Mr O’Malley told BusinessDaily that commodities remained expensive, however prices for iron ore -one of Bluescope’s biggest inputs – could soften.

“I was talking to some analysts in the last few days and they’ve gone from it being 20 per cent up to maybe flat so the perception (of higher prices) is coming down a bit,” he said.

“It’s really hard to see but I suspect there’s more flatline than up at the moment.”

Mr O’Malley’s cautious optimism about the likely direction of iron ore prices comes after a sustained six-week decline in international prices for most base metals.

Bluescope is also particularly exposed to movements in the nickel price, which has fallen by more than 50 per cent in the past 15 months.

But Mr O’Malley said even if iron ore became cheaper the steelmaker’s other raw material costs, along with energy and labour costs, were likely to remain high.

He said any relief in the iron ore price was likely to be particularly offset by the price of coking coal, which has tripled this year to about $US300 a tonne.

Iron ore might be flatish rather than up dramatically next year but I still worry that coking coal is going to remain expensive,” he said.

Bluescope last month unveiled a 22 per cent rise in underlying profit to $816 million for fiscal 2008, thanks to soaring global and local demand for steel.

However the company’s bottom line result, which included asset write-downs, declined 13 per cent to $596 million.

Costs swelled to $163 million on higher labour, utilities, freight and fuel costs, as well as spending on programs to improve productivity.

Mr O’Malley told BusinessDaily that Bluescope had the balance sheet and assets to “survive challenging times” and was even in a position to entertain making acquisitions.

“One needs to be prepared so that if a good business comes along, that’s complimentary to your existing businesses, you’re in a position to have a look at it,” he said.

“We feel we’re in a position to have a look if opportunities were to come up.”

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