Labor’s $500m plan to rescue Whyalla from wipeout

The Albanese government will fund up to $500 million of green upgrades to the imperilled Whyalla steelworks if it is sold to new owners, after the South Australian government seized control of the debt-laden business and the federal opposition slammed Labor’s renewable energy goals.

A senior government source said the rescue package would be worth about $500 million in the short term as the company entered administration once more.

Sanjeev Gupta, pictured at one of his plants in 2017, is presiding over a manufacturing empire in crisis.Credit: Joe Armao

Over the longer term, a second part to the rescue plan would significantly increase the total outlay by state and federal governments to save the iconic steel works.

South Australia on Wednesday lost patience with British billionaire Sanjeev Gupta’s debt-ridden GFG Alliance, which owns the plant but has been teetering on the edge of collapse, and rushed bipartisan laws through parliament letting South Australia hand control of the plant to a restructuring firm.

Prime Minister Anthony Albanese and Industry Minister Ed Husic will visit the Whyalla steelworks on Thursday to announce that state and federal governments will fund the upgrade for a new buyer that takes over the steelworks.

The joint announcement on Thursday by Albanese, Husic and South Australia’s Premier Peter Malinauskas comes after months of discussions between federal and state governments.

The plan to save the steel works is in three phases, with the first being the decision to place it into administration.

Phase two will see the federal and state governments equally invest up to $500 million over about six months to keep the plant running.

In the longer term, phase three of the plan will see further investment to replace ageing infrastructure, such as the operation’s blast furnace, so that it could potentially manufacture green steel in the future.

Industry Minister Ed Husic welcomed Malinauskas’ move.

“What’s going on in and around Whyalla can’t continue – workers kept in the dark, creditors unpaid – a proud, industrial city left wondering about its future,” Husic said.

In April 2023, Gupta announced the steelworks would switch its coal-based steelmaking to a green system using an electric arc furnace – a transition that experts estimated would cost $500 million to complete.

The opposition seized on Malinauskas’ decision to argue that Prime Minister Anthony Albanese’s plan to revive Australia’s manufacturing sector was failing, reprising a clash from 2012 when the opposition under Tony Abbott claimed the facility would be doomed by Labor’s carbon tax.

Malinauskas said the situation at the plant, which owed many millions in unpaid bills and was only operating sporadically, was unacceptable for its 1000 employees and imperilled Australia’s capacity to make steel.

“I would love to be there now,” Malinauskas said. “To look in the eyes of people who work at the steelworks and assure them of their future and the fact they are in a far better position right now than when they were this morning.”

He declared that restructuring firm KordaMentha was “fully funded” to guarantee the workers’ future but declined to give financial details of the arrangement and hinted that the Commonwealth could provide additional assistance soon.

The steelworks started creating steel again in January after a four-month shutdown that cost the company millions.

GFG Alliance bought the facility for $700 million in 2017 and now owes its creditors an undisclosed sum, which Malinauskus said ran into tens of millions of dollars. A GFG spokesperson said it was assessing its options, following the government intervention.

US President Donald Trump’s declaration that he would impose tariffs on steel entering America has roiled the global market, but Whyalla’s steel is largely destined for the local, New Zealand and Asian markets where it is used in things like railway sleepers, wire and construction products.

Gupta’s GFG Alliance has been in financial difficulties since its key finance partner, the Australian-founded Greensill Capital, collapsed in 2021.

In 2012, then-opposition leader Abbott claimed Whyalla would be wiped off the map by the Gillard government’s carbon tax. Then-trade minister Craig Emerson responded by singing “No Whyalla wipeout, there on my TV” to the tune of Skyhooks’ 1970s hit Horror Movie.

Deputy Opposition Leader Sussan Ley said on Wednesday that state and federal Labor’s renewable energy goals were “killing the competitiveness of Australian manufacturing”.

“Federal Labor was elected on a promise that they would ‘rebuild manufacturing’ and yet today the Whyalla steelworks joins the long list of Australian manufacturers who have gone insolvent since Labor took office,” Ley said.

The federal government has set a nationwide goal for 82 per cent renewable electricity in the grid by 2030 and the South Australian government is aiming for 100 per cent by 2027.

Whyalla’s then-operator collapsed in 2016 despite Abbott’s 2014 carbon tax repeal. GFG bought the plant the next year for $700 million after it had been administered by KordaMentha, the same firm trying to save it now, underscoring the challenge of finding a buyer who can profitably run the plant long-term.

Energy Minister Chris Bowen boasted the move exemplified the clean investments that heavy industry would make, following the passage of the Albanese government’s signature climate laws capping carbon emissions from the nation’s biggest polluters.

The Whyalla steelworks has become emblematic of Australia’s struggling manufacturing industry.Credit: Ben Searcy

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