Under the Spotlight: BlueScope Steel ($BSL)

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Inflation is running hot again, rate hikes are back in focus and the outlook for construction is getting tougher. It’s not an easy moment to be a steelmaker.

That’s the backdrop against which investors are reassessing Australia’s biggest steel producer BlueScope Steel ($BSL), two weeks after the company rejected a US$13B takeover proposal from Nasdaq-listed Steel Dynamics ($STLD) and Kerry Stokes-backed SGH.

Since the offer was made public, $BSL shares have jumped 25%, matching the consortium’s bid of $30 per share and hitting a new 52-week high.

It’s the fourth time in 18 months Steel Dynamics has tried to buy BlueScope’s American operations. After Donald Trump announced 50% tariffs on imported steel last year, BlueScope’s U.S. steel mills suddenly looked far more attractive – and $BSL shares jumped 17% on the news.

BlueScope’s board wasn’t convinced. Chair Jane McAloon put it bluntly: ‘This proposal was an attempt to take BlueScope from its shareholders on the cheap.’

The market appears to agree. Since then, the company has sought rival bidders in Asia in the hope of flushing out a higher price. 

A steel

In an earnings call this week, Steel Dynamics chairman Mark Millett slammed BlueScope’s rejection, calling its main acquisition target – the profitable U.S. North Star steel mill – ‘essentially a stranded asset’ hampered by ‘incomplete growth strategies.’ 

It’s a view BlueScope ardently rejects, but the timing couldn’t be better for a takeover. FY2025 was a reminder of how unforgiving the steel cycle can be.

BlueScope’s underlying earnings (EBIT) fell to $738M, down more than $600M year on year. Reported net profit plunged 90% to $84M after a $439M impairment in its North American coated products business.

Softer demand paired with lower steel prices hit the steel industry globally. Steel prices in China and Asia fell to historic lows in 2025 and show little sign of improvement. Rising energy costs have also weighed, particularly higher electricity prices in Australia. In New Zealand, weak construction demand pushed BlueScope’s business into a loss. 

North America wasn’t immune. Steel spreads were weaker for much of the year, but pricing improved late in FY2025, supported by higher steel prices inside the tariff-protected U.S. market and ramped-up output at North Star.

Crucially, this wasn’t a balance-sheet blow-up. BlueScope finished the year with just $28M in net debt and returned $293M to shareholders through dividends and buybacks, followed by a rare $438M special dividend shortly after rejecting the takeover bid.

U.S. optimism

Since its demerger from BHP Group ($BHP) in 2002, the company has reshaped itself around steel products used directly in construction and manufacturing.

Rather than relying on raw commodity steel alone, the company sells coated and pre-engineered steel products used in roofs, warehouses and industrial buildings. That value add gives it more pricing power and reduces exposure to day-to-day swings in steel prices.

While it remains an Australian name, most profits now come from the U.S. In FY2025, North America delivered underlying EBIT of $514M – almost double the Australian business and roughly 40% of group sales.

The centrepiece is the North Star mill in Ohio, a low-cost operation that uses electric arc furnaces instead of older blast furnaces, allowing it to produce steel more cheaply than most U.S. competitors.

In Australia, profits are driven by Colorbond roofing and cladding and Truecore framing steel. These are higher-margin products, but more exposed to construction cycles and energy prices. Smaller operations span Asia, New Zealand and the Pacific.

Forging ahead

Management expects earnings to lift in FY2026 as steel prices and spreads improve, particularly in the U.S. market. BlueScope has guided to first-half FY2026 underlying EBIT of $550–$620M.

Broker consensus estimates put FY2026 EBITDA around $1.9B, while Morgan Stanley sees a path to $2.3–$3.0B by FY2030 if cost savings land and U.S. conditions remain supportive.

New Zealand is a swing factor. The shift to an electric arc furnace from April 2026 should lower costs and add flexibility. BlueScope also owns around 1,250 hectares of surplus industrial land – a source of optional upside, but one management plans to monetise slowly and selectively.

Costs remain a risk. Inflation is sticky and the U.S. coated products business is still in turnaround mode. Even so, BlueScope continues to invest, including rolling out Colorbond in the U.S., underlining how central North America remains to its long-term strategy.

Pressure test

Despite ongoing weakness in the steel market, analysts are relatively upbeat on BlueScope’s prospects in light of the takeover bid.

BlueScope’s biggest shareholder, AustralianSuper, said it would only support a deal priced ‘materially higher’ than the current $30-per-share offer, while others have pointed to valuations well above that level.

Bullish analysts argue the bid undervalues North Star, particularly if U.S. steel remains protected by tariffs and demand is tied to a push to rebuild domestic manufacturing.

Of eight analyst ratings tracked by LSEG, six rate the stock a ‘Buy’ and two a ‘Hold’. The average 12-month price target is $30.62 – broadly in line with recent trading.

More cautious voices warn steel remains cyclical. Tariffs may not last forever, global oversupply hasn’t gone away and parts of BlueScope’s U.S. portfolio – particularly its coated products segment – still need work.

Final cut

BlueScope isn’t in play because earnings are peaking. It’s in play because its most valuable assets are clear and increasingly hard to replicate.

The rejected bid has sharpened focus on North Star – a low-cost, tariff-protected U.S. steel asset at the heart of America’s manufacturing push. Whether a higher offer emerges will hinge on how durable those tariffs prove to be and whether another buyer agrees the asset is worth more than $30 a share.

For now, that question is doing most of the work in the stock.

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.