Govt seeks advice as Whyalla Steelworks falters
With the blast furnace at Whyalla’s steelmaking plant offline for the second time this year, the state government has requested advice as part of “contingency” planning to be ready if the operator calls in administrators.
A procurement activity report published by the South Australian Department of Energy and Mining details the state government has sought advice on what to do if the Whyalla Steelworks falls into administration for a second time in a decade.
Energy and Mining Minister Tom Koutsantonis today confirmed that the government was taking such advice, noting it was “what you would expect any good government to do to prepare for any contingency”.
It comes after the blast furnace at the steelworks – operated by billionaire Sanjeev Gupta’s GFG Alliance – went offline last week for the second time this year.
The blast furnace first went offline in mid-March for a period of four months after it went too cold during a two-day maintenance shutdown.
The furnace’s external shell was then damaged during attempts to bring it back up to temperature, setting back the restart timeline.
Steel began rolling off the Whyalla steelworks production line in July after repairs on the blast furnace were completed.
A GFG Alliance spokesperson said: “the blast furnace restart is progressing and we expect to be back to normal operations in the near future”.
It also comes amid reports that GFG Alliance owes tens of thousands of dollars to contractors and the state government telling parliament on Tuesday that the company owed it unpaid royalties.
Further, nearly 100 staff have been laid off from the Whyalla steelworks in recent months, while up to 116 jobs at mining contractors connected to GFG Alliance are reportedly set to be cut from mid-October.
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The Whyalla Steelworks operations previously fell into administration in 2016 when its former owner, ASX-listed Arrium, collapsed. Arrium was sold to London-based GFG in 2017 in a deal heralded by former Premier Jay Weatherill as a “victory for South Australia”.
InDaily is not suggesting that the operator of Whyalla Steelworks has appointed voluntary administrators or is set to appoint voluntary administrators.
Koutsantonis this morning told ABC Radio that the state government was making sure it has “the very best advice it possibly can to prepare for any eventuality”.
“It doesn’t necessarily mean that anything in particular is going to happen,” Koutsantonis said.
“We’re just preparing for any eventual outcome. We want to make sure that we’ve got all of our ducks lined up and we’ve got all the advice we need to act and act swiftly.
“Whyalla is one of our most strategically important cities, not only in South Australia but probably the country. It is the last structural steelmaker in Australia and it’s important that its prosperity be maintained.”
Koutsantonis said the Department was asked to “go away and get as much advice as possible on any eventual outcome”.
“The Department has gone away and gone out and procured the advice that we need, that we don’t have in-house, whether it’s specialist financial advice, legal advice, any other advice that we might need to make decisions very, very quickly because we’re talking about real people with families in Whyalla,” he said.
“It’s fair to say we’ve asked them for a lot of advice about what else we can do to assist in Whyalla.
“There’s lots of investigations going on to make sure that we’re prepared.”
Steel rolling off the production line at the Whyalla Steelworks in February 2024. Photo: Thomas Kelsall/InDaily
The report, dated 24 September, shows the Energy and Mining Department is assessing GFG South Australia’s “current financial position” and is looking for an “estimation of VA’s (voluntary administration’s) immediate and ongoing funding need”.
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Further, the Department is seeking “advice regarding security and structure of SAG (SA Government) super-senior funding facility”, “negotiation support for DTF/DEM (Department of Treasury and Finance/Department of Energy and Mining) on VA financing terms and conditions”, “advice/support of SAG representatives attending formal and informal meetings with VA and Committee of Creditors” and “evaluation of VA restructuring scenarios”.
The report says the likelihood of the procurement to proceed is “certain”, and the department will take a “direct approach” to the market.
The news comes after Treasurer Stephen Mullighan yesterday revealed in parliament that GFG Alliance was in arrears in paying royalties to the state government.
Leader of the Opposition Vincent Tarzia said the government should “come clean on what it knows” and that “questions remain unanswered”.
He said Koutsantonis – who is travelling in Berlin for a transport conference this week – “needs to be back here and on the ground dealing with this issue”.
“We don’t want to catastrophise these things. We understand the importance of Whyalla but we don’t want this becoming another State Bank disaster,” he said on ABC Radio.
“We can’t get basic information out of the government and that is not good enough.”
But Koutsantonis said he was unable to disclose exactly how much was owed to the state government in unpaid royalties due to confidentiality agreements but that it was “not an amount that would concern me a great deal”.
The minister also said he was “more interested in creditors being paid than our royalties being paid”.
“The more important budgets right now are the budgets of the other businesses in Whyalla than the South Australian budget,” he said.
“Those royalties ultimately will be recovered. Businesses from time to time delay their royalty payments and GFG aren’t the only ones in history to have done that. So I’m not that concerned about the royalty payments.”
He said the focus should be on upgrading the blast furnace technology at Whyalla which is “old” and “structurally too small”.
Hydrogen power is being considered for Whyalla steelworks. Photo: David Simmons/InDaily
The Whyalla steelworks are a core component of the state government’s hydrogen plan, whereby it hopes to use hydrogen produced at to-be-built facilities for the creation of green steel at GFG’s factory. The installation of an electric-arc furnace is also planned to replace the ageing infrastructure at the Whyalla steelworks.
“The problem we have is that prices nationally are depressed. China is dumping cheap steel into Australia. Iron ore prices have dropped and that’s hitting Whyalla in the same way it’s hitting Korea, hitting Japan, hitting Germany, hitting countries all around the world that make steel,” Koutsantonis said.
“Whyalla is not only strategically important to South Australia, but for our country. It is the last manufacturer of structural steel and rail line in this country. And if we’re to be a modern industrialised country, steelmaking has to be at the beating heart of it.
“This isn’t just about Adelaide or Whyalla or South Australia, this is a national problem and this needs a national response.”
