The Whyalla steelworks has averted a worst-case blast furnace shutdown but Arrium expects a $30 million hit

ARRIUM will be $30 million out of pocket as a result of the storm-related shutdown of its Whyalla operations if the outage last as long as currently expected.

Whyalla’s steelworks has averted disaster. Picture Campbell Brodie.

• RECAP: How we covered 3rd day of the storm impact
• THE PROBLEM: Blackout threatens tonnes of Arrium steel

ARRIUM will be $30 million out of pocket as a result of the storm-related shutdown of its Whyalla operations if the outage lasts as long as currently expected.

Arrium administrator Mark Mentha said the steelworks and mining operations were losing $2 million per day each, and the company had been advised that grid power would take about a week to come back online.

“If we were out, without the ability to make anything, which is the case right now, we’d be out about $30 million for the week,’’ Mr Mentha said.

“SA Power networks are telling us it probably will be about a week before sufficient power will be restored to the grid to get our plant here and our mining operations fully operational.’’

Thankfully the company has averted an uncontrolled cooling of the blast furnace, which would have meant almost a three month shutdown — five weeks for the blast furnace to cool and another six to reheat it.

Nyrstar said on Friday its Port Pirie smelter would be out of action for up to two weeks with up to a $7.3 million impact on the company’s bottom line after the slag in its blast furnace solidified.

The Arrium steelworks is still operating with no grid power or telecommunications, but Mr Mentha said the “incredible commitment’’ put in by Arrium staff had averted disaster.

“At the moment we’re doing our best here to support as much of our own power needs as we can.

“At the moment we have our gas turbine operating and our boiler is back up so we are generating steam which will drive an alternator shortly which will give us about another 10 megawatts of power.

“Typically we would need about 44MW and we’re operating on about 19MW at the moment.

Mr Mentha said the blast furnace was operating, making iron, but it could not be turned into steel.

SA storm and its chaotic aftermath

Mr Mentha’s firm KordaMentha, via Morgan Stanley, is currently marketing Arrium, which is in administration, for sale domestically and overseas.

Mr Mentha said the power outage highlighted the need for more energy security for the plant, but any buyer could have access to federal funds.

“We’ve put into the data room the opportunity for investment, supported by the Federal Government and the Clean Energy Finance Corporation, various models where the plant can be self sufficient.

“I think this event will probably drive bidders to look more deeply at that opportunity and the support from the Federal Government.

“I think it also provides an opportunity for the State Government because if everyone’s committed to the Whyalla steelworks and the mining operations surviving, it needs power to do so, and if there’s going to be funds available through the Clean Energy Finance Corporation and perhaps other federal and state funds, you can look not only at self-sufficiency for the plant but also look at building a plant that’s bigger and feed back into the grid.’’

Indicative bids for Arrium were expected in mid-October with a shortlist to be determined shortly thereafter.

OZ Minerals’ Prominent Hill copper and gold mine and BHP Billiton’s copper, gold and uranium mine in the state’s far north remain out of action following Wednesday’s power outage.

[e-mail]