Whyalla resumes steel production after outage but GFG Alliance says the plant’s outlook is uncertain

The resumption of steel production at the SA regional city of Whyalla will boost hopes the plant’s future can be safeguarded, but even owner GFG has conceded hurdles endure.

Whyalla steelworks has produced its first steel in four months, GFG Alliance has confirmed – although the troubled industrialist company said the future of the plant was still uncertain.

The resumption of production is a boost to hopes the Whyalla plant, a major employer, can be safeguarded as GFG executive chairman Sanjeev Gupta struggles under a barrage of global pressures and technical issues at the Australian facility.

The South Australian government has been concerned enough to prepare contingency plans in case Liberty Primary Metals Australia, the GFG subsidiary which owns the steelworks, is placed into voluntary administration.

Tempering that concern has been news from Liberty that repairs to the blast furnace have been advanced enough to allow for some steel production, although GFG global chief manufacturing officer Theuns Victor conceded there were plenty of ongoing obstacles.

“I want to caution that we still have a long way to go before the plant is stable and secure. The blast furnace is currently running at half its capacity with a number of issues yet to be resolved,” he said.

“At the same time we are also tackling challenges in the rest of the plant and will soon enter the EPIC Energy natural gas lateral shutdown for two to three weeks, which will add further complexity to the operations.

“Despite this I am very confident we will deliver the plant to stability and then to its full capacity, but this will take time and patience. I am immensely proud of the perseverance of our Whyalla team, which will see us overcome the enormous challenges we have been facing.”

Whyalla’s steelworks and smelter facility late last year. Picture: Ben Clark

Whyalla’s blast furnace has been beset by problems. It went offline twice last year and GFG at the time did not have any indication of when it would be able to be restored.

The resumption of some steel production at Whyalla is a much-needed boost to Mr Gupta’s fortunes, as the British billionaire faces pressure from authorities and contractors for outstanding invoices.

GFG has blamed the global economic downturn for its troubles, and has moved to cut costs – including on maintenance works – and announced dozens of redundancies.

GFG last November negotiated $US100m in new debt to provide capital for the Whyalla steelworks, with the money to fund ongoing maintenance work and payments to suppliers.

The company said it had signed a term sheet with an unnamed “major global credit fund” and the funding was expected to be locked in by the end of the calendar year.

Mr Gupta has previously told The Australian his broader GFG group had been propping up the Whyalla operations to the tune of about $1m per day, and more than $400m had been contributed over the previous two years – and that there was considerable concern about the capacity of GFG to continue propping up the South Australian facility.

GFG has been forced to mothball European facilities, and one in Scotland is only being run intermittently as it struggles to compete with cheaper imports.

Mr Gupta is also being prosecuted by the UK’s corporate registry, Companies House, for allegedly failing to file accounts. He has pleaded not guilty to the charges.

He said progress in returning Whyalla to profitability illustrated his commitment to the project.

“I would like to reassure them that my commitment to Whyalla remains steadfast and we will not rest until we bring the business back to black for the long-term prosperity of all our stakeholders,” he said.

“Back to black is the critical foundation on which our incredible aspirations to build a green steel future for Whyalla and GFG rest.”

The fate of the Whyalla steelworks is consequential to both the South Australian and federal Labor governments. SA shapes as a critical battleground election state and both tiers of government will be desperate to avoid large-scale job losses in the regional city.

Both Labor and the Coalition are in lock-step on the importance of the facility to Australia’s sovereign manufacturing capacity. GFG claims its still is the only domestically produced steel capable of use in bridges, industrial complexes, docks and high-quality rail.

Originally published as Whyalla resumes steel production after outage but GFG Alliance says the plant’s outlook is uncertain