During the year, we also refreshed our code of conduct to further reinforce our commitment to ethical behavior across all regions and levels in the group. Turning to health and safety, which is fundamental to everything that we do. The loss of young man's life at the Port Kembla Steelworks last week is a tragedy and a devastating reminder of why safety must remain our absolute focus. As David noted at the outset, we won't be providing further details today, but we will engage to the extent that we can at the appropriate time. Our approach to safety has a strong focus on enabling and engaging our people to design better risk control solutions, improve the effectiveness of those controls and strengthening leadership capability. Our approach includes balanced use of lead and lag indicators to gain insight on performance. The global refocus on safety program is well established and embedded and supported by our people. A key aspect is freeing up our leaders to spend more time on the shop floor, focusing on those foundational leadership practices, and that includes tiered audits, enhancing and updating our codes of practice and improving our management processes to gain insights and learnings that are then shared across the organization. Uplifting our safety performance remains a commitment and focus across the organization. Moving to climate. Steel is a critical enabler for the energy transition, and it spans all parts of the renewable generation, whether it's onshore and offshore wind towers to solar farm arrays and the infrastructure that's required for transmission. There's certainly a bright future ahead for steel's involvement. And our steels, it's their strength, their durability, their recyclability and they're also inherently circular. We've heard earlier today about our Color steel products. We've got our COLORBOND products. They're known for their durability, and they've also got that inherent recyclability as well. And the circularity can even be further enhanced at all phases of the cycle, and we have ongoing work to increase the reuse and remanufacture of steel as well via design principles. Our pathway to steelmaking decarbonization, it's still track. So we're continuing to make efficiency improvements across the steelmaking portfolio, looking at those lower carbon energy sources and making upgrades to the equipment, whilst at the same time, looking at those more step change technology processes to unlock more of the decarbonization potential. And you may have heard us speaking about the 5 enablers of decarbonization. So that's the technology and the raw materials to actually just crack the code on having new processes to move forward, combined with requiring the availability of firmed and affordable renewables, affordable natural gas as a transition to green hydrogen when it becomes commercially viable and all supported by policy settings. And we're here in New Zealand, our Glenbrook operations, which are a prime example of unlocking lower emission steelmaking. We've got well-established electric arc furnace technology. We've got the domestically available scrap, a large firmed renewable grid and the New Zealand government support with the [ 140 million ] co-funding for the electric arc furnace project. So it's a fantastic example of when the enablers enable us to be able to make those significant step changes in the decarbonization of our operations. Our Glenbrook operations are contributing not just in terms of for themselves with the electric arc furnace, -- but with the electric smelting furnace technology that we have here, which is an inherent part of that Neo smelt project, where we're looking at adapting the technology that we use on the medium-grade iron sands here in New Zealand to the medium-grade Pilbara ores to find a pathway for lower emissions iron making from those Pilbara ores. And we've got a video here the addition of new partners in Mitsui selection of a location for the pilot plant at Kwinana in Western Australia and moving forward into the feasibility study phase as well. So we're very excited about the Neo smelt project. It is part of a solid pipeline that we've got of decarbonization projects across the organization. And so whether it's the large-scale projects such as the electric arc furnace, and Neo smelt project, but also across a number of different development stages. So we keep a robust pipeline coming through from those concept stages and always being prudent around pulling through the things that are the most prospective and most commercial as we move forward, particularly looking at aspects around blast furnace optimization. So we've trialed the use of biochar in the blast furnace, electrification of boilers, waste heat recovery, oven replacements such as our CPL2 down in Western Port and then furnace optimizations across the coated and painted business. Looking a bit more at some of those projects that we have underway. And so I mentioned the NeoSmelt joint venture. Very excited about that project in terms of its potential to unlock a process for those medium-grade Pilbara iron ores to have a DRI pathway for a lower emissions iron making. And then here in New Zealand, we're also looking at DRI technology for our iron sands, partnership with the University of Victoria Wellington to see if we can find a process again for the iron sands through direct reduced iron. In steelmaking, we're continuing to optimize the blast furnace. So projects such as the 23 turbo alternator, which is utilizing the off gases for electricity generation and we're also trialing torpedo lids on the vessels that come out of the blast furnace to maintain the heat in the molten iron, which then will enable us to increase the proportion of scrap that we're using out of Port Kembla. We're already sitting at 25% scrap, and we're looking to increase that even further again. And then down into that midstream part of the business, again, a lot of projects around furnace optimization, oven replacements, utilizing regenerative thermal oxidizers, which we've installed at Middletown, looking at where else across the portfolio, we can implement those sorts of opportunities to continue to get that emissions intensity down across the portfolio. So focusing on the performance of our steelmaking emissions intensity. noting that over 90% of our Scope 1 and Scope 2 emissions are from steelmaking. And so we've got an asset level breakdown here of that emissions intensity profile. And you can see that across each of our assets, we have been reducing the emissions intensity, continued progress with Port Kembla and with North Star, which both sit well below the global averages for blast furnaces and electric arc furnaces, which really highlights the great work that our people are doing. And here at Glenbrook, it has been impacted by the transition to the electric arc furnace, but will decrease materially with the commissioning of that EAF in the short term. On our targets. So as a reminder, we've got 2030 Scope 1 and 2 targets of a 12% reduction in emissions intensity from our steelmaking, 30% reduction in our non-steelmaking emissions intensity together with a 2050 net zero goal. And so pleasingly, in FY '25, we actually achieved a 14% reduction in our steelmaking emissions intensity from a 2018 baseline, and that's something that we're really proud of. That steelmaking outperformance has been driven by the ramp-up in our North Star electric arc furnace in the U.S., which is our lowest emissions intensity operation. And then we've also continued those energy efficiency projects across both the New Zealand and Australian operations as well. Importantly, our emissions intensity reduction progress is not going to be linear. It's going to be highly dependent on having the enablers and then being able to implement step changes in performance when we can switch over processes as we're doing here at Glenbrook. Based on the work that we've been undertaking with these projects coming through, we're now expecting to achieve a greater than 20% reduction in steelmaking emissions intensity by 2050 -- sorry, 2030. And so we're continuing to work on what targets might look like post 2030, noting that there is inherent uncertainty given the reliance on the enablers for us to be able to continue to make those step changes. And then on the non-steelmaking side, as I said, we've got a pipeline of projects that we're working on, noting that the intensity performance is impacted both by lower volumes compared to the baseline in 2018, but also we've been doing more value-added products, which increases the emissions for the same dispatch tonnes. Turning now to our products. So our product and site sustainability credentials are becoming increasingly important to our customers. This has been driven by demand for transparency and stewardship. And so we have the environmental product declarations, and we heard earlier today from Sus regarding the DCRB environmental product declaration, which is helping our customers to understand how the emissions intensity or embodied carbon of our future products will help them achieve their sustainability objectives such as green building credentials. We also have responsible steel certification, which is an independent verification across 3 of our sites that have been undertaking, certifying our performance at the Port Kembla Steelworks, Western Port and [indiscernible] in Vietnam on 13 different sustainability measures. And lastly, on our sustainability disclosures, this is really what encapsulates the hard work of our teams across the business globally. And given our approach to transparent, robust sustainability disclosures, we're well placed for the mandatory climate reporting that's being adopted. In FY '26, you will see our annual reporting suite evolve as we move to having a new section in the annual report on those mandatory disclosures, and then we'll have certain voluntary sustainability and governance disclosures also being captured in an integrated annual report. So we'll continue to focus on telling our story, telling it in a clear and transparent manner. And with that, I'll pass across to Q&A.

Okay. So Q&A, raise your hand when you're ready to ask a question. I think the first one over here, Tom.

Just one for Michael on property. I'd love to hear a bit more about the time line for some of these potential recurring income projects. When should we see potentially a material income number come through from those assets? The time line -- so going to the scale of it, 1,250 hectares, as I led to, it's a lot of land, and it is a decades-type long process to be able to develop out all that land. The income -- the example in the best, once that's commissioned, that will actually be producing income and some of the other sites that we're looking at is some opportunities. When will the income be at a material basis, I'll probably look to David a little bit more to say when it will hit that threshold. But as far as the income generating, it will be in the near term.

Yes. So I think importantly, the objective for the next 12 months is to really lay the groundwork on those short-term initiatives, West Aappto sale, industrial lease at West Aappto and the leasing here in New Zealand. At that point in time, we'll be in a much better position to use that transactional information, our own analysis to finalize effectively the long-term property strategy for those adjacent sites. And the expectation is we come back and share that with you as we realistically finalize the balance of the FY '26 year.

Just, I guess, David or Michael, just your thoughts on the time line for -- used to provide an AI sort of valuation at CSL. Is there a strategy to sort of arrive at that point? And when could we see that?

So I never let precedent interrupt creativity. But I think to your point, the benefit of driving the projects across this 12-month period is it gives that tangible external market verification in addition to kind of what we would describe as a theoretical valuation at an is level. I think a component of that strategy needs to understand the as is opportunity that's there. So without committing the team to that direction, I think that's a likely component that will be incorporated within the strategy that we'll share with you. And then I guess the degree of how we do update that on an annual basis, I think, is a helpful part for us to show you how we're tracking towards the creation of that value. So not something that we'll sort of commit the team to today, but certainly something that we're considering as we move forward.

The other thing I might -- the only thing I might add to that is that, again, on the scale of these, the net absorption of these type of developments in these asset classes would need to be considered when you are looking at that type of number. It's a lot of land, and we're targeting assets that will be complementary and synergistic to the operational business. So we need to look at what is the realistic time line to be able to make sure you don't overflood the market with supply on this amount of land.

My question is for Deborah. In terms of the -- and congratulations on meeting your interim target and steelmaking. And my question relates to what are your thoughts around sort of a further interim target? Or does it go to your point around just the volatility, it's not going to be linear. And is that why you're sort of hesitant to set a further target?

It's a great question. And so the focus at the moment is around bringing the EAF online, getting the performance there and really just continuing to deliver on the emissions intensity reduction in the first instance rather than necessarily focusing on revised 2030 targets. I don't anticipate that we'd be putting out new 2030 targets. And then when you look beyond 2030, we are looking at what that might potentially be, but there is that inherent uncertainty around the timing of the enablers becoming available. And so we have to factor that in when we're looking at it.

Deborah, my question is kind of part from your presentation and part as a follow-up to Robin's. He mentioned right at the outset that the drivers for the EAF were carbon pricing pressure increasing. And what I'm getting to here is New Zealand versus Australia. So you've got carbon price pressure increasing, which you do with the safeguard mechanism in Australia. You have New Zealand government support, which was both financial and facilitating, which I would argue you don't in Australia. And then we heard from S that there was some moderate sales of green or low carbon steel that you're missing out on, which, to my knowledge, there's not a market in Australia for that yet. So with that, -- what are you missing from the Australian government in terms of being able to push forward more aggressively on decarbonizing Port Kembla?

Well, I think when you look at what we're doing with Port Kembla Steelworks to transition the blast furnace, again, it is about fundamentally changing the nature of the process. And so we consider to be the most prospective technology to be a direct reduced iron pathway. And so we're undertaking that work with Neo smelt to unlock that technology and demonstrate its viability with the Australian iron ore. Inherent in what's required for a direct reduced iron pathway is natural gas as the enabler through to ultimately when green hydrogen becomes commercially viable. For the Port Kembla Steelworks, we currently use approximately 1 PJ of gas on a direct reduced iron pathway, that's 40 PJ of gas. And so for us, what we need is to have that available and affordable natural gas for us to be able to continue on our decarboniz.

Owen from RBC. Just another question for Deborah. Just looking at those targets, you clearly made the steelmaking target through the assistance of North Star and their upgrade. But I'm just curious about the non-steelmaking targets. It's still fairly short of that and the profile of progress doesn't look like you're going to get there. Just wondering what projects there are in the pipeline to get you to that target? And are the projects that you're proposing at the moment enough to get you to that target? Or do you need further advancements elsewhere?

Thanks for the question. It's a large pipeline of projects given the number of coated and painted lines that we have across the business and the settings for each of them are quite different. And so if you look at something like our Western Port operations where CPL2 undertaking an upgrade there, that was a 60-year-old line. And so the energy efficiency that we'll get on the back of that. Over in Middletown, we put in a regenerative thermal oxidizer. We're looking at the ability to deploy that technology across other lines as well. And so really, it's a number of different projects to work away at it as opposed to where here we can bring on an electric arc furnace and 50% of the emissions profile shifts. So it is a big portfolio of projects there. I think the other thing to keep in mind is it's an emissions intensity target. And actually, with the dispatch tonnes that we have been lower than what they were in the baseline year, that's actually impacting that. So whilst we are making those emissions reductions, it's the dispatch tonnes that are actually coming into play with the emissions intensity as well. And then it is that addition of the additional value added. So we've got our metal coating line number #7 coming on in Western Sydney, that's creating more of those value-added products. Same dispatch tonnes, but it does mean that there's been higher CO2 emissions associated with it. So we're continuing to work away on it. The other aspect is that the emissions intensity of the grid is an important factor there as well. And so having the grid come with us is going to be material.

You mentioned the role of the ETS in New Zealand earlier. What's -- do you have any sort of view on the long-term trajectory there of the prices, given the recent volatility again in the market and recent changes put forward? And how important is that?

Yes. As you observed, some recent kind of tweaks to the policy creates a level of uncertainty and a drop in carbon price. I think it has recovered. So I think it would -- I think your observation is right that it's somewhat quite sensitive to any kind of relatively small policy changes. I think the policy changes that were on foot were an attempt to simplify the regime and create clearer incentives for businesses like New Zealand Steel and others to actually decarbonize as well. I think it is well intended, but certainly, it's kind of been volatile. We've seen the kind of climb of carbon price probably the $70 kind of a level and it's going to drop to $30, $40 back to maybe $50. So it's very sensitive to any kind of changes around forestry and those kind of policies. So I think it is vulnerable to any of those kind of small policy changes. I think as you think about -- as we think about our New Zealand Steel business, the halving of the iron, the coal-based operation materially reduces our long-time exposure. So you can imagine we were exposed to 2 million tonnes of carbon previously. You use a figure of $60, $70, $80, $100 a tonne of carbon. And as the allocations, which are today, 84% of our emissions profile dropping by 1% and then 2% beyond that. That exposure becomes very material to this business. So I think we've been able to kind of drop our exposure materially with the electric arc furnace. So we're less vulnerable to those kind of policy sort of shocks going forward. And with the electric arc fines now we have the ability to increase the scrap ratio move to 100% scrap and respond in a much better way to any of those kind of policy shots long term. But as you know, that I think current government is probably struggling with the financial obligation of what the shortfall in emissions reduction actually turns into and I'm sure that will become a political issue as it goes forward. But I think we've been able to make a very significant kind of step with what we're doing and not only change the emissions profile from a New Zealand point of view. I think our business now is far more resilient to any future shocks in that sense.

I just had one for you, Deborah. Just could you give an idea of what sort of natural gas price you'd require in Australia to produce a globally competitive product using DRI?

What we've been advocating for is a price sub-$10 per gigajoule.

So that doesn't require any sort of subsidy to be competitive there.

That's what we've been incorporating when we've been looking at what those DRI options are and where we think that you could potentially look at moving the client across from the blast furnace to a gas-based process.

And maybe just to add, that's obviously in relation to sort of domestic Australian production to the degree to which you need export to be a component of that green iron production or that lower-intensity product. That obviously puts more pressure on it being sort of globally more globally competitive price.

Maybe one for Deborah. Just you mentioned using about 25% scrap feed into the blast furnace at the moment. Where do you see that potentially getting to? At what point does that max out at the blast furnace?

Yes. It's already at a very high level on global standards. When you look across sort of blast furnace fleet in the world. So we're already doing incredibly well down at Port Kembla. It's going to come down to what sort of improvements we can get through opportunities such as torpedo lids to get the temperature up and then how that ends up playing out, but you do sort of hit a theoretical maximum just given the heat sink that you get by having the scrap in with the iron.

So it doesn't look we've got any questions online at the moment. But we do have Rob and David from an earlier session, too. I know we kind of cut some of the questions of in the first pass. So if you got any other questions as well, please feel free to ask.

Just a follow-up for Suzanne then. Can you just talk through the market share opportunity that still exists in New Zealand for COLORSTEEL? Perhaps how the market share compares to Australia for COLORBOND.

Some good thinking time on the way down.

I'm going to make him repeat the question now.

Would you like the question again? Sorry.

Yes.

Could you just talk through the market share opportunity that exists in New Zealand for COLORSTEEL and perhaps how the market share compares to Australia for COLORBOND?

How the market share compares to Australia? Quite different in terms of the fact that COLORBOND is the only painted -- prepainted supplier, and we're not here, although COLORSTEEL is definitely the market leader in the New Zealand market. In terms of opportunity for market share, I think there is, right as the market returns. I'll go back a step. So one of the value propositions that we have with New Zealand Steel is our marketing like across the value chain. So we have a team BDMs who are engaging with our specifiers. So there's the opportunity in terms of continuing to have brand awareness selling our differentiation with that specifying market. We have a team dedicated to our roofers as well in terms of making sure that our roofers understand our proposition and are loyal to us as well and then continuing our strong brand market share. I think it's also about architectural design, right? We're seeing kind of growth in desirability for pre-painted steel over other construction materials in New Zealand, but usually opportunity for market share growth through planning and New Zealand pre-painted steel has a small propensity in residential housing, and we're actually seeing that start to shift. So year-on-year, we're seeing growth of leading growth. So that's a great opportunity for COLORSTEEL as well.

Maybe just following on from that, the steel framing opportunity given it's sort of earlier stage. Can you give us a sense of the potential volume opportunity there?

Potential volume. I think if we were to look at the Australian market and kind of pro rata it back for population size, we certainly have significant tonne growth opportunity ahead of us in the range of at least 100 tonnes to be attained. We're starting off kind of a low base. I think I was talking to someone in the audience at morning tea talking about the differences between the Australian market with TRUECORE and New Zealand, like we don't have the bushfires. We don't have termites. We don't have the extreme heat, which does give us some differences between the 2 markets. As a forestry nation as well, we're well entrenched in timber framing. So it is a much slower build but the opportunity lies with us kind of engaging with the group homebuilders, explaining to them kind of the weight ratios that your framing can give the time, the quickness of the build time. So there is a huge opportunity, but it is going to be a little bit of a slower build than perhaps what Australian team experience with TRUECORE.

Maybe a quick question for Robin. Just in terms of potential market turnaround and how you see is looking at some of the indicators that you're watching for any stabilization in green shoots you're seeing?

The word green shoots came up a bit. Look, I think we certainly watch the residential, nonresidential consent levels. The residential consent levels have improved in the last quarter. We've got the official cash rate dropping. And there's some signals from government that some an infrastructure spend is starting to kind of turn into strong inquiries and engineering activity in that sense. It's -- there are some short-term indicators in our order book. The things are moving a little bit. But again, we've got used to a very modest kind of volume, as Suzanne described, the market has been very soft. So there's probably some small pickup in volume in recent months. I think that completion rate that Suzanne talked about getting those consents actually completed, that is a good indicator of not just consent sitting there for a period, actually people -- the rubber hitting the road. So look, I think we've all become a little bit -- we would have expected in normal economic cycles for things have recovered by now. So you'd expected some form of rebound. And I think we've all become quite sort of conservative given the experience the last 12 months of predicting an improvement, and that's probably come from a place of optimism such that it must recover soon. And we've really not seen that yet. But there's some signs that there is an intention and an improved economic basis with borrowing rates and that sort of stuff that must start to turn into some economic activity. And as we approach an election cycle, I'm sure there will be very strong signals of a commitment to infrastructure projects. And again, it's always a question of timing as when they actually turn into real projects. But there are projects like the Bledisloe Wharf project, for example, is reasonably substantial Dunedin Hospital, they're reasonably substantial structural steel, reinforcing type activity that is turning up into orders at the moment. So it's -- yes, that's probably early days, I think, is fair to say.

All right. So we've got no more questions online. Is there any more on the floor? Last call for questions.

This is a question for Michael with regards to the existing property portfolio. I'm assuming this land is just not sitting there dormant. You're not just mowing the lawn on this property. I'm assuming it's being rented out to farmers or so forth. Are you able to give us a sense of what the income is across the portfolio at the moment?

Thank you for the question. And you're correct. Some of it is actually under adjustment, so with farmers utilizing the land. Some of the land is brownfields. So an example of that is the Port Kembla site. That is the next operational site. So that has existing structures on it that are no longer utilized for steelmaking. And some of those do have third-party tenants in there, utilizing the warehousing but we are looking at doing a further repurposing of those sites to be able to get a more intense economic use out of it. The exact number of what that third-party income probably can't really give it to you right now. But as probably something that will come.

And immaterial for operational purposes, right? So realistically, it's more for efficiency and management than for material commercial offset.

All right. It's looks like we've got no more questions. So David, I might hand back to you to finish up.

Look, well, thanks, Tim. Thanks, everyone, for the questions and the interest and to the team and particularly to the New Zealand lead team and members who are taking everyone around. Really want to thank everyone for their perseverance online. We'll finish the formal presentation here, and thank you very much for your interest today.