South Korean steel giant may buy Arrium’s Whyalla plant

SOUTH Korean steel giant Posco has emerged as a potential saviour of Arrium’s Whyalla steelworks, raising the possibility it could build a new power station to help ease SA’s energy crisis and increase production at the troubled plant.

Scott McDine, Tom Koutsantonis and Greg Hunt are shown around Posco’s plant in Pohang. The company says it is serious about buying Arrium, increasing steel production and building a new power plant. Picture: Twitter

• Takeover bid could be good news for Whyalla
• Asian investors bid $1bn to buy Whyalla’s Arrium steelworks

SOUTH Korean steel giant Posco has emerged as a potential saviour of Arrium’s Whyalla steelworks, raising the possibility it could build a new power station to help ease SA’s energy crisis and increase production at the troubled plant.

Senior Posco executives on Wednesday told Federal Industry Minister Greg Hunt and SA Treasurer Tom Koutsantonis in South Korea they were “extremely interested” in purchasing Arrium, which went into administration in April with debts of $4.3 billion.

But Mr Koutsantonis warned that the potential deal could fall over if Australian banks — who are major Arrium creditors — insist on the company being broken up.

Also on Wednesday, Arrium announced that 44 new jobs are up for grabs at the town’s troubled steelworks because of a pick-up in demand.

Mr Hunt said Posco had proposed constructing a new steel plant at Whyalla which used modern “Finex” technology to build low-cost, high-quality product.

The upgrade could also help solve SA’s energy crisis because gas generated in the steel production process would be used to generate electricity at a new power plant. And half of the power generated by the proposed 220MW gas turbine power plant would be fed into the state’s electricity grid.

“You couldn’t get a better outcome for South Australia,’’ Mr Hunt said. “Not just protecting the jobs but investing, expanding production and providing additional baseload (electricity) grid security.”

Posco, which has an aggressive expansion program dubbed “Posco the Great”, made an unsuccessful earlier bid for Arrium in 2012.

Mr Hunt said Posco remained “deadly serious” about wanting to buy the company.

“They want to make that investment which would increase production by up to 1.2 million tonnes, or more than 50 per cent,’’ he said. “This for them is an investment for the next 50 years and beyond and they have a strong positive view of the workforce.”

Arrium’s Iron Baron mine in the Southern Middleback Ranges, south of Whyalla.

Mr Koutsantonis last night urged Australian banks to allow Arrium to be sold as a going concern to a company such as Posco.

“This business is worth a lot more to individual investors broken up than it is as a whole, but it’s worth a lot more whole to the nation than it is broken up,’’ he said. “I’m not saying take a big hair cut but I’m saying they’re going to take a haircut regardless of who wins. “But, at the very least, put the country first.”

Mr Koutsantonis added that Whyalla had strong historic links to the South Korean steel industry.

“What many Australians wouldn’t appreciate is that, when Korea was building its steel industry in the 1960s, the first place that they visited was Whyalla,’’ he said.

“Whyalla built that template. And we were the first country to give them a long-term iron ore and a longer-term coal contract, which gave them the ability to build their steel industry.”

Mr Koutsantonis said Australia was now being rewarded for its long-term support for South Korea with Posco’s interest in purchasing Arrium.

“The great things about the new technology they have is that the stream gas they create can be used for other purposes which is cheap power into the grid,’’ he said.

Whyalla steelworker Graham Harrison. File picture: Kelly Barnes

Arrium is in the hands of administrators KordaMentha, who will meet with creditors tomorrow. KordaMentha partner Mark Mentha last night said he was unable to discuss the progress of negotiations with potential buyers.

“The administrators have entered into confidentiality agreements that prevent us from discussing any details relating to individual bidders,’’ Mr Mentha said.

“KordaMentha continues to focus on running the business, which includes more jobs for Whyalla and a second creditors’ meeting on Friday where they will vote on clearing the way for the sale of the business, or businesses.”

Posco buys more than 70 per cent of its iron ore from Australia, which is used to produce 38 million tonnes of steel per year.

The Finex technology Posco wants to use in Whyalla is cheaper than other steelmaking processes and produces fewer emissions.

The Finex process uses non-coking coal and does not require a blast furnace.

Mr Hunt and Mr Koutstantonis were joined on a visit to Posco steelmaking facilities in the city of Pohang by Australian Workers’ Union national secretary Scott McDine.

The two ministers stressed they had put aside their partisan differences to fight for the future of Whyalla, its industry and its people. “Greg has been an outstanding advocate for Whyalla and an outstanding advocate for Australia,’’ Mr Koutsantonis said.

The State Government has told potential Arrium purchasers that it is willing to provide a $50 million grant to be invested in mining and steelmaking operations.

The Federal Government, meanwhile, has provided a “letter of comfort” to Posco and other potential purchasers in which it offers to support a new owner and provides assurances about Australia’s foreign-investment regime.

Mr Hunt told Posco officials they could be able to access funding for carbon abatement activities under the Emissions Reduction Fund.

The Federal Government has already provided Arrium with a $49 million loan facility and brought forward work on the Tarcoola rail line upgrade to boost demand for steel.

Short-term jobs boost at troubled plant

IN welcome news for Whyalla, Arrium yesterday announced that 44 new jobs are up for grabs at the town’s troubled steelworks because of a pick-up in demand.

Applications for the positions close at 5pm today — less than 24 hours before creditors are asked to vote on whether administrator KordaMentha should pursue a sale of the company or if it should be wound up.

An extra shift at the company’s rolling mill will meet demand that the current three-shift configuration cannot support, according to the steelworks’ executive general manager Theuns Victor. The new four-shift operation is expected to take effect next May.

“External conditions have really turned around since last year with a strong bounce back in the market ...” Mr Victor said.

Contributing factors to the demand increase include a strong pipeline of rail work stemming from this year’s federal budget, changes in government planning and procurement policies, support from the steelworks’ current customer base and a new customer — which Arrium declined to name — on the order book.

“These factors mean that we have sustainable, solid volume in front of the rolling mill and can enact a very different strategy that allows us to more directly compete in the market place,” Mr Victor said.

Arrium’s Whyalla operations current workforce, including contractors is about 2500.

Several hundred jobs — both direct and contractor roles — were lost from Arrium’s Whyalla divisions last year and early this year as the then management embarked on a drastic cost-cutting drive.

In a report late last month, KordaMentha said “it is more practical to sell the businesses” held by Arrium than to wind them up and that “it would be in creditors’ interests.”