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Adjusting to Surplus. Last year, as the Australian economy struggled through recession, B.H.P. profits were down (to $32.6 million v. $33.9 million in 1961) for the first time in 13 years. Australians are certain that the country's voracious appetite for steel will recover rapidly, and B.H.P. is confidently spending $112 million a year to increase its capacity to 5,500,000 tons by 1965. But in its effort to win export markets—a move encouraged by the Australian government, which is seeking a cushion against the loss of agricultural exports if Britain joins the Common Market—B.H.P. is encountering vexing and unfamiliar difficulties. Prospects are that the company's sales abroad will drop more than 20% this year.
One big reason is that B.H.P. is meeting mounting competition in Asia from India's new government-supported steel industry and from the aggressive steelmakers of Tapan. Last July New Zealand, which traditionally bought half its steel from B.H.P., eliminated the tariff"advantage that it used to give Australian steel, The result has been a bonanza for the Japanese industry, which, with government assistance, sells steel abroad for 10% to 30% less than in Japan.
To counter the competition, B.H.P. is opening new sales offices abroad, has begun an all-out drive to cut production costs. "But B.H.P. isn't in real trouble," says a former top executive of the company. "They are simply worried by having a little surplus steel for the first -time. When you have lived so long in a cocoon—even an efficiently run cocoon—it's hard, when the cocoon breaks open, to adjust to the new world outside."