OneSteel Ltd (ASX: OST, OTC: OSTLF, ADR: OSTLY) manufactures and distributes steel and related metals products in Australia, including structural steel, rail, rod, bar, wire, pipe and tube products. It also distributes sheet and coil, piping systems, plate and aluminum products. All are utilized in the country’s rapidly growing construction, mining and rail industries.

The dark side of Australia’s natural resource boom is a super strong Australian dollar. The aussie is now at USD1.07, up from only about USD0.94 in October and a low of just USD0.63 at the height of the financial crisis in November 2008. That’s made Australian steel manufacturing far less competitive versus competition from developing Asia, and OneSteel has suffered, sharply reducing its dividend since late 2008.

Most recently the company cut its final dividend (declared Aug. 16, 2011, and paid Oct. 13) by two-thirds from the year earlier. The stock is down more than 70 percent over the last 12 months in US dollar terms. And expectations are low for fiscal 2012 first-quarter results, which will be announced on Feb. 21. First half fiscal 2012 net at the company’s 50.3 percent owned New Zealand unit, for example, slipped 24 percent due to the same factors that have affected the core Australia operation.

OneSteel, however, does have four key advantages over foreign rivals. One is proximity to Australia’s resource riches, including the country’s immense reserves of iron ore and metallurgical coal that are essential elements of making steel. Two, its primary customers–those same mining and related industries–are also close by, minimizing transport costs in that direction as well.

Three, it makes its money in one of the world’s strongest currencies, the Australian dollar, and enjoys developed world financial and legal infrastructure. Finally, it has the explicit support of the Australian government itself, demonstrated by an AUD64 million grant dished out to the company under confidential terms to improve efficiency and environmental safety.

That’s part of an apparent AUD300 million rescue fund from the government to the domestic steel industry. It may not be enough to restore robust profit growth or to keep the dividend at its current level. But coupled with a recent streamlining asset sale that basically eliminated near-term debt maturities, OneSteel’s survival should be assured.

The play here is what happens when the company announces its earnings on Feb. 21. Given how low expectations are, it won’t take much to beat them and give the stock a lift.

For those who can handle the risk and who have the discipline to sell in the next few months–either for a big gain or a large loss–OneSteel is a buy up to USD0.80.