11 reasons collapse of Sanjeev Gupta’s GFG Alliance Whyalla steelworks would ravage Australia

Premier Peter Malinauskas has revealed his “grave concern” about Whyalla steelworks’ future – Paul Starick examines the implications.

Premier Peter Malinauskas has revealed his “grave concern” about Whyalla steelworks’ future and operator GFG Alliance’s finances.

Another steelworks collapse would have disastrous consequences for Whyalla, the South Australian economy and the nation’s manufacturing industry.

Editor At Large Paul Starick examines the implications.

1. Jobs: The Whyalla Steelworks supports about 3000 jobs, including at the steelworks and associated businesses. There has been a steady decline since the mid-1980s, when the steelworks alone employed 6000 people. After mass lay-offs over 15 years, that number dwindled to 2500. Today, that figure is closer to 1000. Even if contractors are used extensively, the steelworks remains a large employer.

2. Whyalla wipeout: Spend any time in the proud Eyre Peninsula city of Whyalla and it’s obvious the steelworks is the centrepiece – geographically, economically and spiritually. The blast furnace shutdown last year ravaged Whyalla businesses. Voluntary administration about eight years ago took the steel city to the precipice. A repeat could be apocalyptic.

GFG chief Sanjeev Gupta visits the Whyalla steelworks in 2017 (AAP Image/David Mariuz)

3. Hydrogen white elephant: About four years ago, Labor leader Peter Malinauskas revealed a $593m Hydrogen Jobs Plan, designed to cut energy bills and create thousands of jobs. Whyalla was later chosen for the site and the plan repurposed for the hydrogen plant to fuel green iron production at the steelworks, a centrepiece of the Premier’s State Prosperity Project. The world has changed. Hydrogen projects are being axed across the country. And the much-vaunted hydrogen plant looks more like a white elephant without a viable customer than an innovative clean energy project.

4. Iron dreams rust: In February last year, Mr Malinauskas was in Whyalla trumpeting talks with GFG Alliance to produce green steel – “all part of our effort to improve the state’s prosperity on the back of the global decarbonisation of industry”. By September last year, Mr Malinauskas declared Whyalla steelworks’ ownership “second” to his long-term green iron plan. He then listed steelmaking firms he had spoken to personally about that strategy, naming BlueScope, Nippon Steel Corporation, POSCO, Thyssenkrupp and Tata Steel. But how do they start operations at Whyalla while GFG flounders?

Premier Peter Malinauskas at the Whyalla steelworks on February 25, 2024. Picture: Ben Clark

5. No future made in Australia: Whyalla is the nation’s only manufacturer of structural steel for bridges, industrial complexes and rail. Both state Energy and Mining Minister Tom Koutsantonis and retiring federal Liberal MP Rowan Ramsey, whose seat includes Whyalla, are among those who have emphasised the steelworks’ importance. “If nothing else, Covid and the current political tensions in our hemisphere have underlined the absolute necessity for Australia to maintain a sovereign capacity in a number of areas and steel is one of them,” Mr Ramsey said in mid-2024.

6. Manufacturing lost: South Australia was once the nation’s heavy manufacturing powerhouse, boasting extensive automotive, whitegoods, shipbuilding and steel industries. Holden’s Elizabeth plant closure in 2017 bludgeoned state morale. Shutting the gate on Whyalla steelworks would be similarly catastrophic.

7. Region ravaged: The Upper Spencer Gulf was once known as the Iron Triangle. It was a thriving region, boasting shipyards, a steelworks, coal-fired power station and multi-metal smelter. Today, the Port Pirie smelter remains one of the world’s largest but the Port Augusta power station closed in 2016 and Whyalla Shipyards were shut down in 1978.

Concept image of the Whyalla hydrogen power plant.

8. Gas-fired generator: The turbines on order for the hydrogen power plant can be fired by gas as well as hydrogen. If the hydrogen dream is over, then the Whyalla site likely will be repurposed into a gas-fired electricity generator – a peaking plant to ease concerns about generation capacity in South Australia and Victoria. Even then, gas will still have to be trucked into the plant, at least at first.

9. Tide turns on Mali: The popular Premier could weather the political hit of the hydrogen power plant plan collapsing – most people don’t understand it or even particularly care. But a Whyalla steelworks wipeout would be a political disaster. New-found confidence in the state’s economy, standing and outlook would be battered and the unwanted reputation of a declining rust belt returned.

10. Federal election: Prime Minister Anthony Albanese has to hold every seat he can and might not have the cash to splash to keep Whyalla afloat. Neither state nor federal governments, whatever their persuasions, will want to throw money at Sanjeev Gupta. But they might help back a new owner. Opposition Leader Peter Dutton needs to win a swag of seats to seize government. With Rowan Ramsey retiring in the seat of Grey, which includes Whyalla, Mr Dutton can’t afford to lose that seat to an independent. The Coalition is less inclined to shovel out money to back industry – remember Holden – but Donald Trump’s strong backing of US steelmaking shows a changing political mood.

11. State election: The unofficial state election campaign traditionally is drawn out a year from the poll, which is on March 21, 2026. This year is crucial for the Malinauskas government, which has yet to weather a serious crisis. Mr Malinauskas knows, from his 2022 election experience, how quickly fortunes can turn in politics. A Whyalla collapse and failure to fix the ramping crisis could turn the tide on his government.

Originally published as 11 reasons collapse of Sanjeev Gupta’s GFG Alliance Whyalla steelworks would ravage Australia