BlueScope Steel Limited (BSL) Earnings Call Transcript & Summary

Good morning, and welcome to the BlueScope Investor Briefing Day. I'm Don Watters, Head of Investor Relations. And with me here is Tim Rodsted, our Head of Sustainability.

Thanks, Don. Great to be here.

Before I go any further, in the spirit of reconciliation, I would like to acknowledge all first peoples of this land and celebrate their enduring connections to country, knowledge and stories. I'm speaking to you today from the Eastern Kulin Nation, and I acknowledge the Bunurong/Boon wurrung and Wurundjeri Woiwurrung peoples. I acknowledge and pay my respects to their elders, past, present and emerging, and to all First Nations people with us today on the call. Well, we're very excited to be hosting today. It's been 2 years since our last briefing day. And over these next 2 days, we have 2 key goals: firstly, to provide you with a deep dive on sustainability and, in particular, our climate action progress in the advent of the establishment of our climate change team and the recent release of our first Climate Action Report earlier this month; and secondly, to provide an avenue for you to hear from our business leaders on their growth plans for our businesses. That will be the focus of tomorrow. But focusing back on today, though, Tim, you've been with BlueScope for 4 years and have done a great job in helping us harness, extend and communicate our sustainability efforts. We're going to do a deep dive today on topics that are at the heart of your role. What is it that you're hoping will be clearer or better understood from the briefings today?

Thanks, Don. Today is all about providing further insight into BlueScope's approach to sustainability. We'll explore how our bond lay the foundations to this approach by explicitly referencing our key stakeholders and how our purpose draws on the importance of collaboration and engagement. Our bond details how our success comes from our people, is dependent on our customers and suppliers choosing us, our communities supporting us and our shareholders and lenders choosing to invest in us. My hope is that today further reinforces how BlueScope's approach to sustainability is integrated into the decisions everyone at BlueScope makes every day.

Thanks, Tim. That makes a lot of sense. So in all, we have some 7 individual presenters lined up over the next 2 days. And today's agenda is on the screen now for you to see. There will be ample opportunity both after the climate change briefing and, again, after the briefing on other sustainability matters. [Operator Instructions] Naturally, we'll do our best to answer as many questions as we can. But to the degree that we don't cover everything, you'd be welcome to send Chris Gibbs or me an e-mail, and we'll follow up. Well, let's kick off the day in earnest. To do so, it's my pleasure to hand over to Managing Director and CEO, Mark Vassella.

Thanks, Don, and good morning, everyone. It's great to have you here with us today. I'm excited to be speaking to you today from the U.S. where I'm spending a month reconnecting with the team and, in particular, spending time with the team at North Star and our major expansion project. I'm pleased to report the project is going very well, but more about that later. As Don mentioned, it's been a busy year at BlueScope, particularly on the climate change front, and we have a full couple of mornings ahead of us to jump into the detail. We've lined up more than 10 members of BlueScope's executive and senior leadership teams to present to you over the next 2 days. And I hope, like me, you'll be impressed by the breadth and depth of the BlueScope team. Many of you will have already met or heard speak at prior briefings, Pat Finan, John Nowlan, Andrew Garey and Tania. I'm pleased to also introduce today from the executive lead team, Gretta Stephens, who's assumed the role of Chief Executive, Climate Change earlier this year; Connell Zhang, who joined us in April from Ecolab to take on the role of Chief Executive, NS BlueScope; Kristie Keast, who is our Chief Executive, People and responsible for North American development; Sue Stark, who joined us only a month ago from ITW to lead the Buildings North America business; and Huang Xu, President of our China operations. Other senior leaders from whom you may not have heard previously, we have Chris Page, Head of Future Technologies in the Climate Change team; Deanne Howard, Head of Health, Safety and Environment; Andrew Watson, Group Procurement, who leads our sustainable supply chain work; Matt Roth, who leads our Properties Group; Kylie MacKenzie, who manages our Australian marketing activities; Gerald Cornelius, the General Manager of Australian Steel Markets, leading our domestic sales effort, reporting to John Nowlan. If I could leave you with just 5 key messages from our time together, they would be that, firstly, BlueScope is a purpose-led organization for whom a deep integration of sustainability is crucial. Central to that is our willingness to tackle the challenge of climate action in our hard-to-abate sector. Secondly, we have a high-quality asset portfolio with favorable industry and end-use trends. Thirdly, a key focus for us is our unique and differentiated product technology, branding and channels. Fourthly, we have well-defined financial disciplines, financial strength and cost competitiveness, particularly in our commodity flat steelmaking operations. And finally, from those strengths, we're now able to invest to build long-term sustainable growth and returns. 18 months ago, following extensive internal and external engagement, we clearly defined our purpose that we create and inspire smart solutions in steel to strengthen our communities for the future. Conversations around our purpose are now commonplace at BlueScope and are helping us to rally around common goals of delivering great solutions for customers and doing so in a way that enhances our communities for the longer term. Our bond remains a measuring stick for our behaviors and keeps us focused on the stakeholders that matter the most: our customers, our people, our shareholders and our local communities. Through regular engagement with our stakeholders and through our own insight, we understand what matters most for the sustainability of BlueScope, aligning our strategic activities and disclosure in the following areas: firstly, climate change action, where we're seeking to collaborate and act to reduce our impact on shared resources, mitigate climate risks and leverage opportunities such as supplying steel products that support the transition to a clean energy future or support durable and future-proof building; secondly, creating safe, healthy and inclusive workplaces that value diversity, inspire creativity, support capability and reflect the communities in which we operate. Safety performance remains a critical focus for us. And there's a lot of good work going into evolving our safety approach, but we also want to see that, that coming through our lagging indicators such as injury frequency rates. Thirdly, fostering responsibility and collaboration in our operations and supply chains to provide smarter steel solutions. In particular, this means we aim to ensure that our suppliers and our own operations are engaged in responsible business practices and uphold human rights. Fourthly, being a responsible community employer and partner, respecting local values and sharing success. And in general, operating our businesses for long-term success with good governance, capital discipline, customer focus and innovation. A key part of the sustainability of our business is the strength in the outlook for our products. We see a strong long-term future for steel. It will play a critical role in the transition to a clean energy future, including in wind turbines, solar power and transmission infrastructure. On the supply side, a step change in rationalization and consolidation has occurred in the U.S. steel industry and China's efforts to reduce exports and limit overproduction are major structural positives. The combination of stimulus, low interest rates and recovery in consumer sentiment is driving robust construction demand across our key markets. Government infrastructure programs are expected to drive demand for steel-intensive products across the coming decade. The prevalence of remote working is accelerating a shift towards lower density and regional residential housing, a sweet spot for BlueScope's flat steel products and playing to the more readily transportable nature of steel compared to other building products. And the digital economy and the need for supporting infrastructure logistics continues to grow, creating a demand for warehouses, distribution centers and data centers. BlueScope is well positioned to harness these industry and segment trends with strong operating leverage from our high-quality business portfolio. We're a leader in metal coating and painting for building and construction with a unique culture of building and growing branded products. This includes our iconic industrial brand, COLORBOND. We have a substantial footprint in the U.S., one of the world's major steel markets, with potential for future growth. The cornerstone of this footprint is North Star with one of the most productive and profitable mini-mills in the U.S. We have an integrated and resilient Australian business that's delivering returns across the cycle. And finally, we have a footprint across high-growth Asian markets. Across the 3 continents in which we operate, we have a diverse exposure to end-use segments, including building and construction, manufacturing, automotive, mining and agricultural end users. Our strongest exposures are to the residential and construction segment, in particular, the detached newbuild and alteration and addition spaces; the industrial nonresidential construction segment through each of our coated flat steel products, building products fabrication and in the design and supply of engineered metal buildings; and automotive through North Star, where many of its direct service center customers supply auto makers. I've mentioned our focus on value-added metal coated and painted steel products. To support that, we undertake continued investment in research and development to maintain leadership in steel coating and painting technologies. This includes advanced testing and technical product assessment, providing deep understanding of the product performance in both accelerated and real outdoor exposure conditions; and process innovation, including a focus on developing and improving production and design processes, innovation capabilities and management of intellectual property and know-how. A key differentiator for BlueScope is the consumer branding of our products in our key markets. Brands like COLORBOND, TRUECORE, COLORSTEEL through the BlueScope ZACS have ready consumer recall. Whether you're watching the block from your armchair in Australia or driving down a highway in Thailand, you'll be likely to see an ad for our products. Supporting our manufacturing and branding is an extensive channel network in key geographies, particularly here in Australia where we operate 2 roll-forming businesses and several steel distribution channels; in Asia where we operate through dealer networks; or in the U.S. where Butler and VARCO PRUDEN work with a network of builders to deliver engineered building solutions. These networks provide us with insight and relevance to the end users of our products. At BlueScope, we've learned a lot in our nearly 20-year history as a listed company. Some 5 years ago, we deliberately established a financial framework to enshrine our key learnings in order to position the company for ongoing resilience through the steel cycles. This framework has held us in very good stead and has 3 key arms that Tania will address in more detail tomorrow. Firstly, a focus on measuring success through return on invested capital. The group has now delivered an average of over 18% return on invested capital across the last 5 financial years. Secondly, a robust capital structure. We retained a strong balance sheet with approximately $800 million net cash at 30 June and investment-grade ratings from Moody's and S&P Global Ratings. And disciplined capital allocation with a capital allocation framework to guide our spend. With our valuable business portfolio, strong balance sheet and a highly engaged workforce, we're deploying our strength for long-term sustainable earnings and growth by, firstly, positioning the business for a low-carbon world; secondly, ramping up investment in key growth projects. In the U.S., we're progressing the expansion of North Star and the Properties Group. I'd also call out today that we're assessing the establishment of painted capacity in the Eastern United States. In Australia, we're looking to increase metal coated capacity and progressing the reline feasibility study. And finally, we're increasing our shareholder returns, reflecting our confidence in the strength of the business, having announced both a meaningful increase in annual ordinary dividends to $0.50 per annum and an on-market buyback of up to $500 million. So as I conclude this introduction, I'll bring you back to our strategy, which speaks to how we're seeking to transform, grow and deliver, and it continues to serve us well. On the transformation front, there's plenty going on in both the digital and climate spaces. And I'll leave it to the team to expand on that over the next couple of days. We have a unique and exciting growth opportunity at BlueScope. There's a lot of focus on the U.S. market where we're seeking to grow our businesses, particularly by expanding North Star, but we will also continue to look for broader opportunities in the U.S. in the coated products and downstream markets. We continue to look to drive growth in the fast-growing Asian region from an outstanding suite of assets. And while we have mature positions in the Australia and New Zealand markets, we continue to look for ways to offer our customers new products, better services and grow into material market share. And we'll continue to seek to deliver a safer workplace, an adaptable organization and strong returns, and we'll dive into that detail through this morning and tomorrow.

Thanks, Mark. Before we get into the detail on climate change and our other key sustainability topics, I'd like to take a moment to explore how we approach sustainability here at BlueScope. Our Bond was developed shortly after our company demerged from BHP as a guiding document as to how the company operates. I believe it was well before its time and that it explicitly references our key stakeholders and ensures we keep a keen eye on how we perform across the topics that matter most to them. And this includes more than just financial outcomes of the company. Combined with our purpose, which is that we create and inspire smart solutions in steel to strengthen our communities for the future, these guiding documents talk not only to our stakeholders but to how we seek to achieve sustainable outcomes across both short- and long-term horizons. Many of you will be aware of some of the significant challenges BlueScope has faced over the last decade, all of which were overcome by the commitment, skill and capability of our people who rose to these challenges. Our approach to sustainability is no different. Our approach is also one of open, meaningful and 2-way engagement where we seek to keep you, our owners, updated in an authentic and meaningful manner. I can say that I've thoroughly enjoyed the engagements I have been privileged to have with many of our investors and to hear the direct and constructive feedback you've given us on our sustainability approach along the way. Also key to our approach is collaboration, be it across our industry, the value chain or with other relevant organizations and experts. Our bond and our purpose both reflect our belief that we create better outcomes by working closely together. Through collaboration, we are able to play a much bigger role than our size may suggest. We recognize that steelmakers are an important part in a longer value chain, from energy and raw materials, through steel manufacturing, to buildings and vehicles. The steel value chain is interconnected. And the problems we face in our industry are often shared, making collaboration key to improving sustainability outcomes. ResponsibleSteel is a key example of one such whole of value chain approach. BlueScope is a founding member of ResponsibleSteel alongside the world's largest steelmaker, ArcelorMittal. We are now joined by many other steelmakers, civil society groups, raw material suppliers and downstream customers in further progressing this comprehensive multi-stakeholder sustainability initiative. As many of you may be aware, our Port Kembla steelworks is currently seeking certification against the ResponsibleSteel site standard. Whilst the Phase 2 audit activities have been impacted by COVID restrictions, they are progressing well. Our last important aspect to our approach is our disclosure efforts where we share how we assess, govern and respond to issues facing our company and our stakeholders. BlueScope has been producing community, safety and environment reports in various forms since 2004, with our first GRI-aligned sustainability report released in 2016. Over the past 4 years, we've expanded our disclosure suite to meet stakeholder expectations for depth and clarity on material topics. These other reports such as our Modern Slavery Statement and our Climate Action and Tax Contribution Reports provide deeper exploration and analysis on our approach to these key topics. We continually use the feedback we gain from our stakeholders to improve our disclosures. In recent years, we have further aligned our reporting to the international frameworks such as the Sustainability Accounting Standards Board and the UN SDGs. We believe this further provides our stakeholders with accessible, transparent and meaningful information on our approach and our performance. As always, we welcome your feedback and your questions as we progress through these next 2 days and into the future. And with that, I'll hand over to Gretta Stephens, who will take you through our approach to climate change.

Thank you, Tim, and hello to you all. I'm Gretta Stephens, Chief Executive of Climate Change, a new role for BlueScope which started in February this year. I'm pleased to be here today and excited to take you through a deep dive into climate action at BlueScope. Apologies about the video as I'm coming to you from my home office in New Zealand's Level 4 lockdown. Firstly, I think it's important to start by acknowledging science and the objectives of the Paris Agreement. The recently released AR6 report shows the urgency of addressing greenhouse gas emissions. This slide summarizes what we believe and what we'll do, which I'll elaborate on through the rest of the pack. Our position on climate change sets the foundation for our climate strategy and decarbonization pathway. Our climate strategy is integral to our corporate strategy, and it can be summarized into 6 key components: reducing our direct emissions; increasing the use of renewables; making the case for local steel in our communities; creating efficient and resilient solutions for our customers; using credible and transparent offsets when direct abatement isn't possible; and monitoring and managing and engaging on our process. To coordinate our efforts across BlueScope and support execution of this strategy, we've assembled a small central team with deep expertise in various aspects of climate change, from climate policy to energy markets and iron and steelmaking operational experience. This talented and expert team is well placed to guide and support the business. Our Climate Change Council supports the team and the executive lead team in providing the voice of the business and driving execution of many of our initiatives. The ELT reports through to the Board, who oversee all climate matters with the assistance of its committees. Over the last few months in preparing for the release of our Climate Action Report, we've refreshed our scenario analysis, set new targets and goals and developed our decarbonization pathway, which I'll discuss over the next few slides. In 2021, we've refreshed our climate scenario analysis last done in 2018. Scenarios are important to inform and test our operations and strategy. We assessed a wide range of 5 scenarios from 1.5 to 4 degrees Celsius. Business performance remains strong if low emissions technologies are commercially available by the 2040s. We use these scenarios to inform our view of how future technologies may support decarbonization, which informed the technology road map and decarbonization pathway. We also conducted a physical risk assessment to long-term climate hazards. Using 2 scenarios, we assessed 61 of our largest sites for impacts such as coastal inundation, extreme wind, forest fire and more. The findings indicated risk doesn't increase significantly until after 2050, but we will factor in what we learn to inform any future projects. As announced at full year results, we've set ourselves the goal of net zero greenhouse gas emissions across all of our operations by 2050. A lot of things need to come together for steel to be produced with no greenhouse gas emissions, and we don't have all the answers. So it is important that we're clear on what the 5 necessary enablers are: evolution of emerging and breakthrough technologies to viable commercial scale. While there's lots of R&D underway, the technology is still decades off. Access to affordable, firmed renewable energy; availability of competitively priced hydrogen from renewable resources, and this requires a whole new large-scale industry reliant on the affordable renewable energy I just mentioned and transport and storage infrastructure; access to appropriate quality and sufficient quantities of raw materials such as prime scrap and iron ores suitable for hydrogen reduction; and finally, policy settings that support the investment required and avoids carbon leakage. These include support for R&D development and hydrogen industry. It also needs to ensure a level playing field, particularly in terms of trade. So that's our long-term goal. This year, we've also broadened our short- to medium-term targets as well, bringing the total coverage of these targets to 98% of group Scope 1 and 2 emissions. Our existing steelmaking target was set in 2018, and the 1% year-on-year trajectory is a challenging task given that we are starting with the process we have been optimizing for decades. Progress will be nonlinear as specific projects and initiatives bear fruit, but we're committed to getting to 12% by 2030. We've now also introduced a non-steelmaking target that applies to our midstream production processes 30% by 2030, also on a 2018 baseline. Our opportunities here are primarily in fuel efficiency and increasing the use of renewable energy. Stepping back for a moment, let's reflect on the crucial role steel plays in our world. It's an essential material for modern life and will continue to be. It will underpin sustainable development via its endless recyclability and building the infrastructure required for renewable energy. Accepting that steel has an irreplaceable role, what we have fundamentally is a technology challenge. When we make steel from iron ore, which is primary steel, we use carbon from coal as the reductant. Iron oxides are combined with carbon to remove the oxygen from the iron, and that produces carbon dioxide. There is no other way to make primary steel a commercial scale yet. But once we have made steel, we have it forever. Steel is the most recycled product on earth, and recycling steel with low emissions electricity is very carbon efficient. But there is not enough scrap for the world -- for entire world industry to switch entirely to scrap EAF production route. A full transition to EAF steelmaking in Australia in the short term would not be possible as there isn't enough of the prime scrap needed for flat steel products and power prices are uncompetitive with other regions. Whilst breakthrough low-carbon iron and steelmaking technologies are in development and promising, they're yet to be commercially viable at scale. I'll now hand over to Chris Page, our Head of Future Technologies, to discuss our decarbonization road map and future technologies.

Thanks, Gretta, and hello to everyone listening in. Before I take you through an indicative decarbonization pathway and the breakthrough technologies that have been investigated across the industry, I just want to take a minute or 2 to discuss the year and now. There's a lot of exciting work going on in the development of breakthrough technologies, and it's easy to get caught up in the myriad of stories, predominantly out of Europe on pilot plants and new technologies. However, I thought it would be best to look at the considerations we have made in developing our decarbonization pathway, particularly for Port Kembla and North Star as informed by the scenario analysis Gretta had covered earlier. There are 4 key considerations that we've been given in understanding the technology challenge we face in decarbonizing our business and the industry, namely the availability of prime quality scrap, the availability of suitable iron ore grades, the access to renewable energy and the availability of green hydrogen. I'll jump into each of these briefly, and then we'll get back to the pathway and current breakthrough technologies we are seeing. Firstly, to the availability of prime quality scrap, which is the underpinning enabler of EAF production to recycle steel. On an industry basis, while scrap feed EAFs will play a huge role in limiting the emissions of the sector, there's simply not enough scrap in the world to supply the current or future [ to be ] into steel. This problem was particularly pronounced with regard to the viability of EAF-based flat steel production in Australia and New Zealand, as you can see from the chart on this slide. With a relatively small manufacturing base in Australia and New Zealand compared to, say, what the U.S. Midwest has, we have very limited scrap arisings. And half of the scrap that is generated in Australia is already consumed in steel making, with the rest of the lower grades unsuitable for use in our operations and spread far across the country. As such, there's not a viable pathway to scrap-based EAF steelmaking for Port Kembla or Glenbrook. The next consideration we've made is through the availability of the right grade of iron ore suitable for the use of the DRI process, given the DRI seems to be at the heart of many breakthrough and emerging technologies as the natural gas in the process can potentially be substituted for green hydrogen. The DRI production process relies upon high grades of iron ore. Up to and over 67% of iron content is the material that remains solid during the process, making impurities very difficult to remove. To use the more abundant lower-grade ores such as hematite, an additional process needs to be put in place such as a melter. As you can imagine, this adds both capital and operating costs to the process. The current iron ore markets are dominated by the lower-grade ores such as hematite, with less than 15% of current seaborne ores suitable for ready-use in the DRI process. Whilst the addition of a melter does increase the proportion of ores suitable for the use in the process, the process is in the very early stages of development. Another consideration to be made is the availability, cost and reliability of renewable energy. This is critical on 2 fronts: for the commercial viability and for the decarbonization of existing and breakthrough iron and steelmaking technologies. Current prices in Australia and New Zealand for both electricity and gas are materially higher than in the U.S. where scrap feed EAF is prevalent or Europe, where many announcements of breakthrough technologies are coming from. With the challenges that I've already touched on, these prices make scrap feed EAF and natural gas-based DRI [ unvaluable ] in Australia. The current renewable share of Australian energy generation was 28% in 2020, which also indicates that for the use of electricity in established technologies or even in some of these breakthrough technologies and the required feed materials such as hydrogen, there'd be significant increases in Scope 2 emissions that would likely negate or possibly even more than offset the savings in Scope 1 emissions. This is all not to mention the challenges that will likely be faced in securing reliable energy supply for a 24-hour heavy industrial operations for some renewable energy technologies. But in the longer term, though, we are encouraged by the developments in the renewable energy space, and we can see that it will make a meaningful contribution in the future. The last consideration we've made relates to the state of the development of the underpinning green hydrogen industry that we identified as a critical enabler in achieving our net zero emissions goal. Hydrogen is an interesting feed material that features in many breakthrough technologies being piloted across the globe as it replaces the need for the source of carbon when used in the DRI process. What is important to remember is that the green hydrogen is the critical enabler, that is hydrogen produced from renewable sources. Again, without this, we're merely shifting emissions from Scope 1 to Scope 2. What we have seen across the globe is the developers of some of the hydrogen DRI projects are relying on the use of natural gas for the DRI process, similar to many established DRI facilities across the globe until such a time as the hydrogen supply is available. Even then, many will be opting for blue hydrogen, which is produced from nonrenewable sources with carbon capture technology. Whilst hydrogen is extremely promising, there is a long way to go until a commercially viable hydrogen industry is established in Australia or across many parts of the globe. This will require significant investment in generation, storage and transport, each with technology challenges of their own, along with the renewable energy grid to ensure the hydrogen is green. Once this occurs, the cost of hydrogen needs to be substantially lower than it is now, with the current stretch target for hydrogen set by the Australian government more than double what would be required to make it a commercially viable feed product in comparison with what we have today. This means that realistically, the supply of commercially viable hydrogen at the scale required for the industry is still a long way away. And technologies using it will be hampered with other low-performing and high-cost feed products. Owing to these considerations, in the near term, we do not see any viable alternative iron and steelmaking technologies for our Port Kembla or Glenbrook ops other than the established processes. As such, our immediate focus is on optimizing our current operating assets whilst progressing development of emerging technologies. We have a range of projects either underway or soon to commence to reduce emissions intensity across the categories highlighted in the blue on the slide here, which Gretta will take you through shortly; a number of technologies that are being investigated as part of the reline project, which John Nowlan will share with you in more details in a few minutes. We also know that the decarbonization will be enabled by emerging and breakthrough technologies, which are continuing to develop and are seen as likely to be commercially available at scale sometime in the 2040s. Many green hydrogen iron-making options are emerging as an interesting potential pathway. And we'll continue to monitor those very closely through a strategy of partnerships and collaborations with industry and research bodies, and we'll participate in projects where it makes sense for us to do so. Our industry has a large and relatively newly installed blast furnace asset base, making up over 70% of the global production. This is an important consideration given the capital intensity of these assets as we look to technologies that have the potential to decarbonize iron and steelmaking as it is likely that the technology will emerge as the industry-wide solution hasn't been found yet as it is to be one of those that we've already set in our current view of the decarbonization pathway. It's therefore important that we continue to not only investigate these prospective technologies but that we also continue to monitor, engage and collaborate with industry and research partners to continue to evolve our road map. We'll be sure to keep you updated as we go. The other I'm giving you a broader context is the considerations we have made in understanding our decarbonization road map and its subsequent reliance on breakthrough technologies. Let's look at some of the technologies that are currently being assessed across the globe. Firstly, to the hydrogen DRI-based technologies. It is first important to acknowledge that the EAF and melter BOF technologies here both rely on the supply of direct reduced iron produced from green hydrogen, that is hydrogen from renewable energy. As I've mentioned previously, developing a green hydrogen industry across the globe and the related transport and storage infrastructure will be a significant task, without which, these technologies are unlikely to have a material impact on industry emissions. First, to the hydrogen DRI-EAF, which whilst the technically feasible solution is only a pilot stage with a lot of work to be done to scale this for commercial use in the industry. This is a space in which the European steelmakers are very active typically with extensive government and other stakeholder support. Key challenges for this, the availability of green hydrogen and of the suitable iron ore for the DRI process and the ability to secure it. Many of the pilot projects of the technology are predicated on the use of natural gas with the expectation that green hydrogen industries are developed over time to be able to transition to low-carbon production. It is unclear how this will play out at the moment, especially as to how it will impact operating costs for those pilot mills. Second is the availability of suitable iron ore for DRI production, which, as I covered earlier, would likely limit the scale to which this technology will be able to roll out across the broader industry. Another hydrogen DRI-based technology is the melter BOF process, which can use more widely available lower-grade ores in its process. In this, the DRI is put through a melter unit to remove the gangue before it's being put through the existing BOF process used in integrated mills. This enables the existing steelmaking infrastructure to be used, and we're talking about the existing BOF and casters, potentially reducing the capital costs of this technology. This is an exciting technology and is being trialed by thyssenkrupp and voestalpine in Europe. And we're keen to follow the progress of how these technology evolves given the possibility for it to be integrated with part of our existing works. Lastly, there are a few other technologies that have been developed across the industry, notably the direct electrolysis of iron ore in the role of carbon capture in use and storage in the industry. Electrolysis is a very early prototype stage, with Boston Metal as the key example in this space. Whilst this appears to be a much simpler production process for the hydrogen DRI examples I've just spoke about, something to consider is that the scale of the electrolyzer operations and associated renewable energy would need to be quite large. And therefore, the current energy price environment or even a somewhat lower price environment would significantly impact operating costs. Carbon capture use and storage is an interesting and evolving space. But given the challenges in capturing the carbon, which relies upon collection of large point sources and the challenges in sequestering it given the geography of our operations and associated geology, it is unlikely that this will be the sole answer to the problem and rather may be a component of the solution, particularly where we may be able to capture and use the carbon as an input into coproducts, which is something we are looking at very closely. I hope that this has been a useful look into how we are currently seeing this rapidly evolving space. Whilst this is our current view and the only thing we can be sure of at the moment is that the things will change as the industry works to decarbonize, we'll be sure to keep you updated as we work through what this means for our business over the coming decades. With that, I'll hand over to John, who will take you through the reline project in Port Kembla, which is a necessary step in securing the supply line into the steel works and the economic viability of the business as well as the financial capability for us to invest in breakthrough technologies when they become available.

Thanks, Chris, and hello all. You will all be aware, we are progressing a pre-feasibility study into a reline of the currently mothballed #6 blast furnace at the Port Kembla steelworks to be available to take over iron-making once blast furnace #5 comes to the end of its current operating campaign. This is expected to occur sometime between 2026 and 2030. Given the requirement for continuous iron supply, it means we need to be working towards the reline furnace being ready in the early part of the window, that is in 2026. With lead times for planning, engineering and significant capital items, we are now well into the pre-feasibility process with around 60 people working on the project. The context that Chris provided regarding the availability of breakthrough low-carbon iron-making technologies has been an important consideration in assessing our options for the future configuration of the Port Kembla steelworks. As these technologies are seemingly decades from commercial reality and scaled wider use by the industry, the most technically feasible and economically viable option for us at this time is to progress with this reline. I would like to note that whilst we are looking at a reline as the most likely near-term option, it does not block us into this technology for the full campaign life. The reline will underpin strong earnings and cash flow generation to provide significant flexibility to adopt new technologies and iron-making configurations as and when they are technically and commercially viable and to ensure we continue to make strong economic contribution to our local community in the Illawarra region and more broadly to Australia. In the meantime, the reline project will consider the technologies to reduce greenhouse gas emissions intensity. A couple of examples shown on this slide are a top recovery turbine and possible biochar replacement of fossil carbon for pulverized coal injection. A top recovery turbine utilizes the pressure and thermal energy of the blast furnace gases as they leave the furnace to generate electricity. The technology is proven with modest capital cost to install. Biochar involves the use of charcoal from forestry and construction waste as a replacement of pulverized coal in the furnace. We've been part of a research project with the CSIRO and others from the industry and have future trials planned with the University of Wollongong. A key enabler of this technology will be the development of an economic biochar supply chain, which we're also investigating. However, we shouldn't underestimate how significant an undertaking this is given the volume of material and logistics it will require. A further example is the installation of additional tuyere ports to enable hydrogen injection into the furnace. To support a trial of this, we are seeking government co-funding for an initial hydrogen electrolyzer. This gives you a preliminary favor of the greenhouse gas intensity reduction technologies that we're looking to include. There are, of course, several other options under consideration. I'll now hand you back to Gretta, and we'll look forward to speaking with you tomorrow in more detail about the Australian business.

Thanks, John. Speaking of actions we're taking in the near term, I thought I'd just run through some of the projects we're developing at the moment. At Port Kembla, increased scrap usage, renewables, 23 turbo alternator and BOS waste gas collection and use. At North Star, we're reviewing our medium-term supply options of renewable or low emissions electricity, installing low NOx burners and, of course, the expansion project. And in New Zealand, increasing scrap usage, potentially including a melting furnace, and continuous improvement in coal usage and yield. Our midstream businesses will focus on fuel efficiencies and productivity and renewables. To close, a few words about our climate investment program. This is a commitment of up to $150 million over the next 5 years to support our near-term actions across 3 key areas: optimizing our current operating assets, preparing for emerging technologies and participating in the search for breakthrough technologies. We've already allocated the first few million to progressing concept studies into some of the projects I discussed earlier. With this investment rounding out the people, structures and resources we have put in place, I feel we're well placed to face the decarbonization challenge ahead of us. I'll now hand over to our CFO, Tania Archibald, to discuss how climate is considered in the capital allocation framework. Thank you.

Thanks, Gretta. You may recall that at our full year results in August, I set out that we've now incorporated climate capital into our capital allocation framework. This occurs at 2 broad levels. Firstly, it covers the identification and assessment of projects which support achievement of our decarbonization pathways and targets and goals. Climate capital is considered critical in maintaining our long-term sustainability and so will be prioritized ahead of growth investments and shareholder returns where appropriate. However, it's also recognized that climate-related investments need to have an appropriate commercial overlay to ensure that decarbonization is pursued in a capital-efficient manner. Where the economics of climate-related investments are less compelling, we will look to options for external stakeholder funding. This recognizes that supportive public policy will be required to drive investment in decarbonization and to avoid risk of carbon leakage. Secondly, all major investment decisions are assessed against the climate scenarios Gretta outlined earlier, including the impact of carbon price assumptions over time. This process ensures our investments are appropriately stress tested for the various scenarios we may face and ensures that low carbon performing investments are disincentivized. Thank you for your attention, and we'll now move to answer some of your questions on our approach to climate change.

Thanks very much, Tania. And we will move to some questions now. To do so, we have Gretta, Tania, Mark Vassella, John Nowlan and Tim Rodsted to answer for you. [Operator Instructions] We'll go to the phones first, and if we can have some questions there, please.

The first question comes from Peter Wilson from Crédit Suisse.

Can I ask a question on the targets on Slide 27? The steelmaking target, the target to reduce emissions by -- or emissions intensity by 12%, can I just check whether that includes the reduction that will come from the North Star expansion? Or is it 12% over and above that reduction?

Thanks very much, Peter. Gretta, would you like to take that one?

Yes. Yes, the target does include the emissions intensity reduction associated with the commissioning of North Star expansion.

Okay. On your estimates, the expansion and the debottlenecking, how much of the 12% will that deliver?

It's a few percent of it. I don't have the exact number at hand, but it's certainly not going to get us all the way there. We are going to need to make some considerable improvements and implements and efficiencies in the Glenbrook and Port Kembla processes as well.

Okay. Good. I guess another way to ask it is what will be the emissions intensity of those additional tonnes from North Star?

Very similar to the emissions intensity of the existing tonnes, which does depend on the carbon allocation to the electricity that comes into North Star. So in general, EAF processes are in the order of 0.5 tonnes per tonne, but it does depend on the accounting for the electricity.

0.5 versus the going emissions intensity of 1.6?

Sorry, I missed the last part of that.

Sorry. So that was -- I'm just checking that. So it's 0.5 tonnes per tonne versus the existing intensity of 1.6.

Yes. That's a typical number for an EAF production plant, but it does, as I say, depend on the specific accounting for the electricity that is feeding that plant. So that can change depending on the source of your electricity.

Okay. Good. And just to change tack a little bit. One of the trends that's arising from decarbonization is the transport towards lightweighting, particularly in the auto sector in the U.S. Can I seek a comment on exactly how you see North Star is placed here and North Star's ability or capability to make advanced high-strength steel, for example?

Maybe Mark -- I'll ask Mark Vassella to answer that one.

Yes. There's been a massive amount of work gone on over the last 10 years in many of the mini-mills and integrated mills in North America for lightweighting. It's actually been part of the reason that we haven't seen the penetration that was first expected when aluminum became an issue in the auto industry. The steel mills have got better and better and better at advanced high-strength steels. We have that capability, some capability at North Star. It's not a big component of our product mix at the moment. And again, as you guys know, we tend to pick and choose where we sell our product. We, of course, also don't sell directly to the big auto guys in terms of the skins. So we have the capacity to roll very low-gauge steels, and other mill capacity in North America is continuing to develop. So yes, look, it's something that we're watching, but something that, quite frankly, from our perspective, is not a huge part of our mix right now, and we don't expect it will be going forward.

Okay. But even when the customers demanded it, North Star has the ability to shift towards that?

We've got some capability, yes. Absolutely, yes. John, do you want to add anything to that? John Nowlan, do you want to add anything to that?

Probably the only thing to add is that a lot of the -- I mean the base grades obviously get maiden steelmaking and made through the hot strip mill. But a lot of the -- kind of the strengthening characteristics actually go on the downstream processes, which we, of course, don't run at North Star. So they sort of know about the treatment of the steel and the processing of the steel further downstream. Yes. So probably that's the only thing to add.

All right. Well, thanks, John, and thanks, Peter. We might go to the phones for another question, please.

The next question is from Simon Thackray from Jefferies.

There's a new addition in the commentary about investment -- potential investment downstream in the U.S. in the East painted and coated. I mean we're all aware of Steelscape's success on the West Coast and certainly aware of the success in your technologies in painted and coated in Australia and New Zealand and in Asia. But what's the logic of wanting to play in the downstream in the East? What gives you the sort of -- the confidence to be thinking about that given your commentary, Mark, in particular, around North Star has been about being good at one thing, which is producing high-quality commodity HRC? And how would you achieve it? Is it organic or M&A?

Mark, over to you.

Thanks, Don. And good day, Simon. Yes. Now, look, you shouldn't assume, mate, that if we go into painting and/or coating in the East Coast that it would be part of North Star. So that would be the first comment I would make. What gives us confidence to investigate this is it's a very large market. It's a different market, as we've talked in the past to you guys about. It's not the way that we typically produce coated steel, where we produce the product, we add the paint and then we sell it to a consumer. There's an emerging market around what they call single build, which is effectively what we do here in Australia and in other parts of our portfolio. For the large -- a large part of the market in North America, it's actually -- it's a double build process where you buy the paint, you buy your steel from someone else and then someone applies a toll coating process. So it's a market we've been looking at for a little while, Simon. And given what we do in other parts of our footprint, particularly in coating and painting, we think it's an obvious place for us to investigate. I guess what we're signaling is we started to think about it as a greenfield expansion idea, and that's really, quite frankly, driven by the fact that asset prices are so high at the moment. So we're doing some work on whether we think an investment in a facility somewhere in the East would be an attractive proposition for us.

Okay. That's helpful. I might jump back to Gretta and to Chris. Just thank you very much for providing such sort of a clear idea of both the constraints and the opportunities for production of green iron going forward. Can I just ask a question, what happens if the rest of the world has access to lower-priced energy moves into the production of green iron, green steel? And Australia, because of its own policy and its own constraints -- geological constraints also around hematite, gets somewhat left behind and the demand for green steel in consumer goods, et cetera, rises such that the Australian steel is considered relatively dirty. I just want to understand what -- how to think about that from BlueScope's perspective.

Perhaps in the first instance, Mark, do you want to take that and hand over to Gretta perhaps?

Yes. So Simon, if I just think about it from a broader industry perspective, that would clearly be an issue, right? If we got frozen out because of energy costs or policy decisions, then that would be an issue for us in any jurisdiction that we operate in, whether it's the U.S., New Zealand or Australia. So clearly, if that situation occurred and we found ourselves at a cost disadvantage or a market demand that we're unable to meet, then that would be an issue for the organization. I'm eternally optimistic about this. If you think about blast furnaces, the most modern and significant fleet of blast furnaces operate just north of us in China. 70% of their steel is produced out of blast furnaces. It's a massive incentive for us to solve the technology problem. I think the key takeaway that I have when I look at this -- the work that Gretta and her team are doing now, the work that we've been doing previously, this is such a rapidly evolving space. I'm certain there will be technical solutions, both for blast furnaces and for electric arc furnaces. But if you painted a hypothesis that said we were left with some sort of structural cost disadvantage because of policy, that would be a problem for us, no question.

And just to round that out then, Mark, I know you've touched on collaboration as a business with other stakeholders. We've seen SSAB, and I think Chris referred to this, and the Europeans having to work with the iron ore producers or the concentrate producers with the power companies and heavily subsidized by government. Is that -- how do we think about the world between a steelmaker and the 3 heavyweight iron ore producers locally in terms of collaboration going forward?

Yes. Again, I'll let Gretta give you a bit more detail. But I mean, one of the things, again, I would say, and Andrew has been particularly vocal about this, think about the incentive that those 3 massive iron ore miners have to come up with a solution for their customers who are blast furnace operators like ourselves to help decarbonize the process. So I think there's an incredible incentive for Fortescue and Rio and BHP to work out a solution for the hematite ores that they have. That's been the history and processes that BHP looked at with our HBI plant, Rio previously with their high smelter facility, and of course, all of the work that Andrew is now talking about that they're doing in Fortescue Future Industries. So a massive incentive, I think, for the Australian iron ore industry to come up with products that will help decarbonize the process. Gretta, maybe you want to give a little bit more detail about some of the specific arrangements and relationships that we've got.

Yes, sure. Thank you, Mark. I think Mark has covered it pretty well. Obviously, our Scope 1 issues become Scope 3 issues for our suppliers. And so we're mutually incentivized. Yes, we have been talking to FFI. We've been talking to Rio Tinto. We have an agreement with Rio Tinto to work cooperatively on some technology development. And I think we're very well placed to do that. We're not a massive steelmaker by world standards. But we're Australian-based. We're used to doing technology development. We're a really good location for piloting and trying and testing opportunities. So I think that there's a lot that we can work on together. And those conversations are active. And it's fair to say that steelmakers can't solve green steel alone because it needs this enormous amount of renewable energy and an entire hydrogen industry to be built out, and that's not going to be BlueScope alone doing that.

Thanks very much, Simon. And look, we have -- we'll take one more question from the phone line, if we could, please.

The next question is from Peter Steyn from Macquarie.

I was just curious, as I pull out to Chris' presentation on the key enablers, of the 5 issues, which ones do you think are going to be the particular pinch points? What are the things that one looks for, for indicators of some degree of success? So where is the pain points here? And how would one gauge progress?

Thanks, Peter. Gretta, would you care to address that one?

Yes, sure. Look, it's pretty hard to predict the future, Peter. When I look at the sort of 5 key enablers, the emergence of the breakthrough technologies is that's solving an enormous problem we -- or a technical problem, however, and it's difficult to know how quickly that's going to be progressed, although there are considerable resources going into it. I think from my point of view, I'm thinking to myself, well, what if they crack the technology issue, but we don't have enough affordable renewable energy in Australia to build out a hydrogen to support it. So if I were kind of looking at what the potential pain points are, it's that building out the renewables in the hydrogen industry to be able to support the technology that we'll -- I think we're reasonably confident will emerge given the impetus for it.

Yes. That certainly seems to feel like the potential challenge here. But I appreciate that perspective.

Thanks, Peter. We'll -- we have a number of questions that have come in via the webcast, so we might move through a number of those. And I'll just read those out and then hand them off to one of the team. Firstly, a question -- a couple of questions here from Jack Gabb of Bank of America. "If and when the hydrogen becomes feasible, what could that do to BlueScope's emissions intensity?" Second question on our emissions intensity targets, "How much of the benefit is driven by the North Star expansion?" Now I think that the second part might have already been addressed. But Gretta, you might wish to address the question on the impact of -- potential impact of hydrogen.

Sure. Thanks for that question. Well, look, not to sound too qualified, it depends. There's a couple of stages in here. Chris talked about the more medium-term application of hydrogen into existing blast furnace technology. And that has potential to reduce but not eliminate the emissions from a blast furnace because you can't use hydrogen as a 100% reductant in a blast furnace. It's an endothermic reaction, meaning it consumes heat and we need our blast furnaces hot. So there's a technical limit to the amount you can put in. And so I might potentially -- when I finish this part, I might throw it over to John, just so you'll be prepared, John. But then in terms of the breakthrough technologies, then that has an opportunity to eliminate a substantial amount. If we're using hydrogen to create the direct reduced iron, then that eliminates all -- essentially all of the iron-making emissions. So that's a substantial reduction. So that's really the path to its green iron-making rather than steelmaking. John, did you want to comment on the hydrogen application to existing technology?

Sure, Gretta. Furnace -- as far as the blast furnace goes, I mean the main place that we're looking at and people around the world are looking at is putting hydrogen in the tuyeres of the blast furnaces co-injected with pulverized coal to partially replace the pulverized coal in the blast furnace. So it's actually not replacing the coke, that's the bet in the blast furnace. It's a partial replacement of the pulverized coal in the furnace. So -- and as Gretta said, there's actually a limit on how much hydrogen can go in at this point in time and people are working on trying to increase that by things like preheating the gas or trying to get other ways of making sure that the furnace is kept hot. But that's what actually limits hydrogen going in. I mean it's a reductant, but it's actually -- as the temperatures of the furnace operates, the hearth and the furnace operates, it actually is endothermic, so it actually cools the furnace. So it's -- a few percent is probably the improvements in intensity is what it offers on the blast furnace with the current sort of known technology as a partial replacement for pulverized coal.

Thanks so much, John. We move to another question now, one from Mike Muntisov of the ASA, who asked, "On Slide 22, you say that BlueScope will encourage governments to adopt appropriate policies. What actions has BlueScope taken to date with the federal government?" Maybe Mark Vassella, if you care to address that one.

Yes, thanks. So look, we're very active, obviously, with both state and federal governments in this space. So we have very good engagement at a state level. You would have seen some of the announcements recently that Minister Kean actually made at the Port Kembla steelworks. The New South Wales government is very supportive of BlueScope. They want to see us continue in a sustainable fashion and be a steelmaker in the long term. And at a federal government level, we engage regularly with industry ministers, energy ministers, the treasurer around the public policy settings that we think are necessary and have argued long and hard around reliable, renewable and affordable energy and the policies that we need to allow us to transition from our current fleet of fossil fuel-based energy systems to what we all hope and think is the future in terms of renewable energy. But as Chris said in his presentation, for a business like ours that has a very high base load that needs that baseload available 24/7, we're not yet in a position that renewable energy is the answer for us. So lots of engagement. And I think it's fair to say that the governments, both at a state and federal level, understand the challenges that we have as an industry and are supportive.

Thanks, Mark. A question now from Paul McTaggart of Citi, who is asking about the likely additional capital cost of the DRI melter route. And also a question of the challenge for the scale of renewables feed. Tania, that sounds like one for you perhaps.

I was actually going to pass this one off to John. I mean my understanding, the highly indicative capital costs, we're into the billions of dollars here. So John, I might pass that one to you, just if you got any comments on the DRI melter route.

Yes. So we've done some work on -- obviously, we did some work on the DRI electric arc furnace route, which our first cut at it was it's probably 5x the reline costs on #6 blast furnace. We actually didn't do the study on the melter route, but I imagine it's going to be a little bit less than that because it's actually still using the BOS furnaces for the final steelmaking. But nevertheless, it's going to be similar sort of order, I'd suggest.

Thanks, John. A question now from Lee Power. "How far off do we think are we from having 2 distinct prices for low emission steel versus a high emission steel?" Gretta, if you're willing to answer that one, please?

Yes. It probably would have been better to have one of our sales and marketing people on the call for that one. At the moment, although we are getting inquiries about the carbon footprint of our steel, they do come -- it's relatively niche. And there's some potential that, that will increase as some of the larger construction companies set their own carbon abatement targets as well. But it's -- we still talk about a globally traded commodity. Very, very few countries in the world have any sort of carbon price in this steel at the moment. And there's just so -- such a small amount of anything that would be considered green steel actually on the market. There was a headline about a delivery in Sweden of some green steel to Volvo, but it was 100 tonnes, sort of half of what Port Kembla laid on that sort of after a 5-year pilot project. So we're not really talking about an actual product that's on the market just yet. So I think it's very early to say.

Thanks, Gretta. Moving now to a question from [ Ian Woods ]. "You have a number of joint operations with other steel companies in downstream parts of your business. What discussions have you had with them in pursuing a lower emission steel as a source material for those operations?" Mark Vassella, if you can answer that one.

Yes. I think if you look at the relationships that we talk about in the deck, some of the very key relationships, of course, for us are our joint venture partners, so Nippon Steel and Tata Steel. They're both massive steelmakers relative to us. We have a very strong relationship with ArcelorMittal and are founding members of ResponsibleSteel with ArcelorMittal. We now have had Tata join the ResponsibleSteel group as well. So we're seeing as quite a strong advocate for the ResponsibleSteel space. So I think it's a good question, [ Ian ], because the steel industry is in this together. This is not a problem for BlueScope or a problem for Nippon. This is a problem for the steel industry. And again, one of the things that makes me optimistic about the fact that we'll solve this is the industry has a history of breakthrough technologies, think about electric arc furnace and how that's been proliferated around the world. The technologies become available, they're salable, they're scalable and technically viable. And that's what gives me great confidence in this space. So this is not just a BlueScope problem. This is a global steel problem. We're members of the World Steel Association, which is about 80% of the global steel production. And again, top of mind, lots of conversation. Programs like a step-up program where they're trying to get steelmakers to get to the benchmark level of the top quartile performers in terms of greenhouse gas emissions intensity and a very structured program that helps steelmakers raise the bar to be as efficient as their competitors in other parts of the world. So very strong relationships with those big steel companies, and the steel industry generally is attacking this as a global issue, and I think that's the right way for it to be dealt with.

Thanks, Mark. Second question here from [ Ian ] as well, who's asking about whether we've considered producing steel in another part of Australia where availability of magnetite iron ore and gas prices may be cheaper. Mark, you may wish to answer that initially, and Gretta might have some remarks as well.

Yes. Sure. I mean the short answer to that is no. The capital costs would be prohibitive. But again, I think if you think about the commentary and the vision that Andrew is pursuing with Fortescue Future Industries, it makes a whole lot of sense to me that a green iron product is produced in the Pilbara using their lower gas and potentially, ultimately, their capacity for renewables, just with the space and availability of land in that region and sun and wind to produce a green iron product, which can then be sold to steelmakers globally. Some of the initial commentary from Andrew or the interpretation of the original initial commentary from Andrew was about building a global steel industry in the Pilbara. I personally don't think that's going to be a reality. The history of the steel industry is littered with people trying to export steel on an ongoing basis, and it doesn't work that way. But I can see enormous sense in a green iron product being produced at the source of iron ore, at the source of renewable energy or lower-cost energy and that value-added product being sold to the existing list of steelmakers and steel customers that the iron ore companies have.

Thanks, Mark. [ Finn Glava ] has put a couple of questions in for us from Crédit Suisse. The first one is, "You've outlined some of the current challenges of decarbonization in moving to new steelmaking technologies as a basis for a big decision on the Port Kembla possible reline. However, that's potentially a long way away. Perhaps you could outline a bit more about how your assumptions shift up to 2030 on these technology shifts and how that might change your decision on the reline." Gretta, do you want to have a go on that one, please?

Sure. I'll start, but it's probably fair to throw over to John as well. We -- the reline is in pre-feasibility already because we need to have a source of iron units for our Australian business really as early as 2026. And for a project of this magnitude, that's -- we have to get started now. We're talking about many years of lead time on some of the main items. So given that there isn't a commercializable technology scale available at the moment, we don't have another option to choose from. But the cash flow of the Australian business is such that we're not viewing the reline as a lock-in. It doesn't mean that we -- we get our own units when we put that furnace into service, but it doesn't mean we're stuck with having to use only that process for the next 20 years. It provides us the option to be able to adapt when the technology turns up, whether or not that's the early 2030s or the early 2040s. I don't know, John, if you wanted to add anything to that.

Thanks, Gretta. Probably the only thing to add to it is that, I mean, one of the -- we operate one blast furnace -- I mean this is stating the obvious, but we operate one blast furnace in Port Kembla. If we're going to switch technologies from that blast furnace to a new iron-making technology, we need to be pretty confident that it's going to work and it's going to be reliable and that it's going to work from an economic point of view as well. So I think at this point in time, we're not expecting that that's going to be the situation at least in the early 2030s and probably even during the 2030s, I would suggest. As Gretta said, what's really important for us is that we maintain a good cash flow out of Port Kembla, both sort of in the good parts of the cycle and in the not so -- the down parts of the cycle. So that's something that we're fairly focused on as well because ultimately, we need that to be able to fund a transition to new technology when it's available.

Thanks very much, John and Gretta. [ Finn's ] second question is regarding the EU Carbon Border Adjustment Mechanism. And Gretta, you might be the person to answer this one, I'll just read it out. "Can you share a bit more about your cost of carbon assumptions and your current read on the impact of the EU CBAM? Currently, you have a low exposure to the EU, but it is possible that other countries follow suit. What's your reading on the risk of carbon pricing being imposed on your exports?" Over to you, Gretta.

Yes. Well, the cost of carbon assumptions, I think they're pretty -- that's pretty well covered in the Climate Action Report, and those have been drawn from the base scenarios, which are IEA and IPCC scenarios. So I probably won't elaborate there. I think the EU discussion of the CBAM is an interesting one. It's sort of -- it's the simplest thing to say in concept and will be very, very difficult to implement in practice. As you say, we've got very low exposure to the EU at the moment. And so the extent to which it interferes with trade flows in our half of our hemisphere of the market, I don't see it being particularly large. I'm adopting a bit of a wait and see, to be honest, to see -- a lot of people are talking about it. I think the complexity and the implementation is going to be really difficult given that you've got thousands of steel products being traded around the world. And to implement a CBAM, you're going to have to accurately know what the carbon footprint of each of those thousands of products is. And then the extent to which it's only primary projects -- products, so how far you go down semifinished into finished products, I think there's a lot of water to go under the bridge yet here.

Thanks, Gretta. That's great. Got a question...

Sorry, Don, I was just going to add on to that. That's what I was signaling across to you there. It's probably just worth calling out that the scenario analysis that we've done very much looks at what happens to us, BlueScope, relative to the marginal producer, which at the moment we've assumed is China. And we look at the carbon prices, carbon price relief, what it does to demand and what it does to our cost of capital. And that's all reflected in those scenarios that are in the climate report. So it's a key part of our thinking and watching very carefully how will carbon pricing evolve in the marginal producer, how does carbon price relief evolve and what does that do to the economics of our individual operations and the portfolio. So just to round out that question.

Thanks very much, Tania. That's great. A question now from Dan Kang of CLSA. He says, "A key absentee of the ResponsibleSteel group membership is China. Is there any reason for this? Clearly, for the industry to decarbonize, China is going to be a critical player. How do you assess China's own stated pathway to decarbonize by 2060? Does it materially differ to that being identified by the ResponsibleSteel group or BSL's own carbon pathway?" I haven't given Tim Rodsted a chance to answer any questions now. So I might throw it to you, Tim.

Thanks, Don. And thanks, Dan, for the question. So I mean ResponsibleSteel is -- I mean we've been involved for some time, but it is still very early days. From the time when we started out with ArcelorMittal, there are now 10 steelmakers that have joined in and recently U.S. steel coming on board. But there is a small sort of operation in China. So VAMA is a member of ResponsibleSteel and have been for some time, it's a JV with ArcelorMittal. But I guess coming back to what ResponsibleSteel is trying to do, it is multi-stakeholder, it is right across the value chain. And one of the key things that come through around the development of the initiative is making sure that it's going to be stretching the industry but is also inclusive. So how do we bring the whole of the steel industry along and sort of focusing on the broader ResponsibleSteel objectives. In terms of the -- I guess the stated pathways piece and the China's decarbonization, Gretta, I mean, coming back to the scenario analysis piece and what Tania has mentioned as well, do you have any reflections on how we consider the China 2060 target?

I think it's worth noting that the Chinese industry is very, at the moment, heavily weighted towards the blast furnace and quite a young fleet of blast furnaces there. So I think as Mark pointed out earlier, that's going to create an enormous impetus for that medium-term technical work to decarbonize the blast furnace. The same kind of scrap considerations apply in that there's -- there isn't enough scrap in the world for China to go 100% EAF between now and 2050. And even the IEA's road map only estimates that sort of full utilization of prime scrap, the world can only get to about 45% EAF by 2050. So there will still be a substantial amount of primary steel being made in the blast furnace. And a lot of those younger blast furnaces are in China by that stage.

Great. Thanks very much, Gretta. Anderson Chow of Jarden has joined us on the webcast as well. He's got a question which I might direct to Mark about, "Rapid adoption of decarbonization targets in China appear to have caused material production constraints for steel products, especially in recent months. Has BlueScope China being impacted by the restriction in terms of sales or production in any way?"

No. No, we have not. So our business operates in China for the Chinese market. So we buy our material in-country from local steel makers, convert it and process it and put it into our downstream businesses. So no, we've seen no restriction on supply in the China business within that Chinese market.

Thanks, Mark. We've got 2 more questions, and then we might have a brief break prior to moving on to broader sustainability matters. The first of those 2 questions is, again, in relation to ResponsibleSteel, so maybe one for you, Tim. The details of the ResponsibleSteel certification that is being sought for Port Kembla, what does the plan have to demonstrate? And why is the company seeking the certification?

Yes. Thanks, Don, and thanks, [ Murray ]. So the ResponsibleSteel standard, I mean, climate change is a really key component of that, but it does pick up 12 total principles, which includes safety, labor rights, human rights, integration with suppliers and how we sort of purchase from upstream. So it is broad and it's meant to be that way, which is a whole of value chain approach coming off all the key sustainability issues for the steel sector. So from a Port Kembla perspective, and John, I might throw to you to close this off as well, is really around what sort of management systems do we have in place to manage those issues but also picks up sort of targets and where we're heading to as well. So it's a comprehensive audit more so than what you would do for an environmental standard audit or a health and safety audit because it covers all of those areas, but also picks up interviews with employees, with management and also the community stakeholders as well. So it's a really comprehensive process. John, I might hand to you in terms of, I guess, why are we going through the certification process.

Yes. I mean the history of ResponsibleSteel was that we were one of the original members that actually sort of were part of setting the process up and setting up the accreditation process. But as Tim said, I mean we have a number of, I guess, building blocks already in place there, so some of the ISO certification that we have around the way we manage our operations from an environment point of view, from a safety point of view, from a quality control point of view, a building blocks for the ResponsibleSteel. But it actually stretches us beyond that in the sense of the way we use our resources, how efficient we are about using our resources, how we -- what sort of processes we have in place to improve the efficiency of that resource utilization, the way we interact with our suppliers, what's going on in their supply chain, some of the aspects that's in the sustainability report that you all have seen that's going to get talked about later, how we deal with our employees and interact with our employees, how we deal with the local community, how we -- like when I say resources, I mean, an example of that is water, so the use of fresh water and the way it's actually used in our processes for managing that and improving our efficiency in that space. So it's a very integrated standard. And as I said, we have -- already have the building blocks in place, but the ResponsibleSteel certification is actually stretching us well beyond what we had in those building blocks.

Thanks, Tim, and thanks, John. John, while you've got the microphone, one final one here for you from [ Murray ] again. "What sort of emissions reduction are you targeting for the reline blast furnace #6 relative to the existing blast furnace?"

So the -- it's quite obvious that it's basically a replicator of #5 blast furnace and we will add additional things on to it. So we've got -- for example, we've got a top recovery turbine on #5 blast furnace. Our plan is to put one on #6 blast furnace. It will be a more efficient one. So it will generate additional electricity off it. But we're working on the current injection of gas into the tuyeres as well as pulverized coal to be able to put either coke ovens gas in the first instance or hydrogen when it's available at an economic price. There's other sort of projects like trying to improve the heat recovery, the stove heat recovery. So my -- in summary, I mean, those projects really will contribute to the sort of target that we've already got in place for the emissions intensity improvement out to 2030. So that will be a contribution to that.

Thanks very much, John, and thank you all for your questions, and thank you to the panel for the session we've just had. We're going to take a roughly 10-minute break and rejoin you at about 5 past 11 Melbourne-Sydney time, where we'll pick up the conversation on broader sustainability matters. Thanks very much. [Break]

Welcome back, all. I hope you're able to stretch your legs and grab a quick coffee. Moving along from climate change, and now we're going to touch on our other material sustainability topics, namely health and safety, inclusion and diversity and supply chain sustainability. Before I introduce the leaders of these functions, I'd just like to cover off on some of the highlights of our recent performance. Firstly, to safety. And as Mark highlighted at our full year results and touched on again this morning, a performance on our lag indicators is not where we want it to be. As you'll hear from our VP, Health, Safety and Environment, Deanne Howard, lagging metrics are an important tool for us to report on our past performance, but don't in themselves give insight to how hazards are being managed or the mitigation of risk exposures for our people. Consistent with the evolution of safety thought leadership and like many of our peers, we're substantially evolving our approach to reduce the incidents and impact of events that do or could potentially cause harm. As a key part of this evolution, we've had over 1,000 leaders from across the company, including all of the Board and ELT attend our refreshed HSE risk program. We've also focused on team-based risk control projects, of which we've completed over 400 this year. These projects as well as many others have focused our efforts where they are most needed, whilst importantly, leveraging the knowledge of our people across all of our businesses in designing more effective controls. This evolution in safety will be enabled by our inclusive culture. This culture is also paving the way for us to better reflect the diversity of the communities in which we operate. And pleasingly, in FY '21, we continue to progress on gender diversity, with female workforce participation rising to 22%. Kristie Keast, our Chief Executive People and North American Development, will talk to inclusion and diversity of BlueScope shortly. Under our progress on our sustainable supply chain program despite travel restrictions slowing our progress with on-site audits, we exceeded our target to complete 220 assessments on priority 1 and 2 suppliers since the initiation of the program only a few years ago. Our Head of Global Procurement, Andrew Watson, will round out this session with a rundown on our supply chain sustainability approach. And now I'd like to hand over to Deanne to cover off our evolved approach to safety.

Thank you, Tim, and hello, everyone. I'm really excited to share with you all the journey we've been on over the last few years in evolving our approach to safety. As Tim mentioned, in terms of our lagging injury metrics, our performance has declined in recent periods over a longer-term plateau. Whilst there has been some variation to this, we've sat in the total recordable injury frequency rate, or TRIFR, range of between 5 to 7 over the last decade despite our enduring efforts to reduce the number of people who are hurt at work. Encouragingly, we're seeing an improvement in the injury profile with a lower proportion of injuries in recent years, having had the potential to be life changing. But we know that TRIFR is only a backwards-looking figure. And a focus at face value on these indicators doesn't give us a full picture. In the last few years, we've recognized that we would need to build on our risk management foundations and look for contemporary ways to continue to learn and improve to make a positive difference in our workplaces. Our evolved approach has leveraged leading global industry expertise and leveraged our existing inclusive culture. We're focusing on reducing severity of actual and potential incidents so that when an incident does occur, its outcome, especially to our people, it is only minor. So what does evolving our approach really mean? We're shifting our focus to ensure the presence of capacity in our systems and processes rather than being driven by an absence of incidents as influenced by injury frequency rates. We acknowledge that humans make mistakes and our ability to tolerate this error and our resilience to recover when things go wrong lies in strengthening our controls. At its core, we are taking a human-centered approach to managing risk. We're doing this by learning from the people who make and handle our products, leveraging their rich insights to understand what is working and where we can improve and seeking their involvement in designing better controls where we need them. We're empowering our people across all levels of our organization to proactively identify potential problems, find opportunities for improvement and equip them to be part of the solution. As part of this, we're evolving the indicators we're using to provide more meaningful insights moving from a reliance only on lagging indicators towards a balanced approach that considers potential risk, the capability of our people, the capacity in our systems and the context that underpins our past performance. In terms of lagging indicators, we're moving away from lost time injury frequency rates, instead focusing on TRIFR. We're also gleaning insights from injury and incident severity measures to provide more useful context to TRIFR. We're continuing to evolve our leading indicators. And as you saw at the full year results, we're tracking the number of people involved in our global HSE risk management program and the number of risk control improvement projects our teams are undertaking across our business. Our shift continues our alignment with the broader evolution of industry reporting standards. To support the evolution of our approach, we've embarked upon a global HSE risk management program, which over 1,000 BlueScope people have participated in, and this has included all of the Board and executive lead team so far. The commitment from our leaders who have participated in the risk management program extends beyond classroom type learning. It relies on practical immersion to learn and embed some of the concepts and frameworks that are discussed in the program. In the program, there are a number of frameworks to assist our people in their understanding how we're thinking about safety. Today, I'm profiling 2 of them that we -- have created some impact for us. Firstly, the blue line/black line concept which shows the difference between how a task or planned work is designed to be completed, that's the straight black line, and the way work is actually done in a complex environment, which is the wavy blue line. The reason the way work is designed and completed differs can be due to a whole host of factors, for example, distraction outside of work, changes to operating environments, differing staff on shifts, how tired an employee is, human error, whether the tools for the job are available or just better ways to do the work and the list goes on. The point being that the way work is often planned is really completed consistently in that way. The red line on this image represents a potential hazard, where work strays away from the designed or planned procedural process. As the blue line drifts below the black line due to the myriad of factors I just mentioned, it may come to a point that intersects with the red line, leading to an incident. The green shaded areas on this chart show the opportunities where we can strengthen our controls. It recognizes that good HSE management is not just about following policies and procedures or designing a task or process that avoids risk. It's about us understanding the controls we have in place when work flexes or varies and how effective those controls are at keeping our people away from hazards. The second framework is better questions, stronger solutions where we're encouraging our people to ask better questions as part of their work to better understand how to do things in order to identify improvements to processes or procedures. We're having our people ask 2 types of questions across all levels of the organization. First, what is STKYE, like in the work we do, what is the stuff that can kill you or seriously harm you or the environment? What stops that from happening? How do we actually do the work now? The second is the 4Ds. In the work we do, what seems either dumb, dangerous, difficult or different. Across the 2 types of questions we ask, we seek to understand if the controls in place are enough or if we could do better and probes our people to think of alternative solutions, including ensuring we consider potential impact of current or potential controls. These frameworks and our global HSE risk management program have been developed with the assistance of industry expert and thought leader in industrial safety, Dr. Todd Conklin. Whilst I could try and cover off Todd's experience, approach and reflections on BlueScope, I thought it would be best that you hear direct from him. So without further ado, I will play on a video that will hopefully provide you with some insights into the journey we're on and how our approach has evolved.

My name is Todd Conklin, and I work in the field of human reliability. And I've done so for a long time. In fact, I have spent about 30 years working at a place called Los Alamos National Laboratory in the United States. And what we did at the time was understand the human to system interface, which sounds kind of fancy. But really, we started thinking how can we make the art of doing work safer, more reliable and more resilient. My background is in psychology, industrial psychology, and I've studied for years the notion of highly reliable organizations. I've published books, I've written papers. I've given about 1 million presentations, and I have a podcast. And I talk to people all over the world about how to make their organization more resilient and reliable. It's interesting to think about helping companies like BlueScope because BlueScope is in a position that they might be afraid to say to you, but I'm not. And that position is they've worked diligently for years to become better and better and better at industrial safety. And you would only need to look over time at accidents to realize a constant drumbeat of improvement. That's important because that means the fundamentals of industrial safety are in place and functioning. The problem is, is you get to a point organizationally where the tools that got you to where you are, are not the tools that will take you to where you want to be. Now the fancy word for that is an asymptote. And in fact, BlueScope is in an asymptotic curve. They have really good safety performance that's sometimes peppered with highly significant events, fatalities and serious cases to get to a place where their performance is even more reliable because we're not talking about being safe. We're now talking about being safer. What we want to do is help BlueScope reformulate its understanding of safety. Safety for BlueScope is not the absence of an accident. In fact, safety is the presence of the [indiscernible] accident successfully. Right behind my head, in fact, you can see that very quote redefining safety so that you're not managing accidents, you're actually managing the ability to have failure safely is a very important next step on the BlueScope journey. And what's most exciting is it's a step they've taken already. and they're already seeing remarkable benefit from simply redefining the target and focusing on creating systems that have the capacity to fail successfully. Well, let's talk about what success looks like because to do that, I think we have to talk about the difference between the word robust and the word resilient. So BlueScope is an organization that's been on a journey, and they've created very robust systems. Your systems are good at preventing bad things from happening. But robustness is vital. It's just not enough. What is missing is the resilient aspect of an organization. So I think of a dam, the thing that holds back water. A dam has to be both robust. It has to hold the water back, but it also has to be resilient. It has to have capacity so that if the water gets really high, they can put it in a spillway or put it in a canal or put it in a holding pond. They can actually move the excess water and keep the fortification, the robustness of the dam intact. That, in fact, is the journey that BlueScope's on. But that means the traditional measurements we've used to understand safety are probably not very valuable in moving forward because traditionally, the way we've understood and measured safety is by counting the number of people we injure. Well, between you and I, that's kind of a dumb thing to count. What we ought to do is actually measure and monitor the things we desire. So on that dam that I used earlier in the example, I would want to measure the effectiveness and availability of the spillway, the holding ponds, the canal system. And I'd want to know if my system had the ability to actually stretch and flex if some kind of variation operationally happened. That sounds pretty fancy, but really what we're saying is let's not measure the things we don't want to have, let's actually measure the things we want to have. So instead of measuring injuries, why don't we measure the availability of barriers of defenses, of controls, of engineering. Those things actually help us understand what we have in our capacity so that when some unusual operational upside happens, we have the ability to recover. It's a challenge, but it's a great challenge. [Technical Difficulty] about it is there's not really a right answer because we're all on this journey to understanding what to measure together. And we'll find it, but it's going to take some time. BlueScope is really bold and brave and pretty smart and pretty forward thinking in their belief that there are truly better things they can look at and understand to see how much safety capacity they have in their organization globally.

Good morning, all. I'm Kristie Keast and I'm the Chief Executive, People and North American Development. I'm proud to be here today to speak with you about inclusion and diversity, which is a core value of BlueScope. We want being a part of BlueScope to create a sense of pride in our people, our customers, our suppliers, our communities and our shareholders. We want all of our people to feel included, valued and to know how they contribute to our purpose. Social impact and inclusion is driven at a global level, and this ensures we align and integrate all our I&D activities under the global due diligence process and with the continuous improvement mindset. We will continue to focus on our people and connecting them with our purpose. We want a workplace, which is inclusive and respectful and reflects the communities in which we operate. We want strong engagement with all of our communities and we hope to develop new partnerships to drive change, and we are committed to holding ourselves accountable to the same standard that we expect of our suppliers when it comes to human rights and our social license to operate. Whilst we are proud of how we do business and of our inclusive culture today, we know there is always more that we can do. Our businesses are staying focused on gender diversity as a priority. However, also exploring beyond gender focus areas such as disability, ethnicity and race, First Nations, diversity of experience, thought and opinion. Whilst we consider diversity across many aspects, the greatest opportunity for us to improve has been in gender diversity. In 2016, BlueScope made a considered commitment to improve the gender diversity of our workforce across all levels of the organization. The following data illustrates our ongoing progress towards gender balance, including in the leadership pipelines and our operations workforce. We have made great strides in this area and are really proud to have a gender-balanced Board and 40% female representation at the ELT. We've also vastly enhanced our leadership pipeline by doubling the percentage of women in our broader executive team since 2017. This year, we signed on to the HESTA 40:40 Vision initiative. BlueScope is in a great position with regard to having already achieved this, the Board and ELT. However, this will be stretching and challenging at the next levels down and will require ongoing focus and commitment to building female participation in our leadership pipelines to ensure this performance is sustained. Reflecting then on the operator and trade workforce, you will see we have doubled the percentage of women in these roles. Clearly, there is still more work to be done. Our improvement has been driven by thinking outside the box to overcome perceived barriers and through a multifaceted approach. I wanted to share a case study to explain how we have achieved these outcomes. So on the next slide, you'll see some information relating to the Blue Boots campaign. Our approach to be able to deliver on this change had a number of components to it. Firstly, we had to review long haul traditional recruitment and selection processes and do a complete rethink of our approach to market from the places we look for candidates, the attributes we assessed and the way we promoted these. We launched an innovative marketing campaign, Blue Is The New Black, with a female focus across multiple social media channels, including Facebook, Twitter and Instagram, inviting women to apply. And this was to drive interest in areas we wouldn't otherwise have considered such as targeting women in other industries, but with similar shift structures including nursing, childcare and food processing. The language of the ads was modified to be less masculine and biased to heavy manufacturing. We designed a 3-phase selection approach involving video interviews and information evening and an interactive assessment center, and we invested time in familiarization visits, enabling our candidates to meet with other employees within BlueScope to learn from their experience as well as seeing firsthand the work environment. This and to feel highly informed about the role requirements and the capabilities throughout each stage of the process. We also look to the labor hire companies and established relationships with those providers who are willing to work with us to source more diverse candidates. We then had to ensure the design of the role in the physical workplace were suitable. This was as simple as ensuring there were suitable female [Technical Difficulty] and near the work areas and providing PPE in women's sizes. We explored alternative work arrangements and job design, including different shift patterns, flexible start and finish times to be more suitable around school times, looked at where the heavy manual task could be reengineered or eliminated to the benefit of all, not just women. We created a supportive environment by rolling out inclusive leadership training to over 400 of our leaders and we assigned buddies and mentors for new employees to ensure the culture evolved with the makeup of the workforce. Where possible, we had more than 1 female on a shift or team and ensured performance standards were the same regardless of gender, so there was no special treatment. This approach was piloted at the sites with the most opportunity through attrition, turnover or growth. And given its success has since been adopted by the broader business. And as you can see, has had a material impact over a 5-year period, and importantly, a sustained improvement year-on-year. We've been working really hard on the retention of our new women joining the business, and this is why building an inclusive culture in parallel is critical. There have been many positive outcomes and benefits, including a positive shift in workforce behaviors and culture, our willingness to explore innovative approaches to work design and flexibility, the willingness to challenge traditional approaches to recruitment and selection, improved relationships and results from labor-hire providers and identification of new recruitment pathways. We've changed the perceptions of the nature of the work and conditions and now are receiving word of mouth and referrals through existing employees. We have higher quality candidates as an outcome of focusing more on attitudes and behaviors rather than just the technical competencies. And we have improved work environments so more innovation, problem solving, diversity of thought and flexibility, which has benefited all of our employees. Looking ahead, in FY '22, we want to ensure that we foster an inclusive culture in everything we do. We've chosen 5 focus areas what we feel will make the biggest impact. These are: Creating a safe environment for all to speak up, be heard and to feel welcome. And last year, we launched our speak-up policy, our how we work Guide, and we've been working through this on our HSE evolution program; enhancing under-representative groups; and then driving positive community impact through partnerships; and building leadership capability for an inclusive culture; and finally, measuring our progress, sharing our learnings and stories. I hope this update has provided you with some practical insight into how we are driving change and an overview of our social impact and inclusion framework. Of course, we'll continue in our efforts to better reflect our communities, and we will keep you updated during the results presentations and in the sustainability report. I will now pass to Andrew Watson, who will provide an update on supply chain sustainability.

Thanks, Kristie, and hello to you all. For those of you I haven't met, I'm Andrew Watson, and I'm BlueScope's Head of Group Procurement. I oversee our supply chain sustainability program. I thought I would start by talking about our approach to managing ESG risk, including modern slavery risk in our supply chains. Our first step is to segment our suppliers based on risk and leverage and to ensure that we're addressing the highest risk areas and working with those suppliers where we have the ability to influence. The process incorporates detailed risk analytics provided by ELEVATE Limited as well as aligning with our local procurement and management teams. From this segmentation process, we prioritize suppliers for engagement and then we then engage with our suppliers to take them through our approach to sustainability, our expectations and to help them understand the risks that we're seeking to manage. Following this, we assess our suppliers with a mix of assessments through EcoVadis, through on-site audits and, if possible, leveraging industry certification programs. From this assessment, we provide our suppliers with feedback and discuss strengths and areas for improvement. We also discuss how our suppliers are assessing their own supply chain. And if required, we agree on an improvement plan and explore what resources may be available to assist them with the improvement work. This process is cyclical. We aim to refresh the entire segmentation model at least every 2 years but update the risk analytics annually. And the suppliers that remain prioritized require an assessment every 1 to 2 years depending on the assessment outcome. Now a little about our supply chain. As you've heard today from many of our speakers, doing business well is part of BlueScope's DNA. We have always sought to operate responsibly and have had an interest in ensuring that those that we do business with share this intent. Given what we do as a capital-intensive industrial manufacturer, it's important to have reliable, consistent and secure supply of raw materials and inputs. Because of this, we often have deep and long relationships with our suppliers and have worked with many of them for decades. I've included on the page a graph showing the distribution of our EcoVadis assessed suppliers compared to the distribution for all of the companies assessed by EcoVadis, as I think this demonstrates what we are seeing as the risk profile in our supplier base. Our average supplier score is about 12% higher than the EcoVadis average, and we're seeing significantly lower numbers of suppliers in the high- and medium-risk ranges. It's also important to note that our suppliers are predominantly domestic to our operations. In fact, over 85% of our suppliers operate in the same country as the BlueScope facility that they are servicing. Many of them in the same region. This is an important factor in the design of our supply chain sustainability program, which while centrally led is very much powered by our in-country procurement and supply chain teams partnering with their suppliers. As you can imagine, we have many thousands of suppliers across our global operations. However, our supplier segmentation process focuses on around 1,100 suppliers that make up over 90% of our spend by business unit. This segmentation process utilizes country and supply chain risk data provided by ELEVATE as well as relationship data to determine leverage. The process helps us to prioritize our engagement efforts with -- on suppliers where there is a high combination of risk and leverage. And while I'm addressing our supply chains, I wanted to mention that across the supply chains of our broader industry, there are several key issues that we're aware of and engaging directly with suppliers when required. A couple of these are: firstly, tailings management in the iron ore supply chain. This has been of critical focus following several disasters over the last few years in South America. We're keen to ensure our suppliers have addressed these risks and taken corrective actions where required; pig iron. We source pig iron for our North Star operation from Brazil. This is produced in Northern Brazil using charcoal, which is a labor-intensive process that is often located in disadvantaged regions of Northern Brazil, giving rise to high risks of forced labor, under payment and poor conditions. We've conducted many on-site audits of both the pig iron and charcoal suppliers related to this supply and have had good success at implementing recommended corrective actions. Much of our effort in that supply chain is aimed at building the capacity of our pig iron supply to better manage the risks in their charcoal suppliers; and lastly, we're acutely aware of the impact that mismanagement of heritage sites has had on First Nations' peoples in recent years. We've engaged with relevant suppliers to understand the causes of these and to add our voice to the need for them to ensure that the processes to identify and manage these sites and the agreement and dialogue with their owners is in place to avoid this happening again. Now I wanted to talk a little about how we're progressing in strengthening our controls and reducing risk through our Engage-Assess-Improve process. Over the last 2 years, we've completed 230 assessments of our priority suppliers against a target of 220. This has led to implementing corrective action plans for around 20% of these suppliers. We have been successful in moving many of our assessments across to the EcoVadis process, which provides a consistent, independent and shareable supplier assessment and has really ramped up our ability to engage with suppliers and corrective actions. The ability to continue to progress EcoVadis' assessments through the disruptions caused by COVID over the last year has been a real game changer. We've also continued to use third-party on-site assessments as part of our toolkit. However, this has been significantly impacted by the impacts of COVID-19 on travel and access to sites. As I previously mentioned, we have refreshed our supply segmentation process, which now includes around 1,100 suppliers who account for 90% of our external spend by business unit. This refresh has increased the list of prioritized suppliers to around 280, and this will form the basis for our assessment targets over the next 2 years. I've included on this page some details about the sort of data that's available from our EcoVadis platform. In this case, it relates to supplier reassessments. And it indicates that 57% of the supplier base on the platform have been through multiple assessments and that this overwhelmingly results in an increase in the overall assessment score, demonstrating their improvement over time. It also indicates that only 4% of these reassessed suppliers have an assessment score of concern and have also had a score decrease upon reassessment, clearly indicating a small pool of suppliers that may need more support. Before I hand back to Don and Tim, I wanted to briefly take you through our key focus areas for the next couple of years. In terms of our supplier focused work, our Engage-Assess-Improve program, as I mentioned earlier, we're targeting engagement with around 280 prioritized suppliers over the next 2 years. Importantly, we also have an aspiration to continue to increase our targeted approach to on-site assessments. This will be dependent on COVID-19 impact. However, we're targeting around 40 to 45 audits over the next 2 years, which is around 15% of our prioritized supplier base. I've included on the page some data from the ELEVATE on-site assessments conducted in FY '21. The vast majority of audit findings relate to health and safety audit areas, predominantly related to emergency preparedness and machine or process safety. Hours of work is a consistent area for audit findings. And while only 9% of the findings overall, it's the one area that was represented in all audits that we conducted. This is clearly something that will require ongoing focus. And lastly, there are very few findings that relate to indicators of potential forced labor and/or child labor. These audit findings come from a single audit and relate to policy or process gaps. Another key area of focus is building on our capacity to support people working in our supply chain. This is in addition to working with suppliers, and it involves deeper training within our own business on modern slavery and social compliance risks and a deeper appreciation of the specific risk factors that are present in each of the regions where we operate, incorporation of these risks into our existing risk assessment and management frameworks and building the capacity to recognize and act on these risk factors, as well as exploring effective and appropriate tools to provide mechanisms for raising grievances, worker voice and providing access to remediation to people working in our supply chain. Overall, I feel that we've progressed well in building and implementing a framework for supplier engagement, risk assessment and improvement. Our progress over the next few years will build on this while also starting to focus more on improving our capacity to support the people working in our supply chain. I hope you found this session informative and look forward to taking your questions shortly. I'll now hand back to Don and Tim.

Thanks very much, Andrew. As it happens, we have a panel assembled, Mark Vassella, Tania's here, Tim, Kristie and Andrew. But as it turns out, we have no questions at this point in time. So I'll invite you all to contact Chris Gibbs or myself separately if anything comes to mind after this session. But thank you very much for your interest in our discussion today. Tomorrow, we're going to pick up on the second part of our transform pillar of the strategy, which is focused on digital and innovation. And then we'll move extensively into the grow pillar of our strategy and have briefings from each of our business heads around the globe. So we very much look forward to you joining us and coming with some great questions tomorrow. Thanks again for your attention and we'll see you tomorrow.