Future Of Whyalla Steelworks Again In Question
The South Australian government is seeking advice after speaking with people in the Whyalla community who are concerned about events unfolding within GFG Alliance and at the Whyalla steelworks. In late September the Premier, Peter Malinauskas, told parliament: “The government is making active inquiries and conducting some thorough policy work to contemplate how government may play a role to combat the challenges currently being experienced at the steelworks.’’ The suggestion that government would “play a role” implies a bail-out might be being contemplated. However, in addition to exploring its possible role in the future of the steelworks, the government has confirmed approaching BlueScope Steel to assess its interest in helping to revive the steelmaking industry in South Australia, if such help is needed. A BlueScope spokesman has said the company is “monitoring reports from South Australia about the situation at the Whyalla steelworks”. The spokesman also confirmed that BlueScope had provided technical support to the steelworks in the past and would do so again if required, under certain circumstances. Mr Malinauskas added that his government had also approached Nippon Steel Corporation,
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POSCO, Thyssenkrupp and Tata Steel on the same matter.
The British industrialist, Sanjeev Gupta, whose family privately owns GFG Alliance, the parent company of Liberty Primary Steel Australia, which in turn owns the Whyalla steelworks, has said the plant is now a loss-making enterprise. Mr Gupta cited the sharp downturn in global steel prices as the principal cause. Nearly 50 staff were laid off from the steelworks in August and a further 116 are slated to be dismissed at mining operations connected to GFG Alliance in South Australia. Added to that, September saw a temporary stoppage in steelmaking at Whyalla when the blast furnace went offline. This followed a more serious shutdown which stretched from mid-March to early July this year, caused by problems during routine maintenance of the blast furnace.
The perception of problems at the steelworks was exacerbated in September by the publication of a procurement activity report by the South Australian government´s Department of Energy and Mining. The document, dated September 24, says the Department is seeking “specialist financial and insolvency advisory services’’ relating to GFG Alliance’s South Australian operations and an “estimation of VA’s (voluntary administration’s) immediate and ongoing funding need.” The existence of the report does not imply that Liberty Primary Steel Australia is about to go into voluntary administration. Indeed, the Department said: “The Department is ensuring that it is prepared to provide this advice for any scenario, however it should be emphasised that this procurement is in no way reflective of any anticipation or expectation regarding the operation of GFG.” Meanwhile, the SA Energy and Mining Minister, Tom Koutsantonis, has said that seeking advice is only “what you would expect any good government to do to prepare for any contingency”.
In addition to news of the government’s contingency planning, the Treasurer Stephen Mullighan has told state parliament that GFG Alliance had been in arrears on royalty payments to the state government and that other creditors existed outside of government. “The government is at pains to ensure we maximise the chance of those South Australian suppliers being paid as and when GFG is able to make those payments,’’ he said.
The Premier, Mr Malinauskas, told parliament the Whyalla steelworks is a critical piece of industrial infrastructure – not just for South Australia but for the entire country. He reiterated that he believed the whole state wants to see GFG succeed. Nevertheless, he said: “We have contingencies in place to contemplate what government actions may or may not be necessary into the future, in a way that is diligent and responsible considering the importance of this enterprise.” Mr Malinauskas reminded parliament of the state’s plans for Whyalla and the region which are dependent upon the continued operation of the steelworks. These include the $593 million hydrogen power plant on the city’s outskirts and the Northern Water project – a $5 billion water desalination plant and pipeline network creating more than 4200 jobs.
The Federal Minister for Industry and Science, Ed Husic, has said his office is in close contact with the South Australian government. “We want steelmaking to be on a sustainable footing well into the future,” Mr Husic said. In late January, the Whyalla steelworks was given a $63 million upgrade grant by Federal Climate Change Minister, Chris Bowen. In May, Mr Gupta announced a two-year delay for a proposed $500 million upgrade to an electric arc furnace at the steelworks. GFG Alliance acquired the Whyalla steelworks in 2017, along with other Australian assets, for about $700 million after the collapse of Arrium, once part of BHP.
Finally, the Federal Government´s Department of Industry, Science and Resources has released the September edition of its Resources and Energy Quarterly report. Among other things, the report forecasts Australia’s resources and energy export earnings will decline to $372 billion in 2024–2025 from $415 billion of 2023–2024. Continuing falls in prices for bulk commodities such as iron ore, coal and LNG are expected to bring earnings down to around $354 billion in 2025–2026. The report reaffirms Australia’s place as a crucial global supplier of resource and energy commodities at a time of high geopolitical risk and renewed uncertainty across major economies. Commodity demand has been affected by tighter financial conditions in advanced economies and ongoing weakness in the Chinese property sector. The report notes that iron ore, a key steelmaking ingredient, remains Australia’s top commodity export. However, despite an expectation that volumes will increase by 1.7% a year, the report forecasts lower prices over the next two years. Exports are forecast to earn $107 billion in 2024–2025 and $99 billion in 2025–2026. Thermal coal exports are forecast to fall from $37 billion in 2023–2024 to $32 billion in 2024–2025 and $29 billion in 2025–2026. Metallurgical coal exports are forecast to fall from $54 billion achieved in 2023-2024 to $42 billion in 2025-2026.