BlueScope Steel says it needs to cut $200 million of costs from its Australian operations as falling Chinese steel demand hammers prices and casts a cloud over the future of BlueScope's Port Kembla plant.

The steelmaker said its full-year underlying profit rose 9 per cent to $134.1 million, but the pressure on steel prices was undermining the group's competitiveness.

Chief executive Paul O'Malley said there have been dramatic recent changes in the global steel industry.

Between 2010-2013 China's finished steel exports have doubled to a run-rate of over 100 million tonnes a year, an increase equivalent to 20 times the output from the massive Port Kembla steelworks in Wollongong.

"With steel demand having peaked in China, and rising global steel production and exports, steel prices and spreads have come under significant pressure," Mr O'Malley said.

"Indicative Asian hot rolled coil steel spreads are now below $US200 per tonne, down from an average of around $US295 per tonne over the five years to June 2014."

Despite large falls in iron ore and coal prices - the inputs used to make steel - the fall in steel prices has been sharper, leading to a compression in spreads, which is the difference between steel prices and the cost of key inputs.

"At these prices, it would be more competitive to externally source steel substrate then to continue to operate our Australian and New Zealand steelmaking operations - unless we deliver a game-changing approach to costs to improve their competitiveness," Mr O'Malley said.

China makes half the world's steel and as the world's second biggest economy has slowed its building of railways, high rise buildings, and other steel-intensive construction, its exports have increased.

BlueScope is targeting $200 million in cost savings in Australia by June 2017 and $NZ50 million ($45.9 million) in cost savings from its New Zealand business.

The company, which was spun out of mining giant BHP Billiton in 2002, said its revenue increased $570 million to $8.57 billion.

Stronger performance in the North American Global Building Solutions business and Australian Steel Products, where residential home building is driving steel demand, boosted sales.

On a statutory basis, which takes account of restructuring and impairment charges, BlueScope swung to a profit of $136.3 million from a loss of $82.4 million last year.

Earnings in the New Zealand iron sands business, which has been impacted by the drop in iron ore prices, plummeted 144 per cent to a $33.2 million loss.

Mr O'Malley said that the iron sands export business was "also under review".

In June, BlueScope said its costs of manufacturing steel were too high and that it needed a "game-changing approach" to reduce costs.

The admission sparked debate about the future of BlueScope's remaining No. 5 blast furnace at Port Kembla and of the Australian steel industry.

"The strategic review is well underway and we are committed to the delivery of the targeted savings," Mr O'Malley said.

"If this target is not achievable, we will have no option but to move to external supply of quality hot rolled coil and billet steel feed with mothballing or closure of steekmaking."

If Port Kembla is shut down around 2,000 direct jobs would be lost and thousands of contractors depending on the steelworks would be out of work.

BlueScope said it would pay a final, fully franked dividend of 3¢ on October 19.