Sanjeev Gupta’s Whyalla pressured as steel mill closure extends

Sanjeev Gupta’s steel mill may be down for close to three months, at a pivotal time for the company’s finances.

GFG Alliance global chief executive Sanjeev Gupta. Picture: John Feder/The Australian

Sanjeev Gupta’s Whyalla steel mill will be down for several weeks more according to the company, putting more pressure on its finances as the Australian steel market suffers a 15 per cent fall in demand in the slowing economy.

Gupta acquired Whyalla in 2017 for a reported $700m, rescuing the mill from financial administration and saving the 900 jobs potentially affected.

But with the mill now down for over seven weeks since mid-March and for several more to come, nerves in the town are increasing.

In response to questions from The Weekend Australian the company said: “GFG Alliance is making steady progress and expects the blast furnace to be back to usual operation in coming weeks.”

It noted “the planned blast furnace maintenance shutdown created an unexpected loss of taphole connectivity during the restart procedures.”

The company declined comment on reports Infrabuild’s profits had slumped in the second half of this year, noting “InfraBuild has delivered net profit for the first half of financial year 2024 of $40m, from revenue of $2.5bn, with an adjusted EBITDA margin of 8.7 per cent.

“The robust result comes amid continued softening in the domestic steel market from peak-cycle levels, with sales volumes abating due to lower residential activity and price moderation,” it added.

Mr Gupta’s Australian arm Infrabuild has been the jewell in the crown, allegedly being used to help plug the financial gaps elsewhere in his global empire.

This was put under strain in 2021 when the supply chain finance company run by Australian Lex Greensill collapsed in 2021.

Mr Gupta reportedly accessed $5bn in funding from Greensill but according to some reports he has not paid around $900m in loans outstanding and administrator Grant Thornton is reportedly considering recovery operations.

This makes the timing of the Whyalla shutdown crucial, given it is the only Australian supplier of long product steel like structural beams and also supplies billets to the company’s electric arc furnaces in Sydney and Melbourne.

Loss of product means loss of cash flow.

The extended shutdown was caused when the furnace cooled too much during a planned two day maintenance shutdown in mid-March.

Australian steel suppliers report an overall slowdown in the market, with more construction projects on hold in the slowing economy, but are hopeful it will bounce in the 2025 year.

The slowdown is estimated at as much as 15 per cent, which will also put some pressure on Bluescope’s Australian operations.

UBS is tipping Bluescope’s Australian revenues will fall from $7.9bn last financial year to $7.1bn, with earnings down from $537m to $348m and flat for the 2025 year.

Whyalla, in its statement on the blast furnace recovery, said “a range of complex steps are currently being undertaken to return the Whyalla Blast Furnace to its usual operation, which include progressively opening up 18 wind tuyeres (nozelles) while heating up the furnace and enabling use of the main tap hole. We have successfully opened six wind tuyeres and are in the process of opening another four.”

Gupta plans to replace the blast furnace next year with a state of the art electric arc furnace which will create a low emission steel plant.

Originally published as Sanjeev Gupta’s Whyalla pressured as steel mill closure extends