Plunging demand for steel is forcing Australia's largest steel maker, Bluescope Steel to go to the market once again in five months to raise as much as $1 billion (A$1.4 billion) through a share sale, in order to pay off its A$2.1 billion debt.

The Melbourne-based steelmaker said in a statement today that it is planning to sell up to $1 billion (A$1.4 billion) in a one-for-one stock sale to existing shareholders at A$1.55 each, which is at a 40 per cent discount to its last traded price of A$2.57.

BlueScope is offering about 60 per cent of the new shares to institutions while retail shareholders will be offered 40 per cent.

Managing director and CEO Paul O'Malley said in a statement, "With a stronger balance sheet and the extension of all our material loan maturities for at least two years, we are well positioned for current market conditions and to take advantage of opportunities as conditions improve."

The company had gone to the market in December and February, where it had raised A$413 million and the steelmaker said that it intends to refinance its existing debt of A$2.1 billion, which is maturing from December this year to January 2012, from the proceeds of this new share sale and still have some money left over to boost liquidity.

BlueScope, whose market valuation is A$2.3 billion, was able to obtain a $1.275 billion syndicated loan facility with three Australian banks and one foreign bank since lenders had confidence in the company.

Although the company reported in February, a 250 per cent rise in first half net profit after tax of A$407 million against A$116 million for the same period the previous year, (See: BlueScope Steel reports 250 per cent rise in H1 net; sees losses in second half) the board declared an interim dividend of only 5 cents per share in the backdrop of the unforeseen changes in demand and prices.

BlueScope, like other steelmakers around the world, has been hit by slumping demand for steel, both in the domestic and export markets. It has also scaled back on production by more than 60 per cent and has warned that it will end up in the red during the second half of the fiscal due to the global economic downturn.

O'Malley had said last month, ''In the second quarter of last year, export sales from Australia were materially curtailed by the economic downturn around the world and the substantially lower demand for steel globally and in Australia,'' he said, adding, ''We are also seeing lower international steel prices while still experiencing peak raw material costs."

BlueScope, is not the only Australian steel company raising cash to meet debt repayments, last month, Australia's second biggest steelmaker and rival OneSteel, had raised $584 through share sale at a 30 per cent discount.

In India, Tata Steel has a 50:50 joint venture with BlueScope Steel to manufacture zinc / aluminium metallic coated steel, painted metallic coated steel and roll-formed steel products and deliver pre-engineered buildings and other building solutions. (See: Tata Steel teams up with BlueScope Steel)

The joint venture company, started in 2005, has invested Rs900 crore (A$ 265 million) in building a state-of-the-art metallic coating and painting facility at Jamshedpur in Jharkhand.

The new plant has a metallic coating capacity of 250,000 tonnes and with a paint line capacity of 150,000 tonnes annually.