Australia's BlueScope Steel said Monday it will close a blast furnace, abandon its export business and axe 1,000 jobs as unions warned the manufacturing sector was facing its worst crisis in decades.

The company, Australia's largest steelmaker by output, made the announcement as it reported a dire Aus$1.05 billion (US$1.09 billion) net loss for the year to June 30, compared to a Aus$126 million profit previously.

Export sales delivered a Aus$487 million earnings loss in the period.

"We are experiencing significant economic challenges and structural change in the global steel industry," chairman Graham Kraehe said, with the company's share price diving 10 percent early, before recovering ground.

He pointed to a strong Australian dollar, low steel prices and high materials costs as squeezing margins. This, combined with low demand due to the global financial crisis, meant reform was needed, he added.

"The restructure announced today will produce a more viable and sustainable Australian steel business and allow us to focus clearly on domestic markets and international growth opportunities," Kraehe said.

The company will shut its number six blast furnace at Port Kembla, south of Sydney, with 800 jobs lost, and close its Western Port hot strip mill, east of Melbourne, at the cost of 200 positions.

Australian Workers Union national secretary Paul Howes warned that the country's manufacturing industry was facing one of its worst periods since the Great Depression due to the soaring, commodities-linked Australian dollar.

"Today's tragic job losses send the clear signal that Australian manufacturing is facing the worst crisis it has seen since the Great Depression," he said.

"We've got to face the reality of the manufacturing crisis that's before us. We can't accept job losses as the norm and we can't rely on imported goods in our strategic sectors."

The BlueScope announcement comes on the heels of another Australian steel giant, OneSteel, saying last week it would lay off 400 staff due to weak demand.

The Aussie dollar breached parity with the greenback in October and has rallied consistently near or above the US$1.00 mark since, retreating only briefly in the immediate aftermath of Japan's quake and nuclear crisis.

It hit a record of US$1.1081 last month.

Howes pinpointed China's "undervalued" currency for causing major problems, with the yuan's weakness blamed for suppressing the cost of Chinese exports and causing rival foreign products to lose market share.

"Estimates suggest China is undervaluing the yuan by up to 40 percent, which just drives export industries and jobs to China at the expense of Australian industry," he said.

"Australia should be developing a diplomatic effort to make sure China does the right thing and floats its currency to alleviate the pressure on local manufacturers."

Treasurer Wayne Swan has repeated warnings on the yuan in recent days, urging "large developing economies to put in place policies to boost home-grown demand and move towards more market-based exchange rates".

Australian companies have announced thousands of job cuts during the current reporting season, signalling gloom for the government.

The nation's unemployment rate unexpectedly rose in July to 5.1 percent, hitting its highest level since November last year in a sign the mining-powered economy is slowing.

Coming on top of slumping consumer confidence and retail sales, analysts forecast unemployment, a lagging economic indicator, to soften further.

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