GFG Alliance says it pumped billions into “running on empty” Whyalla steelworks

The state of the Whyalla steelworks is “a lot worse” than administrators KordaMentha expected it would be, with disputed claims maintenance and repairs have been neglected.

GFG executive chairman Sanjeev Gupta at the Whyalla steelworks.

The state of the Whyalla steelworks is “a lot worse” than administrators KordaMentha expected it would be, with joint administrator Sebastian Hams saying it appeared maintenance and repairs had been neglected for the lion’s share of the time the operations were owned by Sanjeev Gupta’s GFG Alliance.

GFG Alliance has rejected this notion outright however, saying they sunk $1.3bn into capital expenditure and another $2.1bn in maintenance and repair spending into the plant while it was under their ownership from 2017 through to February this year.

The administrators’ valuation of the property, plant and equipment for OneSteel Manufacturing, which own the steelworks, sits at just $385m.

It has also been revealed, thanks to a document obtained under freedom of information by former South Australian senator Rex Patrick, that the federal government had concerns about GFG’s ability to fund its ambitious growth plans in the days before GFG’s “Big Reveal” in Whyalla in December 2018, and warned then-prime minister Scott Morrison that the company could seek to “put you on the spot”.

Sebastian Hams from KordaMentha.

“GFG are expected to ask for financial support,’’ the briefing note says, saying later that “GFG indicated it would seek support from the Commonwealth and South Australian governments to fund the entire investment’’.

The note goes on to say the federal government could not adequately assess the commercial viability of GFG’s plan, which involved more than $1bn in investment in new infrastructure, including renewable energy projects and a new steel mill.

The note also says the government had concerns about GFG’s wider financial position “and its ability to fund the number and scale of acquisitions which have been made since early 2017’’.

Mr Hams this week said that there had been underinvestment in the Whyalla steelworks over a long period, including in the blast furnace itself.

He also said that the coke ovens at Whyalla were shut down due to a lack of maintenance, causing the operations to have an ongoing need to import coke for the blast furnace, rather than making their own.

Mr Hams’ assessment of the state of the Whyalla steelworks - in short that it was “running on empty” - contradicts the narrative espoused by former owner - Sanjeev Gupta’s GFG Alliance.

Mr Sanjeev was often at pains to argue that while his companies had failed to execute on the billions in new projects he had promised they would deliver - such as gigawatts worth of renewable energy and an entirely new steel mill at Whyalla - GFG had poured more than a billion dollars into maintenance at Whyalla. This figure was updated to $3.4bn when the company was queried on Tuesday.

The Whyalla steelworks. Picture: Brett Hartwig

GFG also celebrated the closure of the coke ovens in September 2023, saying it was a key step in moving away from using a traditional blast furnace to an electric arc furnace, which the company had ordered from Italian company Danieli in April that year.

By May 2024 GFG had walked back its original plans to have an EAF up and running by 2025, pushing that date back to 2027, before eventually abandoning a timeline altogether, saying a new furnace was dependent on extra gas supplies being connected to Whyalla.

A spokesperson for GFG said on Tuesday the company had spent the $3.4bn, “to make Whyalla fit for purpose after years of underinvestment by the previous owners and in the face of a weakening demand for global steel’’.

“The safety of our people was always our number one priority and our record of an improvement in safety during GFG’s ownership, speaks to that commitment.

“There was a 40 per cent reduction in the number of workers compensation claims from July 2024 to Jan 2025 compared to the same period in FY23 and a 50 per cent reduction on FY22.’’

GFG’s characterisation of its investment into the plant is at odds with Mr Hams’ assessment, with the joint administrator noting on Monday that even a traffic light at the entrance to the steelworks was not operational when they took over.

“One of the thing about administrations is when you come in, you never know what you’re going to find, and it was a lot worse than what we though we would find,’’ Mr Hams said.

“The state of maintenance in the plant is really challenging.

“It appears there hasn’t been a lot of stay-in-business capex done or repairs and maintenance over the past five or six years.

“So that’s really challenging from a safety perspective and an efficiency perspective.

“To say how bad it is, that’s a relative question, but to say it needs work, absolutely yes it does.’’

Mr Hams also said the blast furnace itself had not been well maintained. The blast furnace failed twice last year, causing extended outages in terms of steel production, and pushing the steelworks into a situation where it was losing $1.5m per day for the first seven months of this financial year.

Mr Hams also said that the coke ovens at the site were shut “simply because the maintenance wasn’t done’’.

Shutting the coke ovens meant that the operations now have to import coke for steelmaking until an eventual changeover to a new electric arc furnace, which “just adds another layer of working capital stress’’, Mr Hams said.

“If we take other parts of the business, the rolling mills have not had the capex put into them that they should have.’’

Mr Hams said the plan was to stabilise the operations over the next two to six weeks, “and then we’ll move into that transition phase’’.

“We’ve got to the point where the vast majority of our operations are back to business as usual ... due to the goodwill of our employees and our creditors,’’ he said.

Originally published as GFG Alliance says it pumped billions into “running on empty” Whyalla steelworks