Arrium administrators Grant Thornton replaced by KordaMentha

UPDATE: Arrium’s major lenders have teamed with the worker’s union to install new administrators to the struggling steel and mining group.

• BATTLE FOR WHYALLA: The town can be saved
• KOUTSANTONIS: South Australian Treasurer calls for calm
• Q & A: What ‘voluntary administration’ means, and what happens next
• FULL WRAP: Arrium goes into voluntary administration
• STAYING POSITIVE: Hope for future of Whyalla steelworks

ARRIUM’S major lenders have teamed with the worker’s union to install new administrators to the struggling steel and mining group.

The banks and the Australian Workers’ Union successfully applied in a federal court on Tuesday to have KordaMentha installed in place of Grant Thornton.

The AWU said the appointment of KordaMentha was made possible through collaboration with the banks and represented the best way forward for all parties.

“The AWU looks forward to working constructively with KordaMentha as the new administrator, engaging in a business-as-usual approach to Arrium’s operations, and ensuring we work in the interests of our members,” the union said in a statement.

But Treasurer Tom Koutsantonis said the move had created more uncertainty for 1600 Arrium workers in Whyalla and thousands more across the nation.

The government had been in advanced negotiations with Grant Thornton’s Paul Billingham to ensure Arrium and its creditors could continue to trade, Mr Koutsantonis said.

“Having forced the issue of voluntary administration, we are now witnessing the banks shamefully squabbling about the choice of administrator,” he told parliament.

“This further disruption by the Australian banks and the continued use of Whyalla’s future as a bargaining chip is distressing for those who are affected by the ongoing uncertainty and constant speculation.”

The SA government would work constructively with the new administrators and other stakeholders, Mr Koutsantonis said.

Grant Thornton said it would do all it could to support the incoming administrators in the transition and expected the impact of the change would be minimal.

Managing partner Paul Billingham said in a statement that the creditors have the right to appoint the firm they wish to represent them in the administration.

“When it became clear that the major stakeholders wished to see a change to a firm not appointed by Arrium, we agreed for the benefit of the process to support an early change as opposed to waiting until the first creditors’ meeting,” he said.

“We believe there is little doubt that the voluntary administration will provide an opportunity to restructure the Australian steel and mining business starting in Whyalla, and also improve the successful East Coast operations.”

This outcome will be a compromise of sorts, with lenders pushing for McGrath Nicol, Arrium for Grant Thornton, and the unions for KordaMentha.

Earlier, Mr Koutsantonis, who last week pleaded for the banks not to “force Arrium’s hand into administration”, again vented his frustration.

“Having forced the issue of voluntary administration we are now witnessing the banks shamefully squabbling about the choice of administrator,” he told Parliament.

“This further disruption by the Australian banks and the continued use of Whyalla’s future as a bargaining chip is distressing for those who are affected by the ongoing uncertainty and constant speculation.

“This disruption is regrettable and something we had hoped to avoid, however, in the event a new administrator is appointed, the South Australian Government and the Steel Task Force will continue the work begun with management last year.”

The news comes as Premier Jay Weatherill will this week meet with an international investor experienced in the steel industry, as the State Government scrambles to come up with a rescue plan for Whyalla.

Mr Weatherill on Monday led his first Cabinet since returning from a trade mission to China, where ministers were briefed in a lengthy meeting on the impact of Arrium’s collapse.

He said any State Government support for upgrades to Arrium’s mining and steelmaking operations would need to be matched with assistance from the Federal Government.

“We’re not interested in just a short-term bailout to kick the can down the road,” Mr Weatherill said.

“We do want to see a long-term sustainable future for Whyalla and these steelworks.

“We know the administrators have been approached by numerous businesses who are interested in investing in Whyalla as a stand-alone facility or as part of a broader group.

“I’ll be meeting with an international investor this week to talk about a substantial proposition about the future of Whyalla. There are positive prospects that are being advanced.”

Mr Weatherill declined to detail the proposals further, other than to say they were from businesses with experience in the industry.

The Premier also did not raise the issue of Chinese steel dumping in meetings with officials last week, indicating it may have upset talks over possible investments including the Iron Road project near Whyalla.

Mr Weatherill rejected suggestions he should have returned early from China, saying talks there were critical for the creation of new jobs in expanding areas of the economy including tourism.

Industry Minister Christopher Pyne. Picture: Mick Tsikas/AAP Image

Forcing industry to use our steel a ‘mad idea’

Meanwhile, Federal Industry Minister Christopher Pyne says forcing public infrastructure projects to use Australian steel would lead to taxpayers being “fleeced”.

Opposition Leader Bill Shorten said last week a Labor Government would compel federal, state and local government agencies to buy Australian steel in a bid to help steelmaker Arrium survive.

But Mr Pyne told a KPMG lunch in Adelaide on Monday that was a “mad idea” which would result in the creation of a “monopoly’’.

“Competitive tension in the market is important. It’s important for the consumer, the consumer in this case is the Government, the Government holds the taxpayers’ dollars on trust, to spend as wisely and sensibly as possible,” he said.

“I’m not going to preside over the taxpayers being fleeced by monopolies.

“Everyone that I speak to in this space believes that the company can trade break-even if not profitably into the future, with the right mix of government support.’’

Spoehr: No barrier to mandating Aussie steel

Industry expert John Spoehr said there was no barrier under our international trade obligations to Australian states and the Federal Government mandating that 100 per cent Australian steel be used on such projects.

Mr Spoehr, director of the Australian Industrial Transformation Institute at Flinders University, said under the Government Procurement Agreement (GPA) of the World Trade Organisation, the US for example, has specifically carved out an ability for public projects to use locally made steel.

The Advertiser has found a paper analysing the trade agreements between the US and Canada which shows they specifically allow 11 states to exclude construction grade steel from restrictions under the agreement.

The American Recovery and Reinvestment Act of 2009, which was the cornerstone of the economic revival program for the US after the Global Financial Crisis “required US-produced iron, steel and manufactured goods to be used in ARRA-funded projects’’.

“There has been some misleading commentary on whether Government buying Australian steel is in contravention of WTO rules,’’ Mr Spoehr said

“The Government Procurement Agreement (GPA) of the WTO (which we are not yet a signatory of but are seeking to be party to) does not prevent nations from directing purchases to their domestic steel industry.

“In fact the US, which is a party to the GPA has ensured that its steel states are able to do just that and more broadly that the US government can mandate the procurement of US steel.

“It is noteworthy that Government investment is responsible for less than 20 per cent of steel purchases indicating that mandated local steel procurement by Government would not create a steel monopoly in Australia.

“Finally, under WTO rules national security and safety are grounds for arguing that a fundamentally important industry like the steel industry remains viable in Australia.’’

Federal Trade Minister Steven Ciobo and Treasurer Scott Morrison have suggested that the plan floated by Mr Shorten would breach our trade obligations.

The plan was “actually in direct breach of quite a number of our trade agreements that we have in place” Mr Ciobo said.

Mr Morrison ruled out any such plan.

“Those trade agreements are providing jobs in the new economy and the service economy and these are important considerations that you have to take into account,” he said.

“You don’t get involved in a kneejerk reaction, the sort of thing that says: ‘let’s tear up our trade agreements; let’s tear up the jobs in the new economy to go and play politics with an issue in South Australia’.’’

Arrium was placed into administration last week following the collapse of a $US927 million bailout deal with US fund GSO Capital.

The future of the company will become clearer at the second creditors meeting to be held on May 13.

Arrium employs 8000 people around Australia, including 3000 in Whyalla, where it is the city’s biggest employer. Its financial strife stems from the downturn in international iron ore prices and a glut of Chinese steel.

Administrator Paul Billingham from Grant Thornton told The Advertiser the administrators firmly believed strong support and commitment from all parties involved would help ensure Whyalla’s continued operations.