Good morning, everybody. Good morning, everybody, and welcome to the Illawarra. Welcome to Port Kembla Steelworks. It's lovely to see you all here today. Thank you for making the effort to come down to the BlueScope Investor Day. We've got a very full day for you, and I'll run through some of the logistics and then give you a briefer introduction shortly. But before we do any of that, I'd like to hand over to Dr. Jodi Edwards, who's gonna give us the welcome to country. So, Dr. Jodi.
Yulunga nagambi nay gang Jodi. Ni nabu ni baba ni bun shnumbun malanda dayalung bora. Ni yulunga. Ni yamba, yamba, yamba, ni Dharawal, Illawarra, Wadi Wadi, ni Yanma, Muru, Yiranma. Ni Dunj, ni, ni Ngempaara, ni Ganangara, ni Yuin, ni Gadigal, ni Dharug. Ni nama Noniya ni BlueScope. Hello, and welcome. Today, firstly, before I start, I wish to acknowledge my elders, past and present, and on their behalf, I welcome you all here today. I'd like to acknowledge that today we meet in the homelands of the Dharawal, Illawarra, and Wadi Wadi people, and in this place, they held age-old ceremonies beneath our Grandmother Mountain and our Grandfather Mountain. That's not all that we did in this place.
You see, we invested in country, we invested in our people, and we invested in us as a community, and we took time to learn from country, both land, sea, and sky country, and we engraved those learnings in the rock art that litters the escarpment behind you. And so that it's very, very, very fitting that you come here today as investors to learn about BlueScope, who for an eternity have learned, watched, mirrored what Aboriginal elders have said to them, have showed them. You see, they were one of the first organizations to create employment opportunities outside hunting and gathering for our people. They understood that we used the bark from the tree to make our nets, and those trees were cut to make way for their organization, and so they harnessed inside of the community.
In a commitment of environmental friendliness and cohesion, they now start to plant those trees back, not only for the people, but for the flora and the fauna that need it. The eucalypt trees, that hardwood that creates the longevity of fire that burns within us, also provides the nutrients required by our koalas, our Gurawula. Gurawula are sacred to us because he helped Dharawal people move when the oceans rose to come across the sea. And so it's very fitting that they are now putting back into the community what they took from the community. You see, that's partnership, that's investing, and that is what creates great harmony. That's what creates a place where people wanna be. You see, our people, we traded from the trees, from the feathers of the emu. We traded with fish. We were one of the first traders.
We traded with the Gundungurra people, who live above the mountain, with the Gadigal people, where Sydney first came from... and those lessons that we learned were learned around the campfires, sitting in circles yarning. So understand today that while you sit and listen, you'll move in many circles, because this organization has taken the time to listen, yarn, and follow the circles of the past, to come back to the present, and to create a future for all. So on behalf of my elders, I say, "Yulunga mujangal gurrugul" hello, welcome. We call you all friends. Thank you.
Thank you, Jodi. Thank you for sharing your stories with us. That's a fantastic start to the day. So look, a quick run-through on today's schedule. We've got two presentation sessions. We'll split them between the morning and then after lunch. We're gonna cover off with Australian Steel Products, where you're at the home of climate and sustainability more broadly. That follows the release of our sustainability report, which just came out this week, and a fabulous document, and most of the team that were involved in it are here today. So I'm very proud of that document and thank them for their efforts. And then after the presentations, we'll do a site tour, which is always a highlight for everybody. So just some housekeeping rules.
In case of an evacuation, I'd just ask all you guys to remain calm and follow the BlueScope people. You'll probably work out who we are. We've got you surrounded with high vis and fantastic indigenous art. We'll meet in the car park, in the grassed area. The bathrooms are on the other side of the hall here, they're clearly marked. And we've given you guys a swag, which includes a water bottle, which there's a couple of filling stations out in the foyer. So you can top up the water bottle. I'd urge you to sort of fill that up. It won't be as hot today as it was yesterday, but I urge you to fill that up before you go on the site tour, so you've got some water and you can stay hydrated.
I think we've also left the Wi-Fi details on your seat. Welcome. My name is Mark Vassella, and it's great to have you guys here today. As I said, we've got a diverse group of BlueScope's leadership here for you today. We're all in high vis, so you can pick us out quite easily. You see plenty of me, so it's not my day today. I'm just gonna do a brief introduction and then hand over to the team. You'll get great access to not only the individuals in the room today, but as we walk around the plant, a fantastic opportunity to see our people in action, and you'll get a very, a very good sense of how passionate they are about what we do here at Port Kembla.
So before we start, just a quick overview on BlueScope. We like to think of ourselves as a different kind of steel company. We're led by our purpose, and we're focused on building a sustainable business. We've got a high-quality set of assets and a strategy that we think leverages that footprint and those assets. A very strong focus on research and development, branding, and channel, and you see that with our products that we'll expose to you today. But also a strict financial framework that ensures the financial strength of the business and our cost competitiveness, and we're always looking to invest in future growth and returns. We're guided by our purpose and our bond, and our purpose goes to the fact that we exist to do more than just provide return to shareholders.
I think you've heard a little bit from Jodi today about the important role that we play in the communities that we operate in. Our strategy, which I'll touch on a little bit more in a few moments, works to guide us on how we deliver our purpose. If we think about what matters to us, the key areas of focus for us as we position ourselves as a large-scale steel manufacturer with long-lived assets in typically regional communities. So in short, it's for us, it's about caring for our people, our environment, and the communities that sit at the heart of what we do. You guys are aware of our great portfolio of high-quality assets. We've got a diverse exposure to end-use segments with a clear focus on building and construction.
Our earnings profile is increasingly shifting to the U.S., with nearly half of our earnings coming from North America and a third coming from Australia. We're recognized as a global leader in metal coating and painting for building and construction applications. We manufacture and market a wide range of branded products, including the iconic COLORBOND brand, and our focus is on high quality and differentiated building steel products. We also put a considerable effort into research, development, innovation, marketing, and branding, and this is what we think makes us a little bit unique as a steel company. The financial framework that we operate to, and much of this is born out of the challenges we faced some years ago in the organization, really clarifies how we think about business performance, the balance sheet, but also importantly, returns to shareholders.
And we think we're well-positioned for favorable and continuing trends that we see solidifying. And that includes the demand outlook for steel and our products and solutions across green energy infrastructure, lower density and regional housing, e-commerce and logistics infrastructure, and a solid pipeline of commercial and industrial projects.... We also see in the U.S. capacity consolidation and rationalization, and that's happening as we speak again right now. And while we're seeing some short-term volatility, China's efforts to reduce overproduction and emissions, we think are major structural positives. And of course, given what we went through with COVID, the importance of domestic supply chains and sovereign manufacturing has been demonstrated over the last few years.
Now, as I said, we operate large and sophisticated assets in a cyclical industry, and what we try to do is look through the cycle, adopting a balanced view of both the current and the emerging operating priorities, and this is all about achieving long-term growth. The ongoing strength and resilience of our business is core to delivering on that sustainability objective. 2023 marks the fourth anniversary of the BlueScope strategy that we first published around the transform, grow, and deliver concept that you see here, and we think we've made reasonable progress over those four years. There's lots still to do, but perhaps if I can just reflect for a few moments on some of the achievements that we've had in this area.
As we thought, as we think about transforming the business, this particularly relates to addressing climate change, and while there's much to be done, the highlights over the last four years include the formation of the corporate climate change function. We're one of the first companies to do this from an ASX perspective, and, I've said to many of you on one-on-one occasions, the only thing I'd do differently is do it a year earlier if I had my time over again, because the wave of effort and focus in this area has been extraordinary. But Gretta's built a fabulous team of subject matter experts that I think hold us in very good stead. We've established our climate strategy, including a 2030 goal, target, I'm sorry, and a 2050 net zero goal.
The acquisition of BlueScope Recycling in the U.S. has bolstered our approach to circularity, which is a core tenet of the steel industry, as we produce products that can be infinitely recycled, and to date, that work is progressing well against our targets. With projects such as the accelerated feasibility study, now in execution, of the electric arc furnace at New Zealand, the company is well-placed for a transition to a lower-emissions steelmaking future. We've also transformed our use of digital technology, which you'll hear about today, and having embedded that capability across the business, we see this as a fantastic opportunity for the business to continue to improve its efficiencies. In terms of our growth, significant strides have been made, most notably in the U.S.
BlueScope's U.S. presence has grown materially since FY 2019, with $2.5 billion invested to build a platform for quality earnings growth. The ramp up and expansion at North Star is advancing well, and work is underway on the future debottlenecking opportunities. As I mentioned earlier, BlueScope Recycling has continued to gain momentum, including the acquisition of a third facility. We're now the second-largest metal coil painter in the U.S., and BlueScope Coated Products provides a great opportunity for us to take our painting capabilities into this very large U.S. market. Locally, here in Australia, works commenced on the new metal coating line in Western Sydney, and this will support our growing demand for value-added coated and painted products, evidenced by the record level of COLORBOND sales in FY 2023.
If we think about the deliver component of our strategy, the evolution of our safety culture continues with an enormous amount of work going on inside the organization. Again, you'll see that today. We continue to make progress on better reflecting the communities in which we operate, with a large range of inclusion and diversity initiatives, while also bolstering our approach to sustainable supply chains. Financially, over the last four years, we've demonstrated our strength with an average underlying EBIT return on invested capital of 22%, an average net cash position of around AUD 500 million, and an aggregate AUD 1.8 billion returned to shareholders.
These highlights demonstrate how our strategy has guided the business, but it also has allowed us to set the business up for the next decade or so. There's more to do. On transformation, a strong focus on customer and digital, whilst we continue to remain focused on climate. On growth, it's about delivering on the promise of our investments, particularly in the U.S., whilst we still have a key focus on growing domestically in Australia, New Zealand, and Asia. All of this while we maintain a safe, adaptable, and resilient business model that will deliver returns through the cycle. I'm now going to hand you over to Tania and the team here in Australia, and we'll then move on to the other areas later in the day. Welcome again, and we look forward to spending the day with you. Tania.
Thank you, Mark. Welcome to Port Kembla. Welcome to the center of the universe. Right, so we've been operating steelmaking at this site for almost 100 years, and 2028 is our 100-year anniversary, so we're fast approaching that point, and we're very focused on ensuring that we have an enduring and vibrant business here in Australia for another 100 years. It is an exciting time, not just in building and construction, but also the broader opportunity around renewables, infrastructure, and defense, and we'll touch on some of our aspirations and initiatives for the Australian business today.... But firstly, a recap just for those who are not familiar with Australian Steel Products.
Here at Port Kembla, we produce just over 3 million tons per annum, and we operate all the way along the value chain: iron making, steel making, hot-rolled coil and plate, then into coated and painted products such as COLORBOND and TRUECORE. Today, we'll be visiting a number of the manufacturing units here at Port Kembla. There's a second industrial complex down at Western Port in Victoria. It takes about 1 million tons of hot-rolled coil from here, and it manufactures that hot-rolled coil into coated and painted products. There's a further two COLORBOND lines in market, one in Sydney and one in Brisbane, close to our customers, and again, taking the feed materials from here, and that network of manufacturing units is supported by a network of service centers in all of the capital cities.
From the manufacturing units, the product then goes off into the various channels to market domestically. About one-third of the product goes through our own channels, so that's Lysaght, Fielders, Orrcon, BlueScope Distribution. It's all of those dots, the green, amber, and red dots, on the map there. So it's a very, very comprehensive network that we maintain, and obviously, two-thirds runs through the external channels. At Port Kembla, our iron-making technology is blast furnace-based, and just a reminder, blast furnace technology comprises around 70% of global iron and steel production. So it's around 25% scrap-based EAFs, and the balance is direct reduced iron, about 5% DRI technology. But it's the blast furnace process that dominates the global steel industry. It's the low-cost producers, as are we, and it's what we compete with in this region.
There's more than 1 billion tons just to the north of us, and it's the blast furnace process that originally drove the choice of this location here at Port Kembla, with direct access to the high-quality Illawarra coking coals. We're also situated on a deep-water port with close proximity to the large East Coast population centers. So if I had to summarize the Australian business, we pride ourselves and have a reputation for high-quality products, and in particular, we're one of the global leaders in coating and painting technologies for building and construction, and the global center of excellence for BlueScope is based here at Port Kembla. We also have the iconic COLORBOND brand, along with a very engaged and capable workforce. We directly employ around 7,000 people across Australia, most of them in regional locations, and these are high-value roles.
Given our extensive regional footprint, it's very important to us that we have strong engagement with our local communities, and I think we touched on that with the opening part. If I put all of those strengths together, what we have is a very successful integrated business here in Australia. Our vision for Australia centers around being a vibrant, modern manufacturer, embodying progress, innovation, and sustainability. There's three key areas that we're gonna touch on today. Growth: we continue to see a bright future for the business here. We've been steadily building demand over many years, not just with COLORBOND steel and roofing and walling and light-gauge steel framing, and Gerald Cornelius, who's the Head of Australian Steel Markets, will be taking you through some of those major growth activities. Looking forward, also the opportunities in defense, infrastructure, and renewables.
For manufacturing, for those of you coming on the site tour for the first time today, the scale and complexity of the asset base here can come as a bit of a surprise, and we pride ourselves on manufacturing excellence and innovation, and you'll hear from Dave Scott, who's the head of manufacturing, and Dave will take you through some of the major initiatives that we have underway, particularly in how we're now leveraging technology into our key processes. Dave will touch on the asset intelligence and process intelligence programs that we're now using to drive productivity and quality outcomes. We'll also touch on the Port Kembla Land Transformation project. Now, this project is not just about property development, it's about creating an ecosystem around the steelworks that we can draw upon as a key resource and talent pool into the future.
Now, we are taking a very long-term perspective with that one, 20 years plus, but it is being done with a commercial lens, and Dave will spend a bit of, little bit of time on that. Then, of course, the pathway to net zero. Our approach to decarbonizing the Australian business has firmed into two parallel streams of work. Firstly, this decade, optimizing the existing blast furnace process, and we're making great inroads, and Dave will touch on some of the initiatives that we have underway. The second work stream is looking over the horizon at the technology change and the key enablers that will need to be in place to achieve net zero emissions by 2050.
Now, this second work stream is focused on the potential for DRI technology, and Chris Page, the Head of Future Technologies, will take us through that program of work, and of course, the Reline is the bridge between the two. So at this point, I'm gonna hand over to Gerald Cornelius, the Head of Australian Steel Markets, to take us through some of the growth program.
Thank you, Tania. Keeping with that theme of growth, over the past 10 years, we've seen significant growth across all all our key product categories, but significantly, COLORBOND, as Tania and Mark have touched on. It's been a concerted effort to drive intermaterial and intramaterial growth, and you'll see with those first three columns that it's been heavily focused towards the residential building market. So that growth in TRUECORE, COLORBOND, and ZINCALUME specifically is what underpins the metal coating line investment in Western Sydney that Mark touched on, and Tania will give a bit more detail on shortly. We're equally excited by some of the growth that we've seen in some of our other product categories when we look at TRU-SPEC and XLERPLATE, and when we look into the infrastructure pipeline of projects that are coming forward, and specifically, the renewables energy opportunity.
So great opportunities for us in solar, onshore wind, offshore wind, and also transmission. We continue to invest in our brands, most notably the COLORBOND steel Made by Australia campaign. We're investing across a number of digital initiatives to increase the effectiveness of the demand, demand funnel, with a focus on marketing automation and targeted and personalized content. This is still in its early stages, but we've been really pleased with the progress so far. We're also working to improve our customer experience through a proactive and cooperative marketing program designed to support customers in effectively promoting the COLORBOND steel brand to drive demand for their businesses. A great example of this is some of the work that we're doing in the fencing space, working with our customers to inspire consumers to use COLORBOND steel in fencing, whilst growing awareness of the recently launched new colors.
BlueScope products have played a significant role in the last six series of The Block, an Australian reality TV series broadcast on the Nine Network. We started as a product supplier, and after a positive experience, have expanded this investment over the last six years to become a major sponsor in recent years. What has been most appealing to us has been the ability to feature both COLORBOND steel and TRUECORE steel. Our annual brand tracking metrics indicate that there's a positive predisposition to our brands that are featured on The Block. It has also provided a great platform to feature our various marketing campaigns. As you can see from the pictures from the current season of The Block, both COLORBOND and TRUECORE feature quite heavily. It also gave us an opportunity to feature three of our brand-new colors that were launched late last year.
The bottom two pictures, you can see Bluegum Matt, Southerly, and Dover White. We continue to innovate and invest in our product offerings. One such investment worth calling out is our direct-to-steel digital printing that we're exploring and on track to bring to market late next year. This will supplement the value proposition of COLORBOND steel by adding high-quality, durable pattern printing capability to our product. It further enables us to better serve niche and bespoke applications in pre-painted steel building segments. This capability will be a first for BlueScope globally and will complement our existing solid color capability. It will be achieved via the installation of digital inkjet equipment to our existing paint lines.
The first market embodiment of this technology, as you can see from the pictures in the top left, will be woodgrain finishes for garage doors, which is an existing market for us. However, the installed equipment will not be limited to this specific application in terms of its capabilities. You can see to the top right, it opens up a whole range of opportunities for us, where we think that there's opportunities for us in fencing and facades in the residential space, and equally in the commercial space, walling and facades as well. One of the success stories that we're really proud of is the acceptance of TRUECORE steel as a mainstream building alternative in the residential market. Australian consumers now know they have a choice. It has been widely adopted by the building industry, especially in applications where replicability and speed of construction feature.
Where this leads us is to the next iteration of the TRUECORE steel creative. Our goal was to bring to life the importance of choosing the right house frame, as it protects your biggest asset, your family. To do this, we needed to bring to the fore the inner strength of a house frame made from TRUECORE steel, whilst reinforcing the message of durability. At the same time, we needed to continue to reinforce that consumers have a choice when it comes to the frame they build their dream home with, whilst also providing confidence to our customers and the value chain that we're continuing to invest in this product well into the future. With that, let's take a look at the recently launched TV commercial for TRUECORE.
With a house frame made from TRUECORE steel, your home is ready for a full life. For a home that's built to last, choose the inner strength of TRUECORE steel.
Thank you, Gerald. So, of course, with all of that market activity, it's a good segue into our manufacturing asset base. So as Mark mentioned, one of the major investments announced just last month is the establishment of a seventh metal coating line in Western Sydney for AUD 415 million. It's co-located beside our existing COLORBOND line in Erskine Park, and the new line should commence operating by the end of calendar 2025, and will have a capacity of around 240,000 tonnes per annum. So that's the equivalent of 240,000 residential roofs or 80,000 steel-framed houses every year. And when it starts up, it will immediately address the capacity shortfalls that we have been periodically experiencing in metal-coated products and feed for COLORBOND.
Now, another significant set of opportunities in the pipeline has been referenced a few times, it's the renewables industry. The backbone of the transition to renewable energy lies in the development of steel-intensive wind towers, solar farms, and energy infrastructure, and we have a number of projects to that end. Firstly, we've upgraded our plate processing capability. That's at BlueScope Distribution at the Hub at Unanderra. That's just a few km down the road from here. It gives us the capability and capacity to service those higher-end processing requirements of the fabricators in the renewable energy sector. It also doubles up in helping us access the defense and infrastructure sectors. The Plate Mill Modernization Project is under investigation. It would give us the potential to upgrade the quality and an incremental level of volume of plate.
It's really a foundational investment for increasing sovereign capacity and capability for the supply of plate, not just into renewable energy, but also infrastructure and defense sectors. The wind tower fabrication facility, that's under investigation as well. We have strong ambitions to see the industry expand capacity and capability in wind tower fabrication and processing to support the renewables build-out and the establishment of local supply chains, and we're very keen to see a third-party fabricator set up either in regional New South Wales or regional Queensland, and we're advocating for the supportive public policy settings for this kind of investment. Capital in Australia has to compete with what's occurring in other jurisdictions, including the IRA in the U.S. So attractive investment, attracting investment, is gonna need the right public policy settings. The new pipe and tube mill is under construction.
That's co-located with the hub at Unanderra, again, just down the road. That gives the ability to produce the structural members for large-scale solar tracking facilities. It should be in operation later this financial year. That product also goes into building and construction applications, and it's gonna give us a good capacity boost once we take into account the pipe and tube mill we have up in Queensland ahead of the build-out for the Brisbane Olympics across this decade. Solar farm componentry is the final one that's under investigation, so that's the piles and torque tubes that goes into solar farms. So there is an awful lot of activity going on in this space, but it will be challenging, and I liken it very much to where we were with light gauge steel framing back in 2016, 2017.
When we launched that strategy, we had quite a number of hurdles that we had to overcome, and it's been a long, slow grind, but it's been a grind upwards, and that's what I think we're probably gonna experience with the renewables industry. Not without its challenges, but and an immense set of opportunities. So at this point, I'm gonna hand over to Dave Scott, the head of manufacturing.
Thank you, Tania. So we continue to modernize and digitally transform our operations in pursuit of our modern manufacturing future. So when I talk about digital transformation, I talk about asset intelligence, I talk about process intelligence, but it's also about automation and robotics. But I'm gonna talk to you about two elements of that today. So asset intelligence is a program of work, that's designed to help us to better understand the condition of our equipment, but also transition from a purely time-based maintenance activity to a more condition-based, maintenance focus. So previously, when we wanted to gather some of that information, we would install a sensor, and every sensor that we installed, we would run a cable back to a switch room. We would have to connect that up to a PLC.
We would have to get people to write code for that PLC to interpret that signal, and then get our process computers to interpret the data from the PLC. It's quite a labor-intensive program. It's quite, expensive and, and costly to get people working on these just for, you know, one particular sensor. With the advent of the Internet of Things, we've installed our own digital LoRaWAN network here. It's a wireless network, and we have plug-and-play sensors that we're able to install on a variety of different, pieces of equipment. It's readily configurable to the wireless network back into our process computers.
We have a software package called Senseye that monitors the trend and understands and learns the performance for of that piece of equipment using advanced analytics, and more importantly, it alerts us to deviations in that performance. So you can see from one of the examples here, we have a spindle bearing on our plate mill. So previously, we wouldn't have been able to put a sensor into this location just to get the cabling and be able to run it back. It's just... It was too costly. So we've got lots of these sensors in different locations. This one here in particular, since I recognized an increase in the temperature of the bearing, we're able to go and address the problem straight away. We looked at the bearing and found a lubrication problem.
By addressing this issue, rather than waiting for the next time-based frequency when we could expect it, we saved a breakdown on the plate mill, which is. It's about a 50-hour delay to actually change this bearing, so a fantastic improvement. This is just one of dozens of examples that we're finding when we continue to roll out this equipment and this program. So process intelligence collects and analyzes data from our real-time production processes and uses advanced analytics and AI to interpret that data and make improvements. So this particular example that we have here is around the recognition of slab identification as we charge it into our hot strip mill furnace. So it's very important to have the right slab aligned with the right production order.
So previously, that was a manual process, and it relied on a crane driver sitting in a crane, looking at a small screen, being able to interpret the number, and manually check off that that was the correct number to with our schedule. So we're really setting our crane driver up to fail here in this situation, you know? There's lots of variables that impact the visibility of those numbers, whether it be the lighting, whether it be the quality of the marking. I think in this actual event here, the numbers are, the slabs are actually upside down, so trying to interpret this number and make the right decision to ensure the quality of our product for our customers is very difficult.
We've changed that process to use the existing camera feeds, but use visual AI character recognition so that now we automatically interpret and recognize the correct slab data, I... the ID. We're able to automatically align that with our schedules, and once that's done, it's automatically released. It's taking a lot of pressure off our people, it's building capacity in the system and basically error-proofing it. You know, words on a page don't really convey the infectious, infectious enthusiasm that I, I get and I feel from the teams that are involved in these projects, you know? Digital transformation is as much about the technology as it is about the experience of the people and building capacity in the people.
It's, the engagement is just absolutely awesome when you get- when you hear some of these projects. These projects are built for, on cross-functional teams. It's bringing people together that don't normally work with each other, and really aligning project outcomes to those real key business deliverables. A fantastic body of work. Port Kembla Master Plan is about creating a vision for the surplus land that we have around the Port Kembla Steelworks. I've got to say, it's one of the most exciting projects that I've been involved with in my career here at BlueScope. It's actually 200 hectares of land, and it's, you know, I would say it's hiding in plain sight.
When you think about 200 hectares, you know, it's hard to visualize what that—what the size of that land is. But effectively, it's our three red areas up here, and it's the equivalent footprint to the CBD of Melbourne. It's a huge space. But as Tania mentioned, this is not just about property development, it's about building a rich ecosystem in support of the steelworks. So we've actually engaged with a Danish architecture company called the Bjarke Ingels Group, so BIG for short. And when BIG turned up here on site, they were absolutely blown away with the opportunity that they were presented with. And some of the things that we really take for granted that they pointed out, such as, you know, we've got four train stations here on the site.
We've got six lanes of traffic and highway that run through the site. We're on a port, and we're very close to the most populous city in the state. It's just a fantastic opportunity that they hadn't seen elsewhere in the world. So, you know, some of the concepts that are emerging around this master plan, it's about: how can we bring in training organizations? How do we bring in vocational training and TAFEs to provide the facilities and train our tradespeople for the future? How can we bring in education organizations? How do we bring the university in to train our engineers for the future, to bring in the innovation and the R&D? How do we attract modern manufacturing businesses along with advanced automation and robotics into the precinct?
How do we attract and bring in companies aligned with clean energy transition? So you get the concept that this is about a collaboration. You know, the problems of the future will not be resolved by individual companies alone. It's about collaboration. So bringing together trades training, engineering training, innovation, R&D, modern manufacturing, clean energy transition, supported by industry, it's just a very powerful collaboration, and this precinct will help facilitate that. The project has also been designed with a very strong environmental focus and designed along the lines of principles in terms of designing with country.
We've had a lot of engagement with the local Indigenous communities, and we've worked very hard to improve the way that we connect the three spaces together, the green spaces, but also improve the flow of the blue spaces, the rivers and the creeks that run between across through the plant. This land historically has also been. We have historically viewed it as a buffer between the community and the Port Kembla Steelworks. It's been about keeping people out. But with this land transformation, we have an opportunity to flip that on its head and really understand about what it is the community wants, and how we can actually bring people in. What are the community amenities that we can create here? The bike paths, the walking paths, the amphitheaters for future events and festivals.
I mean, it's quite an opportunity to transform this land and really bring people back in. This is really a... It's a long-term—it needs to be viewed with a long-term timeframe, and quite a focused commercial lens. You know, as I stand here today, I've got a pretty plain slide here. I would love to be able to show you some of the renders and the concepts that the BIG group have come up with. You know, I look at them, and they're absolutely world-class. You know, our focus right now is to complete the master planning exercise, and we'll work out an appropriate time to release that master plan. I please just ask you to remember this slide and really watch this space.
So we also recognize that we're gonna need a lot of green, renewable energy, and in support of that, transition to clean energy, we're hosting a number of pilot plants on our site here at the Port Kembla Steelworks. So we're collaborating with the CSIRO company called Hadean. We're working here with Hadean to install a pilot hydrogen electrolyser in our energy services plant. So this will utilize some of the steam that we generate, combined with electricity, to generate hydrogen. And the fantastic thing about this technology is that it actually requires 30% less electricity than a standard hydrogen electrolyser. So quite an interesting piece of work. In addition, we've also have Green Gravity on our site.
So Green Gravity is a renewable energy start-up, and it's focused on gravitational, storage of energy. So in a similar concept to, pumped hydro, you know, pumped hydro uses large volumes of water and large land spaces. Green Gravity is focused on using a dense mass, and in this case, it's one of our very heavy, hot rolled coils and vertical mine shafts. So we've provided some funds, and we've repurposed one of our warehouses, to allow them to build a pilot plant that they can operate, collect data, and optimize their processes. So as we continue to look over the horizons at our future- at a future low emissions, technologies, and Chris and Anna will really dive into the, the details around this, we need to be, to remain focused on optimizing our assets here in Port Kembla.
So Port Kembla Steelworks, our blast furnace is one of the most efficient blast furnaces in the world, but we can't rest on our laurels. And when I think about emissions, you know, I think about energy. Emissions are related to energy, and when I think about energy, it's related to cost. So we need to be very focused on always improving the efficiency of our energy usage, and also improving or reducing our emissions intensity. So two key projects that we're working on is around increasing our scrap charge and a biochar trial. So we currently charge around 80 tons of scrap per heat into the BOS, and you'll see that, you'll see that process today.
It's about 26% of the heat, and our goal is to increase that scrap charge by an additional 20 tons, and that'll be about 30% of the heat, so that would be a world-class performance. We're currently focused on improving our process capabilities and reducing the waste in energy. So we lose some temperature between the blast furnace and the BOS. If we can harness that temperature in the form of energy, we'll be able to melt more scrap, and we're also investigating alternate technologies within the BOS plant to melt more scrap. So we think that if we're able to achieve that additional 20 tons, it'll give us an improvement of around 6% in our greenhouse gas intensity. We also recently completed a biochar trial that was supported by ARENA.
This first started out with actually trying to get 1,000 tons of biochar, and we were able to do that from Western Australia and Queensland, and essentially, biochar is charcoal produced from forestry waste. Once we got the material here, we can't just put it straight into our process. We need to understand how biochar behaves. So when you look at biochar, it's actually very dry and light and fluffy, and PCI coal is actually moist and dense. So a combination of those two materials together, when you put them into our process, we're quite concerned about segregation and separation. If that were to happen in our process, we could block our bins up and block our pneumatic conveying lines.
So we did a lot of work with the University of Wollongong to understand how the materials behaved, and once we were satisfied that they wouldn't separate, we then progressed to plant trials, where we were able to increase the percentage of biochar in our PCI blend up to 30%. So that 30% blend was able to be processed through our PCI plant, ground, dried, and injected in the blast furnace, and we were able to see no significant impacts on the blast furnace performance, so a really successful trial. So if we're able to achieve that 30%, we think we'll achieve about a 3% improvement in our emissions intensity, and our focus moving forward is about trying to establish a sustainable supply chain within Australia, where none really exists in it quite now.
So the blast furnace reline, this project is critical in achieving our vision of a modern manufacturing future by firstly securing our business now and helping us transition to a low-emissions steelmaking technology in the future. So we expect that transition from Number 5 Blast Furnace will occur mid-2026, and while Number 6 Blast Furnace will have a nominal design life of 20 years, that doesn't necessarily equate to a 20-year campaign life. Because with that financial security also comes flexibility, and it's the flexibility to pivot to low-emissions steelmaking technology when it becomes commercially available. And it also allows us the necessary time to continue to investigate and pilot other renewable pathways, and it also recognizes the practical realities of the renewable energy infrastructure that's required to be developed over the coming decades to support that transition to a low-emissions future.
But the reline is quite a complex project. It's a very large project. We estimate it'll it's gonna cost us around AUD 1.15 billion to execute this project. It covers a number of traditional elements of a blast furnace reline, so we'll be replacing all of the internal cooling elements of the furnace. We call them staves. They're copper and cast iron blocks as big as me, water-cooled. There's hundreds of them in the furnace. We'll also be replacing all of the refractories that exist within the furnace as well. We have temperatures in excess of 2,000 degrees. We need to replace all those refractories. Now, I can also remember the nineties.
They don't seem that far away from me, and when I walk into the control room and have a look at some of the control, the computers that are in there, it actually looks like it's from the sixties, so we need to really upgrade all of our control systems as well. In addition to that, we'll also be spending over AUD 100 million of environmental improvements on this blast furnace reline. We'll be installing, firstly, our TRT. This is a Top Recovery Turbine. All of the gas that comes off the top of the furnace, we will clean and cool. We will also install a turbine in the pipework.
So that clean gas will come through, and just the process of passing that gas through the turbine, the pressure drop will drive that turbine to spin, and we'll be able to hook it up to an alternator that generates 14 MW of power. Secondly, we'll be installing a new slag processing facility. This is an enclosed, condensed plume facility, which will significantly reduce our visible emissions that we currently have now from our granular slag granulation plants, and will also generate 650,000 tons of granulated blast furnace slag. Now, this is a very important material, as it's a direct replacement for virgin clinker in the cement industry, and the cement industry is focusing on granulated blast furnace slag as a sustainable replacement for their virgin materials. And finally, our waste gas heat recovery system.
So we inject large volumes of wind into the blast furnace. That air has to be at a temperature of around 1,200 degrees. So to get that temperature up to 1,200 degrees, we burn coke oven gas and a mixture of coke oven gas and air to preheat the air. If we're able to capture the exhaust gases from that process, pass it back through a heat exchanger, and preheat that incoming air, we won't need as much gas, and we'll be able to liberate that gas that we liberate, we will capture and harness and be able to utilize it in our power-generating assets to generate more electricity. We currently have a team of 120 people working on the reline, and our team, we think, will grow to around 150 over the duration.
We also engage very heavily with our local contracting base. We think at peak contractor load, we will have around 350-400 people here on site. And recently, earlier this month, we passed a significant milestone where we erected the construction fence, we laid down some asphalt for a laydown area, and started the foundations of our tower crane. The tower crane that we will install for this project is one of the largest in the world. It was a really great milestone for the team to actually see us breaking ground on a project they've been working on for some time. Now, we're quite ahead of the game. We had some very long lead time items.
Some of the production items, cycles for the items that I've talked about, are up to two years. We needed to get our slot, so we've ordered those items several months ago, and we're well in the, in that production cycle, and some of those products have actually arrived already. And we're very focused on... We have a very focused team on achieving the execution of this project, and we really look forward to commissioning and ramping up in mid-2026. I'll now hand over to Chris and Anna.
Hello. I'm Chris Page. I'm the Head of Future Technologies. Today I'm gonna talk to you about our Climate Action Program and the things that are gonna be necessary for us to move beyond the blast furnace down the track. So, firstly, the first thing I'm gonna talk about is the enablers. Now, last year, we did talk about these enablers, and I'm pleased to say it hasn't changed. They're all very relevant and are quite still critical to us being able to transition from the blast furnace to what's been mentioned as the DRI process. But we have made some changes to how we view some of these things. I'm gonna talk through those briefly.
But the changes we've made is so that we can focus and be very deliberate about the size and detail that's required to make these enablers allow us to make those transitions. Some of the key changes since last time we talked, we've removed the reference to emerging and breakthrough. There's a series of technologies that are available today, which, if we're able to do some development work on working on how they piece together, we'll be able to create a commercial value chain once those developments have been made. And it also sort of reflects the accelerated focus and pace that's going on within our industry, and I'm gonna talk a little bit about some of those things as well through this presentation. A key aspect to that is the use of natural gas.
DRI is used with natural gas today, and that's a significant step in that it can, by itself, can reduce our emissions by 60%. So we're gonna talk about how we can use natural gas as a transition step to the very nascent green hydrogen industry that's developing at the moment. So rather than wait decades for the hydrogen to be available, we can make a big step now using natural gas. Other changes to note is the use of raw materials and how they're gonna be economic, as well as technically suitable, in relation to their use in DRI. There is some development to go on there. The use of Australian ores in that place really comes down to an economic value and use.
The large scale, I would say absolutely massive requirement for renewable energy is also gonna be noted by Anna, and we'll talk a bit about. And critical is that role of natural gas as a transition to hydrogen, is gonna be really critical, too, along with a range of consistent policy enablers that will allow us to make that transition. My team has been staying very close to the developments within the steel industry. In fact, I only just got back on Sunday from visiting POSCO in Korea, and looking at their fines-based DRI process, which they've been developing. In terms of DRI using natural gas, it's important to point out right now, the current technology using magnetite can actually reduce the emissions from a blast furnace by 60%.
This is an important step in that what we've learned over the last couple of years is that you can use natural gas in transition to hydrogen. Natural gas in itself is 75% hydrogen by nature, and so the change to green hydrogen is changing that last 25% of CO that's used in that process to hydrogen. And so we've worked out what those engineering capabilities and requirements are in that process to be able to do that, and we're starting the work on how that affects the materials in that process, too. A really important sort of thing to say about that step to green hydrogen is around the grid intensity of the electricity that we use, and Anna's gonna talk a bit more about that.
But natural gas is gonna be relevant for a long time prior to hydrogen being ready for that place. Looking ahead to our iron and steel transformation, it's anticipated that the melter technology will play a crucial role in unlocking the potential to use more of the abundant hematite ores that we have available in the Pilbara. And will allow us to make that low-emissions iron in the future as well. The electric smelting furnace, we've previously referred to it as a melter. We're gonna call it an electric smelting furnace. It's a broader technology group which will be used to look at these different available technologies for the DRI feed.
Its ability to separate the impurities that are in those high-gangue hematite goethite ores that the Pilbara have, it will play a crucial role in unlocking the potential of those Australian ores that are readily abundant today. I think the key thing for that is, it's great news for us, is that there's only two places in the world today that use this electric smelting furnace technology to make iron, and we're one of them. In fact, we're the only one that uses a DRI product to do that. So it places us in a really unique position to work with other steelmakers to develop these technologies. Now, just to hark back on the raw material question, I'm gonna quickly talk about hematite, goethite, and magnetite.
So the advantages of hematite goethite, which is the Pilbara Blend type ore, it's most cost-effective. At the moment, we dig it out of the ground, we crush it, screen it, and we put it on a ship, and that's the BHP Rio FMG Roy Hill sort of business model. So it's widely available and abundant today. The unfortunate part of it is that it's higher in impurities. The bits that we don't want in iron-making are in there, and they're locked in there, and they're very difficult to get out. And the DRI process doesn't get it out by itself, and that's why we're looking at this melter technology. It's currently not also used in DRI at scale today, and that's another piece of development work that we'll have to work through, and we are working with Rio Tinto.
In terms of magnetite, the advantages is, it doesn't require slag separation. It's actually very low in impurities already, so we can go straight into an electric arc furnace after DRI. It's currently, when we look at the DRI process today, it's the main feedstock that's used. There are some people that use some of those high-gangue, gangue ores, but only in small proportions. The challenges? It's expensive, it's hard to beneficiate, and there's not a lot of it. At the moment, in terms of the whole world, it only represents about 5% of what's being mined today. It actually is difficult. It's quite hard, and when you start crushing up the ore, takes a lot of energy to do that.
So there's a lot of work that needs to go in that mine development space and how it can become useful in our process. I'm gonna pass now to Anna, who's going to talk a bit about energy.
Thanks, Chris. Hi, everyone. I'm going to pick up where Chris left off and talk about the rest of the enablers. I'm going to start with renewable energy, firmed delivered renewable energy, because it's probably our biggest challenge, actually. I think where I start with that is to talk about the scale of the challenge. We're gonna need a lot of renewable energy in future, as Chris mentioned, to follow our decarbonisation pathway. To put some dimension around that, if we want to move away from the current coal-based blast furnace technology and into natural gas DRI, we're going to need about 3.5 times our current electricity consumption, our average, average use.
In the future, if we want to transition further to green hydrogen DRI, we're gonna need about 15 times our current average consumption of electricity. So that's a really daunting sort of amount of renewables. It's gigawatts of generation capacity. And I guess to further contextualize that, if you have a look in the center panel on this slide, you can see that while the renewable share in the grid is increasing, it's increasing pretty slowly, probably compared to what we need it to do. And I've contextualized it there with a reference to the 2030 82% renewable energy target that's in the mix.
You can see there's quite a lot of work that we're going to need to do to get to that sort of level, and we're not, we're not the only ones that think that. You've probably seen some media reports in the last couple of days, including the CEFC coming out and saying that that target looks really, quite challenging to achieve by 2030. In terms of the electricity price that you need to make green hydrogen economic, it's pretty low. I think I spoke about this a little bit last year. Again, to put that in context, the price you need is about one-fifth of the most recently published New South Wales electricity price, and that's even with quite a substantive carbon price in play.
So that, that's a substantial challenge, I would guess. On top of that, we're going to need transmission investment, and that's because the current spare electrical capacity in the Illawarra is simply insufficient to allow us to transition to our low-carbon future. And, from that perspective, the Illawarra Renewable Energy Zone and associated transmission upgrades are going to be quite critical to enabling that, you know, renewable energy future to eventuate in this location. So I guess the key messages here really are that we need vastly more renewable energy generation. We need firming and transmission. We need it faster than what is happening, and we need it to be significantly cheaper than where we are today.
And so I guess that sort of flows through into our hydrogen enabler in some respects because we've updated this enabler, as Chris mentioned, to explicitly call out. T hat this enabler will go first through natural gas. And I guess that's because the natural gas, we say it has two key advantages. The first one is that if we go to natural gas DRI before trying to attempt hydrogen, we can reduce our emissions from Port Kembla Steelworks by 60%, and Chris already mentioned that statistic. I mean, that's huge. 60%, so much sooner than we think that we could get there if we tried to go to hydrogen first.
The second important thing about natural gas is that if we go- to -gas DRI first, it actually creates a really significant latent demand for the hydrogen to start to be used in that process as and when it comes online and is available and in sufficient quantities and at, you know, commercial price. That's really, really important, because one of the challenges we all know with hydrogen is actually having those big offtake, consistent offtake sources. Just to move to the natural gas piece in the middle here, the scale of that transition is also really important. At the moment, in our current blast furnace operations in the steelworks, we use about 1 petajoule of natural gas. Now, we use more gas than that overall, but, you know, that's also through internally generated sources. But in terms of the external supply, it's about 1 petajoule.
If we want to move to natural gas DRI in the future, we need 40, 40 PJ every year, and that's a really big volume of gas, particularly in the context of an East Coast gas market that's got forecasted shortfalls from the sort of early to mid-2030s, and also the gas price on the East Coast is a little bit uneconomic at the moment. So if I move then to the hydrogen component of this slide, I think the hydrogen enabler is inextricably linked, obviously, to the renewables enabler. And that's pretty obvious, but important to say. And I think one of the critical facts about hydrogen is that for hydrogen DRI to be less emissions-intensive than gas DRI, you actually need the grid intensity to be less than 0.15.
So the grid intensity is how many tons of CO2 you emit per MWh of electricity generated, and so that has to be really, really low. At the moment in New South Wales, that number is just over 0.7, and so this links back to the earlier slide about, you know, we need the renewable, grid share to be coming on pretty quickly to get to that sort of low grid intensity to make, you know, hydrogen DRI less emissions-intensive than gas DRI. So, perhaps a natural conclusion from the discussion about the development of the enablers so far is that government is going to have to take a much more significant role in the iron and steel transition.
Now, we've seen some encouraging progress on policy over the last year, and we've certainly got a really clear advocacy strategy in place going forward. I'll just talk to some of the policy developments that are key around our steelmaking region. In Australia, we've seen some good evolution of policy certainty over the last year with the reforms to the Safeguard Mechanism, and we certainly engaged pretty extensively with the federal government on that, including to help promote a more optimal policy design, particularly in respect of the trade-exposed baseline adjusted settings and also around the AUD 200 million primary steelmaking fund.
In terms of the key role that natural gas is going to play, that we've just been talking about, to that end, we've also started engaging pretty early with the federal government on the future of gas review. On the Carbon Leakage Review, we've come out previously, publicly, and said that we do support, you know, well-designed legislation in that respect, including a possible Carbon Border Adjustment Mechanism. But I do really emphasize that it has to be really well designed, and it has to be very well planned, because this is an extraordinarily complex piece of policy, and it's pretty far-reaching. In terms of New Zealand, there's been some really good developments there as well, and from a policy perspective, I'm actually gonna come back to that one on the next slide.
So I'm gonna jump ahead to the U.S., where we've seen the introduction of the Inflation Reduction Act, and I think it's pretty widely expected that that policy or set of policies is going to put a bit of a rocket under industrial decarbonisation in that country, and that's because it's such massive funding. I mean, it's really, really huge amounts of funding that are gonna go into R&D and also direct investment across a whole suite of low and zero emissions technologies. So every color of the rainbow of hydrogen, CCUS, and of course also raw materials. So, you know, we're obviously monitoring developments in that space and keeping a keen eye out for any sort of relevant opportunities coming from the IRA.
Just to sort of move back to New Zealand briefly, 'cause I think it's a really important mini case study in how effective sort of broader carbon policy environments can be in terms of promoting decarbonisation investment decisions. And I think, you know, in New Zealand, our announcement around the electric arc furnace has really been helpfully underpinned by a few key things. The first one is obviously their climate policy, the second is meaningful co-investment by government, and the third is around the energy market itself. So I guess to just quickly walk through each one of those things. In respect of policy, obviously the New Zealand Emissions Trading Scheme has been in place for quite some years, and that's provided a very healthy long-term signal for businesses to decarbonize.
But it's also important to say that, you know, it's also helped support emissions-intensive trade-exposed entities quite effectively through the free allocation of permits over many years. Now, sure, those permits have been, you know, declining. The free allocations have been declining over time, but nevertheless, it has provided, you know, a really healthy, helpful transition through for those emissions-intensive entities. Now, the recycled revenue from the emissions trading scheme also gets put back into funding for decarbonisation, so that then helps government co-invest alongside business to invest in decarbonisation projects. And then the third thing, and that's really important, is around New Zealand's energy market. So, probably don't need to tell any of you that New Zealand's energy market has a really high share of renewables in it.
I think last year it was at about 87% of generation. And there's, you know, plenty of hydropower and geothermal as well in the mix there, which, you know, helps provide some sort of firming capacity as well. And it's that energy market that's also helped us go, you know, into the market to procure commercial renewable energy contracts to help underpin our EAF investment there. And so collectively, all three of those things, you know, have been instrumental in defining the pathway that New Zealand Steel is taking. And so finally, I guess to round things out, the developments in the enablers that Chris and I have just been talking to really necessitated a bit of a refresh of our decarbonisation waterfall, and this is the waterfall update.
So we originally shared this in our Climate Action Report back in 2021. And I guess if we start on the left-hand side of the waterfall, you can see that we haven't really changed the front end of that around current operations. We're still very much sort of talking about optimizing our current operating assets, and that's through the obvious things like efficiencies and more low carbon energy sources, and also increasing our scrap use. But then, as we move to the right-hand side of the chart, the post-2030 environment, as Chris spoke to, there's been some technological developments there that mean that we're not really talking about emerging and breakthrough technologies anymore. We're talking about transformation, and that transformation is really honed in on the DRI pathway, and specifically gas.
So gas DRI through to hydrogen later, in the period. And in terms of the steelmaking part itself, we've still retained the optionality to either go EAF or ESF BOF, where ESF is the melter that Chris was talking about before. And very importantly, I think, perhaps most importantly to this discussion, the waterfall now clearly articulates that progress on our net zero 2050 goal is going to be critically reliant on development of those enablers, and the diagram really points that out now. Now, obviously, you know, we'll continue to periodically update this waterfall because it will be refreshed as we get further intelligence from what's happening in the broader iron and steel industry around the globe, but it'll also be informed by our own projects and developments and learnings in that space.
That's all from me. I'm gonna hand over to Tania and Chris now. Thanks, Tania.
Thank you, Anna. I appreciate that we are throwing an awful lot of information at you, so hopefully you'll just bear with us for a little bit longer. 'Cause what I'm gonna do now is just try and take all of that information, particularly from Chris and from Anna, and just try and zero in on the Port Kembla Steelworks so that we can be really clear about what our thinking is. So I'm just gonna pivot back to a comment that I made earlier. Just move that on. Pivot back. The comment I made earlier about blast furnace technology really dominating the global steel industry, so it's 70% of global production right now, and it really is the low-cost producer, and it's this highly optimized process all the way along the value chain, and it's been in place for centuries.
It's what the Pilbara iron ore industry is built on, all that hematite and goethite ores that Chris referred to. So the question is: how do we reposition the entire steel value chain in a way that is economically and environmentally sustainable in a highly competitive industry? Now, of course, we need to be ambitious, but we've also got to have a very good dose of pragmatism here. In terms of a scrap-based EAF here in Australia, there just isn't enough scrap. In New Zealand, it's a great case study. We only need about 300,000 tons of scrap each year to make that New Zealand EAF work. In Australia, we need 3 million tons, and there's already three operating EAFs here on the East Coast, and there's more on the drawing board.
We need high-quality scrap, given the mechanical properties and the surface quality requirements, which are inherent in flat product applications. Given the relatively small industrial base that we have in this country, there just isn't enough scrap of the right quality, and that's really a microcosm of what's going on in the broader steel industry. Based on the projections of the IEA, the best that we can probably achieve as a global industry is something like around 50% scrap-based EAFs out by 2050, so up from around 25% today. There just isn't enough scrap in the world to convert everything to EAFs. We can't scrap our way to zero. We do need to find a solution for the blast furnaces, and we need to do it in a way that doesn't endanger our sovereign manufacturing capability here in Australia.
Now, what we do have in this country is a number of natural advantages that both Chris and Anna have touched on: our iron ore resources and the abundant potential for renewable energy. And as a country, we are rich in natural gas, just not at the moment in the domestic market. And we also have a highly skilled workforce and great infrastructure here at Port Kembla. So at this point, we do believe that the DRI technology is a more prospective option than a scrap-fed EAF, and as you've heard, ultimately with green hydrogen, but with a clear pathway through natural gas. Natural gas DRI alone could get us that 60% reduction in emissions, as Chris pointed out. Green hydrogen DRI would get us close to zero.
So that's the ambition, but we do need to be realistic, because as we've touched on in that previous section, there is a long way to go on the evolution of the technology, the energy, and the material sourcing. So that's why we've got that approach that I referred to when I first started of the two work streams: optimize the existing process assets, be focused on the future and the technology and the enablers that have to be in place, and the Reline is the bridge. Now, that future-focused work stream is clearly looking at, DRI technology, either using the magnetite ores, the proven technology, as we've heard, or those lower grade and more abundant Pilbara ores. And as Chris mentioned earlier, it's those lower grade Pilbara ores, there's still that significant evolution in the technology because they're not yet operating at full commercial scale.
But if we can crack the code on the Pilbara ores, that is potentially a game changer. I'm gonna hand over now to Chris and get him to talk a little bit more about the work that we've been doing with Rio Tinto and some of the other first movers in this space and the broader program of work that we have on DRI. Thanks, Chris.
So I'm gonna talk about the three sort of focus areas of work for us, for my team, and how we're thinking about this problem. Right, so the first bit's around the collaboration with the Rio Tinto. We've been doing a lot of work with them. It's a concept study. We've completed it, and in that concept study, what we've done is we've looked at all the available technologies. We've worked with OEMs and engineering partners to determine which technologies we can put together in a supply chain. Now, the challenge is we don't do that with these hematite, goethite Pilbara ores. And so what we've been able to do is risk assess that supply chain and put together a development program of how to acknowledge those risks and overcome them.
That's the process that we're up to now. We've completed the work on what technology, and now it is a case of how do we develop the lab-scale testing to then go into a pilot stage and on to commercial demonstration? That's the program that we're developing now with Rio Tinto. So we've come a long way from last year, and what we need to do now is start fixing all the bits that we need to understand to be ready to go to commercial, to commercial scale. So that's only one pathway that we're looking at, and, and I'll talk a bit about the broader picture in a minute.
In order for us to be able to sort of understand those, those bits that we don't understand, we're working with other steel makers, and in fact, we're partnering with the first movers in this space around the world. We've got collaboration agreements with Tata Steel in the Netherlands, Thyssenkrupp in Duisburg in Germany, and POSCO in Korea. Now, all these companies have plans to develop commercial-scale operations in this space, and given our technology capability and credibility, they've asked us to help them to develop those pathways. We're working with these people who have even got commercial plants announced, to get them ready to be able to use those lower grade ores in that process.
So this is a really exciting sort of bit of work for us to be able to collaborate with those first movers within the steel industry. The next bit, which is a much broader piece of work, is a direct reduced iron option study for here in Australia. We've initiated a study to look at low emissions iron making in Australia, based around making steel here in Port Kembla, with a particular focus on the DRI technology pathways and the necessary options. So rather than just focusing on the Pilbara ore problem, we're also looking at what opportunities exist with the technologies that work today in magnetite. So where can we access magnetite and develop that pathway? And then how do we also develop that other pathway using the melter technology, too?
So, if you look at the study, it is much broader than the technology, though. So technology is one key aspect of it, but in order to solve the problem to create this supply chain in Australia, we need to have the raw materials. We need to have the energy that Anna talked about in some detail. And we also need to be able to find a location and have the government policy and engagement process that enables us to deliver that full supply chain. Now, energy is a big part of that, and I'd just like to reiterate, like, natural gas is a transition. Until the grid gets below 0.15 grid intensity, natural gas is actually lower emissions than using hydrogen.
And so while we're developing that nascent hydrogen industry, if we can use natural gas, we can make a huge impact on our emissions. And so this project is looking at what options exist within Australia, how do we piece that together and build a supply chain, which is similar to how we've been able to do that in Port Kembla over our 100-year history. Okay, we're finished. Over to Tim.
Well, thanks. Thanks, Chris, and hello, everyone. I'm Tim Rodstad, Head of Sustainability, and I'm going to facilitate the Q&A session. So I'm going to ask Mark, Tania, Gretta, and Chris to come back up for the Q&A, please. So we'll have questions, obviously, from the floor. We've also got the webcast questions coming through. So there's two roving mics going through with Don and Tom. So if I can just ask, wait, if you've got a microphone, sort of introduce yourself, where you're from, your name, and if you've got a question directed to one of the panelists, head it that way as well. So I think the first one's down here. Tom.
This thing on? Sounds like it's on. Lee Power from UBS. Thank you for your time this morning. That was really interesting. This is probably for you, Mark. Like, it's... There's a lot on kind of the transform and the grow, and there's a lot in the short term and the, and the medium term, and yet in your opening comments, you talked to China and kind of the issues that you see in the near term around that. Like, ASP spread at 140 is obviously very low. Like, how do you kind of manage the, the short term and the flexibility you need around the short term, given a lot of this is kind of longer term focused? Does the longer term element of what we're talking about today make it a little bit harder to manage the business in the near term?
Yeah, good question, Lee. That's why we've got such a focus around our financial principles and the balance sheet. I mean, we've been accused in the past of having a conservative balance sheet. "How are you guys thinking about it? You've got a debt target, you're nowhere near it." I mean, we're in a cyclical industry. We understand that maintaining that balance sheet strength allows us the coverage to be able to continue to focus on the investments we need to make, whether it's growth or sustainability, without having to worry about the sort of near term. Now, of course, the near term is important, and the spreads are terrible. Yes, I get all of that, but, you know, we think through that and have to think through that.
If you're in a position where you're making decisions about the medium and long term of the business because of the here and now, we've been in that position before, and that's not a healthy position for us to be in. So that focus on our financial principles, making sure we've got capacity, a strong balance sheet, yes, of course, it always affects the near term. We're all very focused on spreads and making sure that we're staying cost competitive, but you need the capacity to be able to look through that, or you're making suboptimal decisions, quite frankly.
Then, just like in terms of the partnerships, like with Rio, and obviously there's a lot of different players that are gonna be involved in the chain of sustainability, like, how far up do you see yourself pushing up the chain? I'm just trying to... When I think about the partnership with Rio, who controls which parts?
Yeah, sure, we'll have a go at that. It's the reason it's really important to be able to work together with partners is it's a complex value chain, and putting it all together is, to make it economic, is absolutely critical. So that's why we're partnering with a miner to work on those beneficiation and pelletization steps in that process. They've got a lot of knowledge and background and research and development into that area, and we're working with them and starting to understand it ourselves. Whereas we understand that iron-making process, the DRI, and that's smelting into steelmaking. Putting that whole value chain together is critical. You can't do that without the right partners, and every partner has a piece to play.
As we go down this further into this DRI option study in Australia, it's gonna go out into energy and ports, and logistics as well. So it's quite critical to have partnerships to be able to piece together all the things we're gonna need to be able to put together a very complex value chain.
Cool. Thank you.
Other one over here, please.
Hi. Paul McTaggart from Citi. Couple of geeky technical questions, so I might apologies. Firstly, I was a bit surprised you can use up to 30% – well, 26% and maybe 30% scrap in a BOF. And I just want to understand what the technical limit might be on that, putting aside scrap availability. And my second geeky question, as I understand it, we're producing magnetite in Australia now with Fortescue. That's a 67% iron ore concentrate, which is suitable for blast furnace pellet production, but as I understand it, not for DRI feed, pellet feed. That needs to be upgraded further to 69%, from my understanding. Is that correct?
The waste and scrap
Yeah, so, charging scrap, it's quite a complex process. It's really about the energy balance within the entire charge, within the BOS vessel. So, you know, you can effectively melt the scrap with the energy contained in the hot metal, but it gets to a point where the scrap basically cools that to such a point where it's what we call an unbalanced charge. So, you know, there are ways in which we can add heat, what we call heat raisers, so things like ferrosilicon. So it's an artificial way of adding more energy in to boost the energy within that entire charge, so we can melt more scrap. But, I mean, that comes with a cost as well.
So, you know, our main focus is about, you know, how do we harness the existing energy that's contained within that hot metal that comes straight out of the blast furnace? We transfer it via torpedo ladles, ladles now between the furnace and the BOS. During that process, we lose a lot of temperature, so there's an opportunity for us to preserve that temperature, preserve that energy. And, you know, every degree that we can increase the temperature of our hot metal as it arrives at the BOS, means that we can charge more scrap without having to spend a lot of money on expensive heat raisers. So it's quite a balanced decision-making process there.
Tramp elements aren't an issue in terms of that much scrap into the blast furnace?
Well, yeah, tramp elements are always an issue, so it's, it's... You know, a lot of our focus is on shred, and, you know, ensuring that we have, you know, we have very good relationships with the scrap suppliers here in Australia. You know, we have quite complex supply chains, where we're, we're bringing scrap from all around Australia. We do struggle a little bit at times with some of the, the tramp elements, you know, when we, we do import scrap from time to time when we need it. So some of the scrap that we see out of the U.S. has, you know, some quite high levels of copper that we have to manage. Makes it quite difficult to sort of...
You know, we have to blend that sort of scrap in, into, you know, across a lot of different, a large number of heats. But, it's one of the things we're very focused on in managing that scrap.
I'll move on to the second part of the question, which was around Ironbridge. The Ironbridge ore body is a magnetite body, but it has a high gangue content. So, in order to be suitable for the DRI process to go into an EAF, electric arc furnace, the gangue content typically needs to be somewhere between 2% - 3%. The Ironbridge gangue content is over 5%, from recollection. So when you say it's suitable for blast furnace pellet, that's correct. It can be going to a blast furnace where you can remove those impurities. But, being ready for that DRI/EAF process, no, it's probably not suitable. You might be able to use a very small proportion of it, but not on scale.
So they either have to work out how to beneficiate that better, or we need to find a different ore body. Yeah.
Thanks, Chris. I might go to one of the online messages here. So we've got from Kenneth Wan from Drummond Knight: So what gas price do you need for natural gas DRI to be economic? And maybe Anna to first respond to that question.
Sorry.
Yeah. Yeah. That's it on the-
Hello?
Yeah.
Okay. So I guess the answer to that question isn't necessarily as straightforward as it might seem. It depends on a range of different factors, including, you know, what state your ore that you're using with it, comes in, to the previous question. And it also, of course, comes down to, you know, what carbon price you might have in play at any given time. But what I can say is that the gas price that's needed to make it economic is substantively lower, than the gas price that we're seeing in the market today. And, you know, there's a couple of places around the world where we're currently seeing gas DRI actually being used, and that's predominantly the Middle East and the United States, where gas prices are, you know, far, far lower than they are in Australia today.
Thanks, Anna. Back over here with Don. Oh.
Sorry. Thank you. Michael Chen from Westpac, and thank you for the informative presentation. Just like to connect a couple of dots that I've heard this morning. So I think I heard your broader decarbonisation ethos, if you like, is one of holding ambition whilst introducing a healthy dose of pragmatism. And also, I've also heard a lot of, you know, it, there's a lot of complexities and interdependencies. So if I were to lift those couple of statements and overlay that onto your decarbonisation waterfall, I guess the question would be then, to get to net zero by 2050, then it's dependent on a lot of enablers that you outlined, right? A lot of different enablers, and it's complex, and I appreciate that.
Have you scenario planned at all? If enabler one and two didn't come to bear, what would that happen to your strategy versus if enabler four and five didn't come to bear, how, how would you then think about a decarbonisation pathway? Would you then pivot to offsets or different technologies? How, how, how would you think about that? Thank you.
Gretta, do you want to start with that one or?
Look, it's a really good question. I think the way that we've looked at it is, if we are to be net zero and making primary iron in Australia, we need all five of them. And if that doesn't, if we don't get all five of them to bear, the most logical outcome is that we may not be making primary iron in Australia. You know, we, we are dead set on preserving local steelmaking. We, we see the enormous value of steelmaking to our local community and our sovereign capability, but we really do need all five of them.
It's probably also just worth pointing out that if we were to close the front-end steelmaking here in Australia, and we're importing it, we're actually importing higher emissions-intensive product, and you've got to bring it here. So it, it's, in some respects, it's a bit of a nonsense to talk about the import strategy as being better from a decarbonisation perspective because it just doesn't exist at this point. So to Gretta's point, we need all five, and this is why the collaboration strategy is just so important, because no one is going to be able to solve this, solve this on their own. We've got to work with other steelmakers. We've got to work along the value chain, which is where the iron ore players have a role to play, the energy suppliers and government at federal and state level.
That policy formulation, Anna touched on it with the CBAM, enormously complex piece of work. This really is an entire ecosystem that we're advocating for and working with to solve the problem.
Hi, Janelle Morrison from Ausbil Investment Management. I just wanted to discuss BlueScope in the context of the Safeguard Mechanism. BlueScope was able to negotiate down the number of emissions it needed to reduce each year, but in the context that the government's looking at a CBAM, but that's going to take a few years if it was to stay on track, how's BlueScope positioning itself in that interim period? Does the government understand the challenges there for you in terms of your competitors overseas? And is there any help that you might be getting from the government with regards to that?
Yeah. Hi, hi there. So I guess in terms of the safeguard first, yes, you know, the TEBA settings are there. We're obviously going to have to jump through the hoops like everyone else to work out whether we qualify for the lower baseline decline rates. But, you know, we certainly, where we sit today, we expect that we, that we will. With respect to how the safeguard interplays with a potential CBAM, I think there's so much water to still go under the CBAM bridge. I mean, we've already started engaging with the federal government on that, as I mentioned in my talk, and it's very clear from those early engagements that they're just at the beginning stages of starting to think about that kind of policy.
So it's probably too early to sort of say exactly how the safeguard will interact with the CBAM. However, they are acutely aware, I would say, through our safeguard mechanism interactions, and we'll continue to engage, you know, on a thorough basis with them in relation to a CBAM, so that they understand what sort of transitional arrangements we think would be appropriate. And, you know, certainly the government has indicated through our conversations with them that they're very keen to see, iron and steelmaking retained here at Port Kembla.
Yeah, if I can just reinforce that. Great recognition from the government and the importance of the role of manufacturing in Australia. That, that's why they engage with us around the Safeguard Mechanism. So great recognition, the value that we contribute. Similarly, in New Zealand, in fact, that Megan Woods, the minister there, termed the phrase when we were announcing the AF, that they want to decarbonize, they don't want to deindustrialize. And I, I think that's a recognition after what we've been through. And as Tania pointed out, I, I mean, the, the ludicrous thought of, "Let's just export, export the carbon somewhere else and bring it back in at a higher level of carbon, and suffer the economic and social consequences of that," that doesn't make any sense at all.
I think it's going to be really instructive to watch what happens in Europe... Europe, I've used the phrase several times, it's a real test bed for the global steel industry. I mean, they've had a carbon price in place for many years. They've been giving out the free credits to boost the balance sheet capacity, very large government grants, and now they're looking at the introduction of the CBAM. But they've been working on that for years. And the risk with Europe, because basically what the transition is gonna do is clearly increase the cost, and that's why the CBAM is important. The risk is if you get those, that policy framework wrong, you end up simply de-industrializing your economy. Because what will happen is, people won't make it domestically, they won't import the semi-finished product, they'll simply import the fabricated finished product.
And so it's, it's a very, very complex area. So I think Europe is gonna be a very interesting case study to watch.
Okay. Lisa?
Thank you. Good morning, Samira Farris from ANZ. My question's about the natural gas transition. I know, Anna, you sort of discussed that in greater detail. I guess if you take away the pressures around gas prices and that being economically just not viable, how long do you think it would take to transition to natural gas if you remove sort of the issue around the pricing? You know, specific to Port Kembla as an example.
Yeah, I think that's the transition to technology. So, the project that I mentioned on the last slide that I looked at, is focused on that transition. If you think about the steps within it, we need to be able to build the extra transmission capability for the steel making. We need to be able to get the 40 PJ of natural gas we need for the process, and if there's some infrastructure required to do that or not. We also need to find the right raw material for that, and that may mean mine development, it may not. So, we're looking at what existing infrastructure and mines and energy capabilities are already available, piece together the best value chain for that process.
We think, we think that's, that takes a little while, and that's what the blast furnace is enabling us to do. It gives us the time to, to develop out that value chain. You know, we've said we're gonna start that in 2026. It has a, it had, you know... Potentially a blast furnace has 20 years of life. We don't think we need that time, but it will take time to develop out that value chain and get that right. Specifically, one of the things Anna mentioned was that we, we're gonna need 3 - 3.5 times the electrical capacity that we currently use in Port Kembla, and the transmission requirement for that needs to be built out as a starting point.
And maybe if I can just add to that, you know, as putting the price thing aside, I think that the challenge that we currently face around gas is that there's quite, most of the gas is contracted on long-term contracts overseas. And so, you know, there's a waiting time, I guess, for some of that to unravel and new fields to come online. So, you know, we're certainly not sort of talking this side of 2030.
Yeah, I might hand to Tania now. I've got a sort of a related question that's come through from Dan Kang from CLSA. And so to go through that, it's around estimating the step-up cost or break-even cash cost at the current gas prices when thinking about this transition.
Yeah, I can't give an estimate, or I won't give an estimate because I'm sure Dan and the rest of the group will put a missile lock on it and hold us to account for it. I would say that even at optimized gas prices, it is a material increase in the cost. And again, it keeps coming back to why having the right policy settings, including a CBAM, are gonna be so important in this space.
Thanks, Tania.
It might be fair to say that I don't think that any of the decarbonized processes for iron and steel making anywhere in the world, they're all going to represent a substantial cost increase for world steel making. The entire cost curve is ultimately going to Step Up, and that's as Tania is pointing out, it really depends on the pace of, you know, where that actually happens regionally, and having mechanisms in place to actually enable you to do that investment, where perhaps you still have China not.
Yeah. Thank you. Tim Gerrard from Janus Henderson. Look, a little bit of a left-field question. I mean, obviously the challenges you've got in front of you are massive, and the approach you're taking, the bit-by-bit approach, is a terrific one. But in spite of those huge challenges, gas is a big challenge. When you look left field and you think about SMRs, not... I'm not saying that's highly probable or anything, I'm just saying, is that remotely on your study pathway? I say that in context of Nucor supporting NuScale, I say that in context of your experience in America, and what you think about SMRs and how they might be used in North America and Canada, and whether there is any hope of at least a study thinking about how it could be applied here at Port Kembla.
So it's a really interesting question. It's obviously a really topical question at the moment. I think, first of all, I would say that Australia, as we all know, is a very, very different place to the U.S. in terms of our views on nuclear. So there's a huge sort of social license issue that would have to be overcome. So that would be point one. And the second point is that I think there's plenty of evidence about to suggest that SMRs are just sub-economic, even when you take into account the additional transmission firming, et cetera, that you need for renewables. I think that, you know, that's a, a bit of a wing and a prayer.
And over and above that, the amount of commissioning time that you would need to get SMRs in play, it's actually, you know, it's a very long lead time that we're talking about there.
No implications for your business in the U.S.?
No. As it turns out, North Star is actually in an energy grid that's supplied by nuclear power, so we have very low intensity numbers at North Star. And our approach on this, and it's obviously a very, very sensitive topic, but our approach on this is we're actually technology agnostic. What I'd just like to see is a sensible debate about what the options are.
Okay, I've got another question online from Megan Kirby-Lewis from Barrenjoey. New patterned COLORBOND offering. Gerard, I think I'm gonna have you come up and answer this one. What is the rationale for the product offering, and can you give us some more detail on the target market?
Yeah, so the rationale for it is, it's quite a bespoke and niche part of the market, so it isn't close to our core, but it's a gap that we felt we needed to have a product, have a solution. We've seen some development. This isn't some development overseas. This isn't new IP globally. It's new for us at BlueScope, so it was really an opportunity to make sure that we had a product offer, and we could fill that space. I think I touched on, there's an obvious space for it in garage doors, but the façade and commercial walling opportunity is probably where we see that there could be some significant opportunities in the future. But it's, it'll be a new market for us.
Okay. Any more questions on the floor? No, I think that looks like we've got all the questions. No more coming through, I think, from online. So we're pretty much right on time, I think, for the morning tea break here. So we'll come back here at 11:00 A.M. Just thank you for the panelists for the presentations and the conversation. So for those in the room, head out for some morning tea, and we'll be back here at 11:00.
All right, we're ready to get started again. Welcome back from the break, everyone. We've had quite the deep dive this morning from Chris and Anna, Dave, and Tania into our updated decarbonisation pathway for iron and steel making, and our refreshed enablers. They are certainly very much the core of our Climate Action Program and certainly what we need to be advocating for. What I'm gonna do now is just take 15 minutes to zoom out onto our broader Climate Action Program, because, believe it or not, that's not all we're doing. First, a very fast recap on our climate strategy. We first articulated this in our Climate Action Report in 2021, and it continues to remain appropriate, and it directs the efforts of both our corporate team and our business units.
Earlier this week, we published our sustainability report. You may have had a chance to have a look at that or not so far, but the climate action chapter in that report provides a good progress update and overview of what we've been doing. And what you'll find in the slides for the investor presentation is that there are hyperlinks at the bottom that direct you to the appropriate pages in the report associated with each of the slides. So as you've already heard, the bulk of our effort is in that reducing our direct greenhouse gas emissions, and that's both now and in the future. And Dave covered some of the current examples for Port Kembla, and Chris talked a lot about the future.
We also offer carbon-efficient and climate resilient solutions for our customers, such as the refreshed palette in COLORBOND of the lighter colors that Gerald referred to, with high solar reflectance paints, high-strength steels, so engineers and designers can use less, light gauge steel framing products, such as TRUECORE, so we can manufacture buildings with less wastage and, in some cases, replace heavier gauge products. But also, just the basics we often forget about is reducing corrosion loss of steel. The better we protect our steels through painting and coating, the longer they last, the less steel we need to use, and also an increasing use of our weathering steels in external steel structures.
On renewables, we remain committed to the Finley solar farm, which supplies about 20% of our needs, and has been alluded to, and I'll touch on a bit later, our firmed renewable power contract in New Zealand associated with the EAF project. We also have a number of behind-the-meter solar projects taking place in our operations around the world. Our strategy on offsets remains unchanged, and that is to use them where direct abatement is not feasible, but also as a way, potentially, to respond to the needs of customers for lower embodied emissions products, which are emerging potentially faster than we're technically able to meet them.
In terms of local communities, we've already heard from, from Tania and others, that the best outcome we believe for our communities and the environment continues to be locally produced steel that is made in line with Australia and New Zealand and the U.S.'s high environmental and labor standards. And our ResponsibleSteel certifications provide evidence of this for our customers and other stakeholders. And finally, as you've heard from Anna, there is an awful lot of external activity that we need to monitor and engage on, and that's not just in government policy, but also change in regulations and upcoming changes in reporting requirements. We'll just take a quick look at our lagging indicator. We continue to improve on our emissions intensity across both our steelmaking and non-steelmaking targets and are now well ahead of our steelmaking target.
That larger step down this year is driven by the North Star expansion ramp-up, as that's a lower emissions intensity footprint. Also, energy and resource efficiency programs in Australia and New Zealand, such as our blast furnace humidity control project and hot accretions crushing, which reduce coal usage, and also increased scrap usage... in the non-steel making businesses, our business units have put a lot of effort in over the last year to building out a solid pipeline of projects to implement on a site-by-site basis. They also focus particularly on energy efficiency and waste heat recovery through the metal coating and painting processes, so projects such as oven upgrades.
I would like to emphasize, however, as I always do, every time you hear me talk about these targets, I will say that progress against these will be non-linear, because it does take a long time to get a project from concept through to implementation, so it will be a series of downward steps. It can also be lumpy because they are intensity targets, tons are the denominator, and they can vary with production tons from year- to- year. As a leading indicator for climate action, we look at our project pipeline. Our pipeline is healthy. It has a number of projects moving through the pipeline over the last 12 months. It is a bit tricky from where you're sitting to compare last year's one to this year's one, because there are ins and outs in every category.
You know, in a perfect world, a project would come in at the concept end and pop out ultimately at the execution end. That isn't how it works. However, projects do drop out along the way. We refer to kiss or kill a project at the stage gates, and they may not pass a cost-benefits analysis, or they may be superseded by a better project that's overtaken them. It's worth noting that these are just the tip of the iceberg projects. In the very small print, in the footnotes, it spells out that this is only projects over certain size thresholds. They're actually underpinned by many tens of much smaller projects underneath them.
A real highlight for us this year has been the accelerated feasibility study for the New Zealand electric arc furnace, and we were really pleased to announce recently that that's moved now into the execution phase. So Anna took us through, or Anna and Chris took us through, the five enablers necessary for decarbonisation, and this is an example of what happens when they do line up. So when we can, we do. And in this case, we have that collaboration and co-investment with government. We have got low-cost firmed renewables in partnership with our supplier, and a win-win demand opportunity, demand management opportunity, that helps us to provide stability to the local grid, and sufficient domestic scrap of the right grade to support the product mix.
For those who like the technical questions, and we had one before, remembering that the New Zealand Steel also produces long products, which helps us to use a slightly wider range of scrap grades. In the diagrams there, you can see the primary iron production process in New Zealand. It's rather unique. It was invented to use the New Zealand iron sands approximately 50 years ago, and the transition involves taking about half, well, exactly half of the primary train out. Removing two kilns and one melter, and replacing that with a scrap-based EAF that can also take a molten iron charge that comes out of the remaining primary pathway. The emissions reduction here is about 800,000 tons per annum. It's enormous.
It represents about 1% of New Zealand's emissions, and this is the lowest cost per ton abatement project ever for that New Zealand GIDI fund that Anna referred to earlier, the Government Investment in Decarbonising Industry. Still, at the same time, we continue to explore options for future further decarbonisation of the iron sand reduction process itself, and that includes our continuing support for the University of Wellington research into hydrogen, iron making with iron sands. In our non-steel making operations, as I said, we have many projects running, and this slide has a few specific examples. The CPL2 oven replacement at Western Port is. You'll find that on the list of sustaining projects rather than the list of climate projects. So the split of CapEx between sustaining and climate is not always as clean as you'd think.
But it comes with significant greenhouse gas reduction benefits through a reduction of natural gas usage through that oven. In terms of waste heat across our midstream or non-steel making businesses, we've got a significant opportunity around the installation of RTOs or regenerative thermal oxidizers, either installation or upgrade. We already have quite a few of those, but there are more sites where they could be installed, and particularly through our recently acquired BlueScope Coated Products business in the United States. And as I mentioned earlier, solar projects are gaining traction, particularly across our Asian businesses. We do these where it makes sense to do them, where there is a positive business case to do them. And in a number of cases, these are behind-the-meter projects, and they are actually cash positive in that they improve our overall energy costs and reliability in those regions.
So that was just a quick once-over lightly about what else is going on in climate action, and as you can see, it's quite a lot. Now, for the remainder of this session, we're gonna move through into some other sustainability topics. Our care and commitment to health, safety, and environment is integral to the way we do business at BlueScope, for our productivity, our success, and for our people, those that work in our business, in our supply chains, and in our communities.... The safety, health, and well-being of our people is paramount, as are our values of trust, respect, and teamwork in the workplace. We are dedicated to protecting the environment and to be a responsible neighbor, and providing smarter steel solutions through resource efficiency.
I'm now going to hand over to Mike Hussey, who is our new Head of Health, Safety, and Environment, to take us through some highlights.
Thank you, Gretta. And thank you all for giving me this, this opportunity to talk to you. As Gretta said, I'm very new in this role, but I am long-term BlueScope. And as Gretta just mentioned, and also Mark at the start of today, health, safety, and well-being of our employees is core to BlueScope, as is our care for the environment and also how we work with our local communities in which we operate. With that in mind, and I guess with a continuous improvement mindset, we are evolving our approach to health, safety, and environment, and we're looking for smart HSC solutions. So, we're looking to build further capacity in both our systems and our processes, where we want to develop a learning culture, have that...
Have our people engaged and working with us to develop new ideas and new ways of working. And we're looking to strengthen our controls across the business, because mistakes can happen. So where can we strengthen those controls to make sure that those mistakes don't deliver horrible outcomes? We're also focused more on leading indicators moving forward. So on the right, sorry, on the left-hand side of this page, you can see that, yeah, some of these leading indicators that we're focused on. You know, for example, we've completed 249 risk control projects across BlueScope in the last financial year, building upon other projects completed in previous years. Now, these projects are what I would describe as sort of grassroots campaign projects.
Their ideas envisaged by our workers and our frontline supervisors, and they're all about reducing the various different risks that we have across our business. Similarly, we've had 48 nominations for our Environment Star Award process, and over 1,500 employees engaged in that learning journey, working in teams to highlight issues, put forward solutions, and then implement. On the lagging indicator side, our total recordable injury frequency rate, or TRIFR, as we generally refer to it, we did see an increase in that in FY 2023, a final number of 7.5. And that is certainly above our long-term aim of between 5 - 7. There are some reasons for that increase. Certainly, one of those was inclusion of our BlueScope recycling business in those numbers.
If that business had been excluded, then the result would have been 7.2. We also recorded 43 environmental non-compliances across our business last year. That also was an increase on historical averages, but with some specific reasons behind that. Firstly, in New Zealand, there was some pretty extensive rain periods, particularly, I think, through January and February, which led to some, you know, obviously some stormwater control issues. We've also had some increasing wildlife issues in some of our Australian businesses, which contribute to E-C oli counts in our water, and also, again, inclusion of new businesses in those numbers.
I'd like to move on to a new initiative that we've launched in BlueScope in this financial year, and I will be showing you a video soon that will, I think, do a better job explaining the process than what I can. But we've drawn on research from the World Health Organization and other international authorities to help us pull together a new model for health and well-being at BlueScope. So, as I said, maybe to make it easier to understand, I'll show this video, which is actually the video which we've been using for employees across 2023 to explain what health and well-being at BlueScope means.
At BlueScope, the health and safety of our people is essential to how we work, and we're proud of our safe and inclusive workplaces. We also recognize how important it is to look after our whole selves, to promote and protect good physical and mental health, and show how important it is to have positive working relationships which enable us to be successful in our roles. It's why we've developed BlueScope Health and Wellbeing. Underpinned by our purpose and our bond, BlueScope Health and Wellbeing is a model designed with all of you in mind. At the heart of it is a simple way we can check in with ourselves and each other to better understand what keeps us healthy and able to thrive at work. We call this the Wellbeing Wheel, with each quadrant describing different factors that influence our lives.
Let's start with healthy workplaces, which includes environmental factors we have in our workplaces, facilities, and amenities. Our codes of practice, occupational hygiene, and ergonomic assessments are some of the ways we're keeping our workplaces healthy. Next up is thriving at work, which captures the work organization factors, like being content with our career growth and working conditions. This covers things like our commitment to training and development, being innovative, and how we structure our work. We then come to thriving culture. It shows that a sense of connection and good leadership are needed for a strong culture that supports our well-being. We're delivering this with initiatives such as our learning and development programs, and our commitment to inclusion, diversity, and respect. Finally, this brings us around to healthy people, where the key factors of mind, body, and lifestyle are all vital and need to be regularly nurtured.
This covers a range of educational materials and services we offer around mental health training and physical health programs. With the well-being wheel to guide us to look at key focus areas, how can we support each other to be well and thrive at work? You can play your part in helping to identify risks and protect a nurturing, empathetic, and strong workplace culture by raising awareness of health and wellness issues to support each other, our teams, and leaders, and taking opportunities to promote learning and the sharing of positive well-being practices, and recognizing how these can improve our lives and workplaces. Find out more about BlueScope health and well-being on our intranet, and take time to discuss the model in your workplace. Looking after each other at work starts with you and those around you.
I hope that gives you some insight into what we've introduced across the business in this calendar year. I think really pleasingly, we're starting to see some practical application of the model. So from gym facilities, physio programs, health initiatives in our U.S. businesses, and also in Australia, to... There was some amazing well-being community days, which have been held in our ASEAN and China businesses. A real focus on psychosocial risk in Australian Steel Products, and also a mental health-focused forum and occupational hygiene focus in New Zealand's New Zealand Pacific Islands business.
So, again, I think this program strongly supports our commitment to diversity, inclusion, and leadership development at BlueScope, and I think that's sort of a good segue for me to pass over to Kerri, who'll take us through the next stage.
Hi, everyone. I'm Kerri, and I'm the Head of Social Impact and Inclusion. My role exists to drive our inclusive culture strategy and align that across the group, and from a social impact perspective, it's twofold: create positive social impact and mitigate any adverse impacts from our operational sites or our products or our business partnerships. My role and function was created in February 2021, as BlueScope saw a need for us to ensure that we're meeting society expectations, and most importantly, holding ourselves accountable to the same standard that we expect from our suppliers and other partners that we work with. I'm pretty privileged because I get to put the human at the center of every decision that I make. Hopefully, by doing this, BlueScope can make a positive impact to the vulnerable populations in our communities.
One of the first actions two years ago was to create a cross-functional steering committee, that would oversee the implementation of our social impact due diligence process. We've got representatives in that committee from sustainability, procurement, risk, and ethics teams, and this diverse group add enormous value to the work because they bring individual experiences from each of their own areas of expertise. And also, they ensure that the strategy and the communication is shared and integrated right throughout the business in the various forums that they lead. I've since learned that this approach makes us pretty unique, and a lot of companies struggle to get that cross-functional ownership. For me, this demonstrates how seriously we take our obligation to address modern slavery and other human rights issues. So let me highlight just a few aspects of our approach.
Managing human rights is much like our safety journey that Mike just mentioned. We want to know where we might have a near miss or a potential issue. We want to engage with our team members, and empower them to help us find the solution that suits. We need to regularly audit our controls. Then finally, we want to have a continuous improvement mindset, so we continue to learn and adapt with every experience that we get. To help us with our journey, we follow the United Nations Guiding Principles for Business on Human Rights, and this provides a set of steps that guide organizations just like us to understand where the risks are for the business and the sectors that we operate in. It strongly encourages us to use existing systems and processes to drive our action, and in this way, we start to change the ecosystem.
It becomes less like a program then that has a start and an end date. We also have a principle-based approach for remedy and have been developing and refining this throughout the last 18 months as our experience has grown. Finally, building leadership awareness and capability is another really critical aspect to our approach, and each year, we focus on core topics and core leadership groups to advance our understanding so that ultimately, we get to a point where leaders ... are starting to identify human rights issues themselves in exactly the same way that they do when it comes to safety. So the first step in the due diligence process is conducting a self-assessment, and I'll just cover off this process briefly 'cause I think it really sets up why we're doing what we're doing.
So to begin this process, we identify all of the human rights that are applicable for our business, you know, such as the right to rest, the right to freedom of movement, et cetera. In terms of, and so then what we do, we take those articles and those rights, and we assess them based on our own exposure. So where have we had actual instances or potential occurrences? Finally, we cross-reference this information with an assessment of severity to the affected party. On the left-hand side of the screen, you can see our assessment for this year has identified six categories that are considered the most relevant to our business, and these are the ones in the blue highlight. On the right-hand side, I've listed our priority areas that have followed this assessment.
So to summarize, we're prioritizing work regarding working hours, regarding payroll compliance, forced labor, with a particular emphasis on foreign contract workers, grievance mechanisms, and harassment and abuse. This self-assessment, it's an annual process, and it's really interesting to see our understanding growing each year with the experience that we gain. That being said, we are on a huge learning trajectory, and very open and comfortable to the idea that we still have so much to learn, especially when it comes to modern slavery. And for a company like ours that operates in 16 countries and with huge number of cultural norms, that's very complex to navigate. So finally, I thought you might like to see a case study from last year that came out of that forced labor priority area, and hopefully, this will help to demonstrate to you how our approach works in practice.
So, as I said, we identify forced labor as one of our priority areas. Then we completed a risk-based desktop review of all of our sites to help us understand: what would we prioritize, where would we start? Based on this review, we decided to do a proactive labor risk audit in Malaysia at our Kapar site. Malaysia was selected due to the presence of foreign contract workers on our site, together with a labor shortage in Malaysia post the pandemic, and a regulatory system for human rights that is still maturing when it comes to modern slavery. So when you line up that very dynamic labor market, and our site profile, it stands to reason that we'd want to go in and understand as much as we possibly can to see if there are any gaps in our systems and processes.
Once we chose Malaysia, we then engaged a third party called Elevate to conduct the audit, and they're experts in this field. The audit included comprehensive listening strategies, including foreign-speaking interviewers where needed. We also used another third party to follow up that initial compliance audit and conduct deeper investigation as required. As this was one of our first proactive audits, we covered all contract workers on site, as well as all employees, to make sure that we maximize the learning. The findings from this two-step process indicated that the contract security personnel, who were foreign workers from Nepal, had grievances relating to modern slavery indicators.
What this means is that some of our controls were not quite as strong as we'd hoped, and this resulted in instances of, for example, passports being withheld from workers, recruitment fees paid by workers to secure their employment, and in some weeks, a mandatory rest day had not been taken. We're still working through some of the remediation phase. However, all remediation relating to those workers was actioned very promptly, including BlueScope stepping in to reimburse those contract workers for recruitment fees that they had paid. There were many insights and learnings for us post this audit, including those remediation principles, but probably the most significant was that modern slavery issues can be hiding in plain sight.
Therefore, we must maintain our approach of proactive auditing based on those external known risk factors, and we almost also have to create a safe environment for all workers on our sites to speak up if something isn't right. This is the most effective way of us ensuring that we're maintaining our standards and controls. The other learning is that this is gonna take time. We need to be patient, and we sort of need to ensure that at all times, our focus remains on protecting people as the number one priority. I'm just gonna switch our attention now on to inclusion and diversity. You may recall that you've seen this slide before. It outlines at a group level what our focus areas are for inclusion and diversity, and I'm now gonna hand to Rebecca to bring to life what this looks like in ASP.
Good morning. I'm Rebecca, and I've got the honor of being the GM of People for our Australian Steel Products business. I'm proud to return this year again to speak to our inclusion journey and our progress in creating a safe, respectful, and inclusive workplace across the business. Inclusion is a core value for us, and we strive to reflect the diversity of the communities in which we live, work, and operate. Together, inclusion and diversity are strategic enablers for our strength transformation strategy. We want everyone to feel a sense of pride in being part of BlueScope, to feel valued, listened to, able to contribute and realize their potential, and be able to speak up safely. We also want our people to know how they can and do contribute to our purpose, which is our reason for being.
Connecting them to it, and having a workplace that is inclusive, respectful, and one that, in the spirit of our bond, reflects our communities. In Australia alone, our people identify with 123 different cultural backgrounds, were born in 63 countries outside of Australia, and speak 90 different languages. When we asked our people across Australia, we also found 5% of those who voluntarily responded identified as LGBTQTIA+, 2.5% have a disability, 2% identify as Aboriginal or Torres Strait Islanders. Now, with such diversity, we can leverage these different backgrounds, life experiences, and ways of thinking to be more creative, innovative, and inspiring business, and that is why we take a strategic approach to inclusion and diversity.
Our focus since 2016 has been on gender, which does remain a key priority, but we have also sought to grow and support underrepresented groups. In Australia, we see this with the launch of our First Nations Framework and the newly formed Pride Network. We work closely and in partnership with local communities, trying hard to build strong engagement. Our First Nations Framework has been informed by listening and through conversations with local elders, seeking to understand and build trust. We also want to create an inclusive workplace that is respectful, and where we choose to treat each other with trust and respect. One where it is safe to speak up, be heard, and feel welcome. We are committed to continuing our change journey and holding ourselves accountable.
We measure our progress, and although we are proud of our inclusive culture, we know there is always more we can and need to do. An inclusive workplace is a key element to ASP's people strategy. We want to enable teams to operate at their best by embracing diversity, instilling an inclusive culture, and maintaining safe and respectful workplaces. And to do this, we are actively celebrating and respecting the uniqueness our people bring to work. In March, we created, for the first time, Inclusion Month, where employees across Australia could celebrate a month of inclusion with a focus on International Women's Day, Harmony Week, which celebrates Australia's multiculturalism, and World Pride Week. It was an opportunity to learn, share experiences, and celebrate with events held by local teams, our diversity networks in each state, and the newly formed Pride Network.
We're seeing an increasing range of employee-led initiatives across the business, which is incredibly exciting, as it's key to instilling an inclusive culture and makes it a fun and interesting place to work, reflecting our wider communities. Whilst it's so important to have the leadership example led from the top, we're finding that we're getting the traction when it actually also comes bottom up. We're giving our people permission, and empowering them to actually be able to work towards a greater understanding of differences in the workplace, greater levels of respect, and experience, and we're getting a huge groundswell as a result of that across Australia. Perhaps let me now show you some examples of how we're trying to proactively support a culture of respect and increase the engagement across Australia.
We very recently launched a new program we developed called Step Up as part of our Respect Is How We Work cultural program. Developed to enhance teamwork, teams work, and create diverse, inclusive, and respectful workplaces that are safe for all, it is led by frontline leaders who facilitate discussions with their teams. They dive into topics to set the team up for success in creating and maintaining a positive workplace. The foundation is that strong teams Step Up with know-how and confidence to intervene when they notice a situation that's not inclusive, safe, or respectful. The team and the team leader agree on the values and the way they will work together, agree what is not acceptable, and give each other permission to call out bad behavior and seek help.
It can be proactive in setting up a new team or when new team members join, or reactive when something has gone wrong and there's a need to reset. You'll also see on the slide our Respect at Work posters, which you can see on the large screen at the gate, and through the plant tours. These aim to promote inclusion and respect, and highlight that it is just banter, just a joke, just a bit of gossip is not acceptable. They're colorful, attention-grabbing, and have stimulated some great discussions. These programs all play an integral part in a positive and psychologically safe organization that is aligned with our purpose and our bond. This time last year, we'd just launched our First Nations framework, and we've continued to progress a range of initiatives.
We have a number of strategic pillars, and by the end of this year, each of those pillars will have a specific strategy developed. For example, we'll have a First Nations procurement strategy, where we'll build local connections that result in opportunities for Indigenous organizations to become suppliers, and this work has already commenced. We are members of Supply Nation, and we recently attended the Supply Nation Connect event in Sydney, which had hundreds of representatives from Aboriginal businesses. There are capability statements circulating around BlueScope, and two Aboriginal businesses are already in discussion for our national tender for stationery. So these strategies will be rolled out over 2024, taking learnings that will help inform and develop our national approach. We are aware that our national approach will also need to be tailored throughout the business and localized, and be place-based.
Pilot programs have commenced, with more to come. For example, we've held a pre-employment program recently in Port Kembla, where we partnered with Illawarra Youth Employment to support and increase the number of applicants from Aboriginal communities to our BlueBoots manufacturing recruitment campaign. That involved us bringing applicants on to site, giving them a tour, having a yarning circle to learn more about our business, about the roles, and also talking about what it was like to work on a roster and shift work. We provided in-classroom support as well on how to respond to job applications, interview questions, and held a simulated assessment center activity. Our employee engagement also continues to grow, with cultural awareness workshops run in the Illawarra, and NAIDOC events held across the country. These were another example of being employee-led.
When Tania and Dave and Aaron and I went to Perth and to Western Australia a couple of months ago during NAIDOC Week, we were thrilled to see that every site that we visited, and we visited four metro ones, were all celebrating NAIDOC Week. And again, this is bottom up. They had initiated themselves with a little bit of encouragement and guidance on the types of things that they could do. As Dave mentioned, we've continued to connect with community locally here by engaging Bangawarra to prepare the Connecting with Country framework for our Port Kembla Master Plan, so that our plans are informed by country. And we're also in the process of gifting a building and land to our local Illawarra Aboriginal Corporation.
A First Nations working group has been established with a unique way of working, trying to find the balance between both Western ways of business and cultural ways of working. And you will all have a copy of our First Nations framework here in your bags, which features the work of a local artist, Jasmine Sarin. She's created this artwork specifically for BlueScope. You may recognize the colors are our COLORBOND colors. The large circle in the middle represents BlueScope. The smaller circles coming out are the sites and locations across our country, and we are showing the connection of sharing of knowledge and stories across BlueScope. The leaves represent cleansing and renewal, and the nurturing of relationships with all communities, and the hands acknowledge and respect the traditional owners and custodians of the land.
With that, I thank you for the opportunity to share our story, and pass over to Tim.
Thank you, Rebecca, and hello again, everyone. So we've heard quite a bit this morning about some of the exciting opportunities for BlueScope, our businesses, and ASP, as it relates to products and, and what's happening within the, the broader sort of environment. So now with the help of, and some support of Pip Stone, the ASP Sustainability Manager, we're gonna further explore some examples of how we and our products are contributing to a more sustainable steel industry. So as, as we've heard, steel is an essential material. It's critical to the energy transition, as well as we being reliant on, on that energy transition, and it will continue to be a fundamental input, into the renewable energy infrastructure and energy supply.
Its strength, durability, and recyclability means its circularity attributes are strong, and BlueScope is continuing to explore ways that we can further our contributions to steel's circular credentials. So you've heard earlier today about sort of the role around our acquisitions in the U.S. into the scrap supply chain. We're looking at the increase in scrap use, which you heard earlier from Dave as well. This is right across our operations. Utilizing the digital and modern manufacturing technology to increase our efficiency of the use of materials and energy, also mentioned by Dave. And then when we look at the products, we're focusing on the design life optimization, pursuing the extended use and also the reuse of our products. So a couple of examples, and Gretta mentioned a little bit earlier about the sustainability report.
It is really difficult to capture all of our products in a corporate document like that. So what we've been doing over the last couple of years is try to anchor them into sort of a platform-type approach, and you'll see the three sort of buckets there. We could probably build those out and do a bit more, but there's a huge amount of opportunities and a huge amount of sort of products that we're supplying into different markets as it relates to sustainability. So I'll pick on, I'll sort of draw out a couple of them, and one that we've touched a little bit on is the cool roofing solutions. So really important in the built environment. These cool roof solutions provide high solar reflectance, which help reduce to reducing the roofing temperature and keep buildings cooler.
The coating technologies, which we're very well known for, and the performance testing that we do, help improve the corrosion resistance of our products. That means keeping the steel that's out into the environment, keeping its use as long as possible. Then our engineering building solutions, which support the efficient use of steel, so making sure that the steel that we're using is being best placed. And they provide pre-engineered functionality for rapid construction, and then allowing the minimization of construction waste. Now, I'll move on to an area that's pretty close to my heart, and the work that I've been doing a lot over the last couple of years, but this is just one of the sort of initiatives that we're involved in on a global basis.
You know, sustainability standards, you know, taxonomies, reporting initiatives, are really important for consistent and comparable targets that we were talking about earlier, and disclosures across the steel sector. You know, we see our participation in initiatives like this as a really integral part to the way that we talk about our responsible products. ResponsibleSteel. Many of you will know that BlueScope was a founding member of ResponsibleSteel, and you know, I'm really proud of the role that we've played. I'm equally proud for the amount of work that's gone through from many BlueScope people in the development of ResponsibleSteel. It is an independent organization, but the standards that have been developed are through a multi-stakeholder process, and BlueScope has played a really strong role contributing feedback through those processes.
So back in 2019, the standard was launched actually here at Port Kembla, in this room. And since that time, ResponsibleSteel's influence and impact has grown. So where we sit this week, and I've just checked overnight, you know, in the four years since that launch, we've had 61 sites receive certification across five continents, nine steel organizations, and those organizations in their, in their global footprints represent about 15% of the world's steel production capacity. So we're talking, you know, thyssenkrupp, POSCO, Tata Steel, ArcelorMittal, U.S. Steel, and of course, BlueScope, all have sites certified under the ResponsibleSteel site standard. Port Kembla Steelworks, and other Wollongong sites like Spring Hill, with those in the room, we'll also get out to see today, were the first in the Asia-Pacific region to receive site certification.
Our Western Port facility recently joined the cohort of certified sites, and our NS BlueScope Phu My site is well advanced through their certification journey. That site is aspiring to be the first certified site in ASEAN under ResponsibleSteel. ResponsibleSteel, with this sort of growing impact and reach, is having, you know, continued to be recognized as the sort of leading, you know, steel sustainability standard, largely because it's a multi-stakeholder approach, you know, civil society and others contributing to its development. Equally, it is a much broader standard, and rather than just focusing on the climate change aspects, it covers water, it covers labor rights, and many of the topics that we've heard about today.
So that recognition has been demonstrated through Green Building Council initiatives, or Green, Green Building Certification initiatives, other sustainability initiatives like the First Movers Coalition, but also being used for sustainable linked finance instruments as well that we're seeing emerging. So our involvement in ResponsibleSteel is just one of the way that we're demonstrating that our sites and our products are managed and produced responsibly, in line with our purpose. But I'll now hand over to Pip, to detail sort of how we use this with our broader stakeholders on initiatives like ResponsibleSteel, and the important role that our products are playing in the Australian built environment.
Thanks, Tim, and hi, everyone. Pip Stone, Sustainability Manager in our Australian Steel Markets business. My role is really customer-facing sustainability, and that includes our product sustainability credentials. So we engage with our value chain on sustainability because it is key to understanding the trends in the built environment and identifying opportunities to support our customers to achieve their objectives. We have long-standing memberships with organizations such as the Green Building Council of Australia, and these memberships provide us with a platform to engage with our customers, and to share our progress. This year, we hosted a visit of MECLA, the Materials and Embodied Carbon Leaders Alliance, here at Port Kembla, in a session really not dissimilar to this one.
Our customers were able to see the size and the scale of our operations, and to better understand the challenges and opportunities of steel decarbonisation, including how they can support us. We have a really strong focus on customer education. We deliver presentations and webinars via organizations such as the Australian Institute of Architects. This year we developed a formal CPD course on ResponsibleSteel, which we are currently delivering to architects across Australia. Our messages are tailored to the role of the customer in the value chain. For indirect customers, such as developers and specifiers, they include design and whole of life considerations, encouraging systems thinking and holistic sustainability, that focus on sectoral decarbonisation alongside achieving project targets, and the importance of product transparency and stewardship, which I'll touch on shortly....
We're also supporting our direct customers to tell their sustainability stories, including assisting them on their own product transparency and stewardship initiatives. We do this by providing both detailed product technical information, as well as our in-house expertise. Our product and manufacturing sustainability credentials are becoming increasingly important to our customers, and that's being driven by industry demand. We classify our credentials and certifications into three broad categories. The first is Environmental Product Declarations, or EPDs. These are based on life cycle assessment, or LCA, and they allow us to clearly communicate the environmental impact of our products over their life cycle for a range of indicators, including global warming potential or GHG emissions. EPDs are really similar to the nutritional labels that you get on the back of a food product in your supermarket that tell you how much sugar or salt is in that product.
Same thing, but based on environmental impact. They are rigorous, robust, credible, and third-party verified, and they're recognized in key sustainability frameworks, such as Green Star and NABERS, the National Australian Built Environment Rating System. We currently have 14 published EPDs, 11 published in the last six months, and our rollout continues. Our current EPDs cover most of our key branded products. We expect to have EPDs across all our, all of our products within the next 12 or so months. They are publicly available on various registers, as well as on our website, and we've got a few in the next room for anyone who's interested in having a closer look. The second category there is eco labels.
An eco label certifies that a product has been manufactured in line with defined environmental standards, and can help specifiers, consumers, and purchasers quickly and easily identify products that meet specific environmental or broader sustainability criteria. In Australia, a number of our products are certified to Global Green Tag Green Rate, achieving level A, the highest rating. The last category there is stewardship, which of course relates to our Port Kembla Responsible Steel certification, and that certification is key to a number of our stakeholders, but especially to our customers. In Australia, Responsible Steel has been formally recognized in the Green Star rating tool, meaning that all of our Australian products produced from steel manufactured here at Port Kembla can support our customers to achieve Green Star ratings. It's not just our credentials and certifications, however, that our customers value.
Some of our products are also well-positioned to help support our customers to achieve sustainable project outcomes through design. I've included a couple of examples here, and we've heard a little bit about both of these from Tim and from Gretta. The first features adaptive reuse, and this is a growing trend in the built environment, particularly in the commercial segment, where rather than demolishing a building and rebuilding, existing buildings are retained and adapted, and that results in resource efficiency and a corresponding embodied carbon saving. Steel can support adaptive reuse cases. In this example, in Lonsdale Street in Melbourne, TRUECORE steel frames were used to add 8- storeys to an existing 12-storey, 50-year-old building. The second example is cool roofing.
A cool roof is made from materials designed to have high solar reflectance and thermal emissions to keep the roof surface temperature cooler in the sun. The performance benefits of a cool roof can include potential operational energy savings and thermal comfort improvements, but will depend on a wide range of factors, including the building type, the design, and the location. In Australia, we have 11 COLORBOND steel cool roofing colors, which provide a simple pathway for customers to comply with requirements in the National Construction Code for roof cladding material. As we continue to roll out product credentials and certifications across our product range and anticipate and respond to emerging trends in the built environment, we are confident in supporting our customers to achieve their sustainability objectives. I'll pass back to Tim.
Thanks, Pip, and now we're going to move into the second Q&A of the day. So I will ask Pip to come back up, and Mark, Gretta, I think we've got we've got Kerri, and we've got Rebecca Roberts joining us as well. So grab a seat up here. So same process as the earlier Q&A. We'll we'll take questions through on the webcast, and also in the room. So as before, just please introduce yourself and where you're from, and feel free to direct the question to our panelist. Any questions? Lee.
Thank you. Lee Power, UBS. Pip or Tim, maybe for you, just I'd be interested to hear just around customers' willingness to pay for responsible or environmentally aware steel and, and maybe what you actually think drives that. What do they want? Do they want low carbon? Do they want tracing? And, you know, where, where do we think it plays out? It feels, I guess, that customers are willing to pay for performance, but maybe the, the emissions tracing component has kind of lagged a little bit of what I probably thought it would have?
Yeah, it's a really good question, so I might throw to Pip in the first instance.
Sure. So you're right in terms of what they're interested in, is the embodied carbon of the material primarily, and not much else at the moment, outside of credentials and certifications. In terms of willingness to pay, you know, we've had a handful of conversations at a very high level, but nothing material in that space yet, so I think it's a fair assessment that you've made.
Sorry, so why do you think that actually is? Like, what, like, what do you think is holding them back? Is it you just can't pass it on to consumer? Because it feels like the end market, the end consumer is well aware of sustainability, and in other, other kind of areas are happy to pay for it, and yet in steel it feels like they're not.
I think that's not just steel. I think that's across the built environment more broadly. So we are starting to see some indicators that consumers are starting to be willing to pay, but very early signals, I'd say.
There are a number of initiatives that are trying to sort of draw that out, so, and Pip mentioned earlier about MECLA in Australia is around understanding, but sort of, and a willingness to, to see what's happening in different sectors. ResponsibleSteel has got a program of work with The Climate Group called SteelZero, so which is around, again, setting targets around aspirations for purchasing sort of low-embodied emission steel. And there's a few others that are, that are coming out as well, focused on that piece. I mentioned the First Movers Coalition. So really trying to get sort of groups together to say: What does that demand look like? Rather than on an individual customer basis, but it's still, you know, it's still very early days.
Thank you.
All right.
Hi, Janelle Morrison from Ausbil Investment Management. This is a very specific modern slavery question: Does BlueScope source pig iron or have any exposure to that? And I guess, yeah, if there's any assessment on that too.
To Andrew?
Yeah.
Or do you want to have a first go, or do you want me to bring-
No, you bring him.
Yeah. So we've actually got Andrew Watson in the room, who sits in our supply chain team. So I might bring Andrew up to respond, if you're comfortable with that, Andrew?
Hi there. Thanks for the question. Yes, we do. We source pig iron predominantly for our EAF operations in North America at North Star. And so we've done quite extensive assessment work on that supply chain, particularly the supply chain in Brazil, including audits, on-the-ground audits, at the pig iron manufacturing facility, and also the charcoal supply chain leading into that. Did that answer your questions?
I was just going to say, I think it's fair to say it was identified early on by us as a very high-risk area, hence the effort that's gone into it. What's actually been interesting has been the improvement in standards that, quite frankly, we've driven as part of the work that we've required the suppliers to institute, has actually put them in a position where they feel they're in a much better position to sell the product more broadly because we've given them the base to operate from. But there's a range of suppliers. The awful situation in Ukraine changed the pig iron market dramatically a few years ago. It's an area that we continue to put an enormous amount of focus on.
The team, including our own people, visiting sites pretty much on an annual basis to do on-the-ground audits, not just relying on third parties because of the potential risk in that supply chain.
As Mark said, probably a number of suppliers that fit into that category, where there's quite a comprehensive approach around BlueScope employees visiting the sites, external auditors, and other forms of third-party accreditation as well. Thank you.
Just showcasing the depth. I think we can just pull people out of the audience to answer questions for you, Janelle, so-
Thank you.
Thank you, Andrew. I might go to another question that's come through online. Again, Dan Kang from CLSA: Great progress on lowering our steelmaking emissions. Surprising to see our 2030 target is an incremental 4% from where we are today. Given the introduction of the New Zealand EAF and potential debottlenecking, you know, in terms of the 4% increase, can you give some commentary on the sort of the forward look, maybe, Gretta?
Yeah, and thank you for the compliment. We're very pleased with how we're going with those emissions reductions. When we set that target of 1% year- on- year, we set it in 2019 to a 2018 baseline. It's fair to say that a lot of the improvements that we now have on the books didn't exist, and it was felt to be, you know, a very stretching target that would require a lot of effort. The North Star project has not been inconsiderable. We've spent an enormous amount of money, and we're still ramping that one up, and now we have two more great projects.
Our 12% target that at the time seemed like it was going to be a real stretch, but we set it at an achievable level, we certainly now see that that's in sight with a couple of these other projects on the books. We're not in the business of resetting our targets on a yearly basis, and having two good projects on the list doesn't mean that they're executed yet. We now have to apply ourselves to the hard work of actually executing on the EAF and the North Star debottlenecking.
Thanks, Gretta. Any other questions on the floor?
Beat you by a few seconds. Just a question on your safety. It seems that your leading targets are sort of looking great, but your lagging targets still aren't improving. I'm just wondering, are your leading targets that you're setting, your HSE risk projects, are you not ambitious enough in that area, and that's potentially why your lagging targets aren't coming down? The second question is, we've seen your TRIFR and the severity, what about your high potential injuries, high potential incidents as well? Is that, how is that coming through?
Yeah, I think it, I think in response to your first question, thank you for the questions. I think that, I think we know it's gonna take some time. So, but by focusing on those leading indicators and, and I think really, as I sort of mentioned, you know, getting that groundswell of support from our frontline workers and getting their engagement and involvement, they're the people who are gonna tell us what's really needed and what the real risk is, and the things that they confront every day. So, I think we believe, right? We believe it will drive improvement and, but it will take some time and time. And your second question? Sorry, again.
High potential incidents.
Yeah, I, on the slide, we do reference there were two injuries, two, so two TRIs last year, which did result in permanent incapacity of those employees. We do track, do track those measures and I think it's probably more realistic to see... You know, I think we'd be focused on those as a lagging indicator as opposed to the TRIFR number. You know, that's really the consequences that we wanna reduce and eliminate in our business. They're the ones that we really are focused on.
Yeah, thanks.
To be fair to Mike, he's been in the role for three weeks, so six, sorry. Thank you for taking that on. Just a couple of other comments to maybe round it out. I mean, we're incredibly uncomfortable with where our TRIFR performance is. We're seeing a reduction in severity, although we still have severe incidents, but we're seeing a reduction in severity. Something like 60% of the TRIFR statistics you see happen between the shoulder and the hand, they're manual handling, handling injuries, they're lacerations, they're sprains and strains. That's something that's gonna take us some time to work out of the business because it goes to automation and different ways of doing things. So the lag indicators give us great angst, and we're not comfortable with them, but there's not a quick fix.
We're also seeing the risk profile change in our business. For those of us, those that were with us in May, in North America, we've introduced a whole new set of risks with the acquisition of the recycling business. I mean, a fabulous acquisition from us from a strategic perspective, but it's introduced a whole new range of risks and businesses that aren't anywhere near up the maturity curve that the rest of our businesses are. So this is, this is an ongoing battle. I wish I could say to you that I can see victory in sight or we can declare victory. Not, not the case. It's an ongoing battle and just something we, we just have to keep working at and, and rightly be questioned about our performance and our aspiration.
Thanks, Mike and Mark. I think we had another question over here.
Sorry, one for Kerri. I think on the slide around the Malaysia audit, the last bullet point was addressing supply concerns. It was kind of menacing. I liked it. So I just... What does that actually mean? And can you push change through that channel, given the kind of ASEAN more broadly issue, let's call it? Have you had success there?
Yep. Excellent question, and I'll start now just so I don't drop Andrew in straight away, but I will invite Andrew as our Head of Procurement to also comment. But we try to work as closely as we possibly can with suppliers, even when we find difficulties and issues that we have to deal with. Some suppliers, when they're prepared to actually work with us and to improve their business model to benefit all of their workforce, then we absolutely support them to do that, and that's always our preferred option. Obviously, you know, if you've got suppliers that are not prepared to work with you or to give you the transparency that we want to see and the improvement, then that's a different conversation.
But our first starting point is always to work as closely as we can with suppliers to, you know, get them to Step Up, so we're having an impact not only on our business, but actually on the broader ecosystem that's operating. But yeah, Andrew, is there anything else that you'd like to say to that?
Nothing to add. That's, you know, spot on.
Yep.
Sorry, in Malaysia, we had-
Yeah
... maybe one thing to add. We actually had three quite different responses in terms from, from three different suppliers. So one was very engaged and interested in the findings, realized that, you know, they would, that improving on that would have a positive impact on their business as well and were, you know, having quick to implement change. Second supplier, there were a lot more findings. It was the security supplier that Kerri mentioned.
That was quite a process to work through, and as Kerri said, you know, working through that and identifying a business model that allows them to deliver, you know, a sustainable and human rights kind of centered approach, is hopefully, we think, sort of, not just impacts on our relationship with them and our ability to continue, but also their ability to provide that service to other customers in Malaysia in the future. And then the third supplier not really interested in the findings, couldn't, you know, see that, you know, that there was any benefit for them in changing the way they were working. You know, we probably won't be working with them in the future.
Thanks again, Andrew. We should have got you a seat, I think. Kerri, I might stay with you. I've got a question that's come through online from Maddy Dwyer from Paradise. So on the case study within the modern slavery statement and the sort of way that we've articulated it. So Maddy's question says, the sort of deliberate language around what we've used to describe the process and what we've found. So the language we've used is sort of around the modern slavery indicators, rather than saying we have a case of modern slavery. So are you able to respond to Maddy's question?
Yep, absolutely. So modern slavery is a really broad term that covers—it's just like saying human rights. It's, it covers a really large number of topics, you know, the ones I've mentioned today, but it also includes, you know, forced marriage and human trafficking and a whole bunch of other topics. So following the, the UNGPs, those principles that I mentioned, the best way for companies like us to identify issues and gaps in our processes is actually assessing ourselves against the ILO indicators of forced labor. So I guess our use of that wording is more to actually provide, technical clarification, and, and actually more transparently, which indicators, you know, we've sort of found and the examples that I gave today. Is there anything else that you'd add to that, Tim?
No, but I think, as you said, we're, we're finding more as we go through the remediation, well, working through the remediation process. So I think the, the best way is to, like we talked about earlier, with standards, anchoring it back to definitions that are provided by others. So that's sort of the way that we're working through it. Okay.
Hi, Janelle again. The TNFD came out with its final framework earlier this week, and I had a read through, and some of the metrics in there are quite interesting and broad. Has BlueScope looked at that recently, and do you have any comments on those metrics, and is this something that you're looking to adopt as a framework to report on?
Thanks, Janelle. I might start with that. Are you going to throw it all to me, Gretta, I think? So I did, I mentioned standards and issues, and they are really important. We've obviously got the International Sustainability Standards Board coming through and working what the response to that would be, would look like. You would have seen, I mean, through our disclosures over the last couple of years, we know what was coming, right? So the way that we've been structuring our sustainability report is picking up those key issues. Maybe we're doing an okay job, but on some of those key nature-related topics like water, we don't get any questions, so you're welcome to ask questions around water. But I think we've been disclosing quite heavily on that.
The TNFD is really complex, as anyone that's sort of read through it. It is very broad. I mean, you know, don't quote me on this, but TCFD is easy compared to TNFD. The breadth, the scale, the depth up your value chain is really, really complex. Yes, we have started looking at it. What does that mean for our business? You know, there are others that are going out, I think, you know, out front on some of this and what it might mean. We're seeing many in the sort of the property space, and we're seeing some also in the raw materials or in the agriculture doing a bit more in this area. It's definitely one that we are engaging with, but, you know, understanding what that might look like for our business.
Tim Gerrard, Janus Henderson. Last year, there was a little bit of a discussion on the Science Based Targets, where the steel industry was, with respect to that and maybe where BlueScope is involved. Can you just give us a little bit of a clarification on where we are on that? And sort of a related question, pretty familiar with Scope 1, 2, and 3, do you spend much time when you talk to your customers about helping them and maybe a Scope 4 or avoided emissions?
So I'll start, 'cause I had the pleasure with some of our colleagues sitting on those very late phone calls with the SBTi for the expert advisory group. So the process or the guidance is now out, it's public. It's been out in public for a little while. And there was a public launch actually this week. So, you know, sustainability week for us has been pretty full on. If you think about an SBTi launch, a sustainability report, and now all of you joining us here today. So you know, where that came out for the SBTi review was, you know, the challenge that we have is they're talking about a 1.5 degrees and what needs to be done for us to get there.
So what needs to be done versus sort of how the structure, it sort of stuck or the enablers are present globally. And I think that's why you've sort of seen us talk at length today, you know, Gretta, Mark, we've had Anna and Chris talk around what we're doing and, you know, where the enablers are present in different geographies. That is one of the big challenges. So there'll be different geographies that will be better placed to respond to the SBTi guidance. But I think where we're sitting at the moment is to understand what the programs of work we've got and then continue to stay close to how that's moving. Gretta, do you want to add anything?
Yeah, I'll just comment briefly on Scope 4. I do have to say it's, you know, our primary attention is on Scope 1. That's where our big challenges are. But we do have some strong examples of Scope 4, where we particularly our co-products head out into other industries. An example was given earlier of the cement industry, where slag provides a great replacement for clinker. So that's probably one of the strongest examples. And there is, you might recall the slide to do with the blast furnace six reline, some additional work going into improving slag granulation in that facility. So that's probably the strongest example where it's our co-products going out into other industries.
Thanks, Gretta. Now, I think we're at time now, so I might hand to Mark just as a bit of a summary for the day.
Yeah, thanks. Thanks, Tim, and thank you, everybody. Appreciate you guys making the time to come down here today. The day is not over yet for those that are in the room, but hopefully what you've seen today is, you know, what we think is a very resilient Australian business, integrated Australian business. There's an enormous amount of work going on in the business. And again, for those of you that are going to join us on the tour, you'll see that at large very shortly. There's a lot of work going on around our emissions strategy and how we're pursuing that here in Australia, but also globally. You know, really exciting opportunity for us in New Zealand with the EAF. And this is all about us creating that sustainable business going forward.
And all of it's backed up in one of the earlier questions. It's very much based around our financial principles, and the fact that we have such a strong balance sheet, we've got such strong financial disciplines, actually gives us the wherewithal to take on these medium and long-term strategies and changes that we need to bring to our business. So look, a lot of information thrown at you today. Hopefully, that's been informative and helpful. You'll get the time to, for those of you joining us, you'll get the time to talk to us on the bus as we go around the site. To those on the website, thank you very much for your participation and interest, and I think we will close it there now. Thank you.