GFG Alliance has announced the loss of 48 jobs at its Whyalla steelworks, attributing the redundancies to cost cutting needed to offset a prolonged downturn in the steel market globally. In a statement, GFG Alliance said the job losses would not affect its steelmaking operations at Whyalla and that the company is committed to its long-term future and transformation to green iron and steel. Australian Workers Union acting secretary, Gary Henderson, told the ABC that the roles being cut are not frontline or blue-collar workers. Nevertheless, he said: “There’s a lot of anxious workers at GFG at the moment.” Whyalla Mayor, Phill Stone, also spoke with the ABC. He said: “Everyone would know that GFG would have lost tens of millions of dollars during the blast furnace closure and that has affected their production and obviously their income revenue stream.”  The redundancies have coincided with claims by several contractors to the Whyalla’s steelworks that they are owed tens of thousands of dollars by GFG Alliance. The ABC said none of the suppliers were willing to speak publicly, for fear of potentially affecting their relationship with the biggest company in the Eyre Peninsula town. However, on the condition of anonymity,

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one contractor produced overdue invoices that GFG Alliance is yet to pay, totalling more than $150,000. Some of the contractors spoken to said if the situation doesn´t improve they may be forced to lay-off staff or go into liquidation.

GFG Alliance´s claim that its Whyalla decision was influenced by international markets finds support in a dire warning recently issued by the world´s largest steelmaking company, China Baowu Steel Group. Its chairman, Hu Wangming, told a half-year results meeting that Chinese steelmakers are now in a fight to survive a severe “winter”. He said that winter was likely to be “longer, colder and more difficult than we expected.” Baowu´s general manager, Hou Angui, followed up by saying: “The current situation in the steel industry is more severe than the downturns of 2008 and 2015.” As ever, China´s problems have global consequences. The problems stem from a crippling multi-year slump in the property market in the world´s second largest economy. New construction starts — the steel-intensive part of building property — have declined by about 24% in China in the first half of 2024, following contractions of 21% and 39% in 2023 and 2022 respectively, according to official figures. During previous market downturns, policymakers resolved the crisis through stimuli but attempts to breathe life into China’s property market this time around have not worked. Compounding the problem, the reduction in domestic demand for steel has thus far not been met by an equivalent drop in production. This has created a glut of steel which has driven down prices, leading to losses at mills. As a consequence, Chinese steelmakers have turned increasingly to foreign markets for their products, exporting the most steel in the first half of 2024 in eight years. In 2023, as steel consumption in China slowed significantly, steel exports increased by more than 34% year on year. Steel industry observers now predict Chinese steel shipments abroad in 2024 will grow by at least 27% year on year, thus exceeding the record 110 million metric tonnes achieved in 2015.

The surge in Chinese exports at reduced prices is causing headaches for its nearby competitors in Asia and has led to predictable claims of illegal dumping in those countries and elsewhere. It has also led to the imposition of tariffs in various forms as a counter measure: the most notable being Europe´s CBAM (Carbon Border Adjustment Mechanism). However, an even more immediate and direct consequence of China´s steelmaking “winter” is the significant fall in the prices of the key steelmaking ingredients, iron ore and coking coal, and the share prices of the companies which produce them. As our Steel Raw Materials graph shows, iron ore futures on the Singapore stock exchange have now fallen to US $93 per tonne – its lowest level in a year. Coking coal likewise is presently at $201 per tonne, well off the $302 from last November. Both BHP and Rio Tinto have seen their share price fall by 20% so far this year.

Meanwhile, the world´s second largest steelmaker, ArcelorMittal, has condemned China’s rising level of exports, saying they have put the global market in an “unsustainable” condition. ArcelorMittal said China’s excess production relative to demand is resulting in very low domestic steel spreads and that steel prices in both Europe and the US are below the marginal cost. Similarly, the German steel giant, ThyssenKrupp, has highlighted the industry’s challenges by reporting a big slump in earnings. The group posted a net loss of 54 million euros (AUD $89 million) for its fiscal third quarter, down from a profit of 83 million euros a year earlier. Such are the vicissitudes of a global steel market which is about to enter – or perhaps is already in – Hu Wangming´s long and cold “winter”.  

In a sign of the times, the Commonwealth Bank of Australia (CBA) has announced it will stop lending money to fossil fuel companies which do not have a genuine emissions plan. Last year, the CBA said from 2025 it wouldn´t provide loans to any coal, oil, or gas company which did not have a transition plan in line with the Paris Agreement. That promise has now been brought forward. The Paris Agreement is a legally binding international treaty signed in 2016 by nearly 200 countries to keep global temperature increases below 1.5 degrees celsius. The CBA’s loans to fossil fuels had already decreased by 92% from 2018 to 2022; from $4 billion to $267 million, according to Market Forces, a group that campaigns against investments in environmentally destructive projects. The CBA also halved its exposure to oil and gas companies in the past two years from $3.3 billion in 2022 down to $1.7 billion. Exposure represents the money the bank is set to lose if the investment fails. The steel industry – historically one of the worst offenders in climate contamination – is moving swiftly to a more environmentally-aware position. Sustainability is the buzz word.