The Australian steel industry holds its breath as Whyalla wobbles and world trade is thrown into turmoil by Donald Trump´s tariffs. Meanwhile, InfraBuild has its own set of problems, as well. As previously mentioned in ASN, InfraBuild´s unaudited finances were disclosed in March in a presentation sent to bondholders, in which it was noted the company went from a $40 million profit after tax in the first half of the 2024 financial year to an $81.3 million loss in the six months to December 31, 2024. It was also revealed that InfraBuild´s debt levels had increased by $200 million to $1.19 billion. In February, one of InfraBuild’s bondholders, FitzWalter Capital Partners, filed a lawsuit in New York demanding that InfraBuild immediately repay more than $800 million. FitzWalter said it was concerned that some of InfraBuild´s assets might be siphoned off to pay down the debts of its parent company, GFG Alliance, owned by British industrialist, Sanjeev Gupta. InfraBuild said the lawsuit was a “nuisance complaint with no foundation”. Then, on April 3, InfraBuild released a statement announcing it had entered an agreement with a majority of bondholders ready to lend the steelmaker US$150 million (AU$240 million).

In the statement, a spokesperson representing a sub-set of the bondholders is quoted as saying: “We are supportive of the shareholder’s vision for the company and have confidence in the management of InfraBuild. We’re pleased to work together for a successful outcome that enhances the credit profile and liquidity of the business. InfraBuild is a market leader, with a strong management team and board – which is well positioned to capture future growth alongside their end markets.” InfraBuild also announced an initial extension until May 31, 2025 for the delivery of its audited FY2024 financial statements.

InfraBuild´s chief executive officer, Francisco Irazusta, said: “Despite the challenging global operating environment, InfraBuild continues to invest through the cycle and deliver on its long-term strategy focusing on sustainability-driven product and service innovations, digitisation, improving operational efficiencies, maintaining cost discipline and enhancing our customer offerings for an expected market recovery.” The statement ended with the claim that it is business as usual at InfraBuild, which has its own board, governance and financing.

Just days prior to the April 3 developments, Fitch Ratings had downgraded InfraBuild´s Long-Term Issuer Default Rating to ‘CC’. Fitch said: “The rating downgrade is based on our assessment of an elevated probability of default by InfraBuild on its US$550 million notes within the next three months.” Fitch also said it saw limited potential for an improvement in InfraBuild´s EBITDA in the next six months due to the risk of an increase in cheap steel imports into Australia. Additionally, Fitch said: “We think InfraBuild’s credit profile is exposed to governance risks. The ownership of InfraBuild is concentrated with GFG Alliance, which has been unable to reach a debt settlement since 2021. GFG’s Whyalla asset was forced into administration, and the group is being investigated by the UK’s Serious Fraud Office for suspected fraud and money laundering. InfraBuild has a record of related-party transactions. Its board of directors has only three independent members out of seven.”

Over at the Whyalla Steelworks, more details have emerged in an affidavit filed with the Federal Court by the administrators, KordaMentha, on March 17. The affidavit alleges that, not only was the steelworks losing money, but its cashflow was further compromised because the steelworks´ owner OneSteel Manufacturing “appeared to accept ‘prepayment'” for inventory that had “not yet been delivered and is not yet in existence”. KordaMentha also claims OneSteel “continually sold product” to fellow GFG Alliance company, InfraBuild, “at less than the cost OneSteel incurred in producing that product”. KordaMentha has asked for a 12-month extension to convene its next meeting of creditors, in part because it claims GFG Alliance is not allowing complete access to OneSteel’s books and records.

KordaMentha partner, Lara Wiggins, who filed the court document, listed numerous occupational health and safety concerns, which she attributed to “a long period of underinvestment” by OneSteel. This included the steelworks having “insufficient spare parts”, “poor health and safety practices” and instances of “inadequate or no maintenance”. According to the state government, the urgency of maintenance work was such that the steelworks’ blast furnace had to be temporarily shut down in March to allow for repairs to its roof and taphole. OneSteel’s parent company, GFG Alliance, disputes that it underinvested in safety during its time owning the steelworks. It claims to have spent more than $2 billion on repairs and maintenance upgrades to make Whyalla fit for purpose.

When the steelworks went into administration in February, the South Australian and the federal governments announced a $2.4 billion support fund, including $384 million – potentially rising to $400 million – to keep the steelworks running during administration. KordaMentha has now said this funding will not be enough to keep the steelworks operating for 12 months. In confirming there will need to be an extension in funding, Premier Peter Malinauskas told parliament in March that: “[The] $400 million figure was nominally allocated towards the first six months and then it will be extended from there.”

For a man who is forever lambasting what he calls “fake news”, Donald Trump sure picked his moment to fudge the figures. To recap, the chart Trump held up at his White House press conference listed a tariff (in percentage terms) that would apply to each individual US trading partner. The chart said the tariff had been calculated in relation to the level of trade barriers and currency manipulation perpetuated by each partner. Now, you might assume that the very best minds in the US Treasury Department had diligently done their research in selecting the size of the tariffs. Alas, not so. In fact, no evidence was given as to how the final percentages had actually been calculated. They were simply presented as “fact”. Subsequent scrutiny has revealed the percentage figures had nothing to do with tariffs or non-tariff trade barriers, or the US being or not being in a trade deficit. Rather, it was just schoolboy mathematics. The bigger the trade deficit experienced by the US, the bigger the percentage punishment to the offending nation. And in cases where the US enjoyed a trade surplus with a nation – as is the case with Australia – what the hell, let´s just give them a 10% tariff anyhow. No logic, no fairness. The figures had no connection with the purpose of the tariffs, nor the actual state of affairs. Trump bemoans that the trade deficit the US has with so many of its trading partners is proof that the US is being ripped off. Not so. When the US has a trade deficit with a country, it´s really a symptom of the US wanting more stuff from that country than that county wants from the US. America has 340 million mouths to feed, whereas Vietnam (for example) only has 100 million. Do the maths, Donald.