Bluescope Steel will shed around 500 jobs at its Port Kembla steelworks operations in NSW as it cuts costs to keep its Australian operations viable.

The troubled steelmaker is under financial pressure due to weakening demand and a slump in prices amid a supply glut.

After posting a $136 million annual profit in August the company flagged plans to cut 500 of its 5,000-strong workforce at Port Kembla, to help achieve $200 million in annual savings it said was needed to maintain production in Australia.

The company announced a fresh three year enterprise agreement with unions and employees at Port Kembla that includes job cuts and a pay freeze.

Around 300 manufacturing jobs and another 200 support and service positions will go, pay levels will not change for three years, this financial year's wages bonus scheme has been suspended overtime payments will be overhauled.

The agreement will deliver around $60 million in annual cost savings, Australian Workers Union Port Kembla branch secretary Wayne Phillips said.

Workers have met to consider the agreement and voted overwhelmingly in its favour, he said.

Bluescope's remaining cost savings are expected to come from contractors and suppliers, raw material procurement, and tax concessions from the state government.

The company will provide an update on its efforts to achieve $200 million in annual savings at its annual general meeting in November.

'This is a major step towards achieving the cost saving target. But we still have a lot of work to do in coming weeks, as steel prices remain under pressure from the global steel glut,' Bluescope managing director Paul O'Malley said.

  • Bluescope is another Australian manufacturing and construction tragedy. Its shareholders have witnessed the destruction of millions of dollars in shareholder value as it continues the journey of death by a thousand cuts. Yes the unions are at center stage and now paying a price for the accumulation of unsustainable work practices that do not have a place in a modern construction industry. But that's only part of the story. Bluescope products are world class. They truly are. So why doesn't the revolving door of management have a better plan for the future that leverages on the potential of these products? The problem is that so many good products and vendors like Bluescope are so far down the food chain in construction procurement they are relegated to commodity status and denied the opportunity to capture their full potential. It amazes me that manufacturers with large balance sheets allow those above them in the construction supply chain to shop and exploit them by the way construction has been traditionally conducted. It really is time for Bluescope to reimagine its business model and value proposition. Modern construction is opening many new opportunities, why not at Bluescope?