SA government forces GFG Alliance Whyalla steelworks into administration
The South Australian government has forced to act against major steelworks, leaving a 1000-strong workforce in limbo.
South Australian Premier Peter Malinauskus said he took the extraordinary decision to force the massive Whyalla steelworks into administration because it was on the way to “compromising” the Australian steel industry.
British steel magnate Sanjeev Gupta’s GFG Alliance owned the plant, but the troubled firm owes creditors tens of millions of dollars, from the SA government to local subcontractors.
Mr Malinauskus said the government had to act.
“The state government was in receipt of advice from our expert steel task force that made clear that the state of the steelworks was now approaching a point where it could be irredeemable,” Mr Malinauskus told 7.30.
“If we allowed it to continue on the current trajectory, where the finances of GFG were compromised so they couldn’t invest in the steelworks, it was actually compromising the ability to make steel in this country.
“It would be clearly unacceptable that as a country we didn’t have the capability to put the two together and make steel for ourselves.”
Prime Minister Anthony Albanese is expected to fly into the battered Eyre Peninsula town on Thursday to announce and emergency rescue package alongside Industry Minister Ed Husic and Mr Malinauskas.
The Australian Workers Union, in a statement from Wednesday afternoon following the shock collapse of the integrated steelmaking complex, said “urgent government intervention” was needed to secure the future of Whyalla and its 1000-strong workforce.
“Placing Whyalla Steelworks into administration is the right move to stabilise the business and pave the way for a long-term transition to green steel,” the union said.
“The AWU calls on the federal and South Australian governments to act swiftly and decisively to take back control of the plant, protect thousands of jobs, and ensure Australia remains a leader in steel manufacturing.
“A structured rescue plan, including strategic government support to facilitate new private investment, is essential.”
Mr Malinauskas said the government had appointed KordaMentha to run the business and would take “early and proactive steps” to find a new owner.
“This means GFG are no longer running the Whyalla steelworks and associated mines,” he said on Wednesday afternoon.
“The South Australian government has intervened. The steelworks is now in the hands of an administrator, who will stabilise operations and explore a possible sale to a new owner.”
The steelworks has suffered losses for months and the government had grown increasingly sceptical GFG Alliance would meet its debt obligations.
The steelworks is a core economic engine for Whyalla, a town of 22,000 people, and the state more broadly.
The move followed amendments to the Whyalla Steelworks Act passed by the Upper and Lower houses of the state parliament in the morning, giving the government the power to call on its debts and push out Mr Gupta.
Mr Malinauskas said the town’s steel workers were now in a better position than they were in the morning.
“There was an option that we could provide assistance to GFG and Mr Gupta, there was an option that we could have bowed out GFG but we are not going to do that,” he said.
“This is not about GFG, this is about the critical economic infrastructure that is steelmaking production in this country, that is a future we need to focus on, not an individual owner of the steelworks.
“So our mind turns to providing support for the industry and for the people that work within it to secure sovereign steelmaking in this country.
“Not a bailout for GFG, an investment in a steelmaking in this country, that is what we need.”
Mr Gupta purchased the plant in 2017 for $700m, promising to reinvest in the ageing works and transform it into a “green steel” plant.
But Mr Malinauskas said he had failed to invest in the plant.
“Mr Gupta’s vision is largely the right one, it just hasn’t been allowed to come to life,” he said.
Whyalla is Australia’s only fully integrated steelmaking enterprise, producing slabs, billets, hot rolled structural steel and rail products.
Mr Malinauskas said the administrators would now work to stabilise Whyalla’s operations and put it on a “surer footing” in the immediate future.
“This is the right course of action to secure steelmaking in this country,” he said.
Mr Malinauskas flew to Whyalla on Wednesday afternoon to detail how the government plans to support the battered community.
“I look forward to being on the ground … 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 said.
“Because the administrator is fully funded and that will mean that bills get paid, work orders are made, workers can roll up to work knowing there is no question over the immediate future and the owner of the steelworks.”
The steelworks employs 1000 people directly, but the AWU warned “tens of thousands” of households relied on the enterprise.
The Premier said he had been in constant contact with Mr Albanese on Whyalla’s woes.
“The Prime Minister and I, every time we meet in person, or speak on the phone, barely an opportunity goes by when I do not speak about the economic opportunities of the Spencer Gulf,” he said.
“He has been receptive, more than receptive, actively interested.
“The Prime Minister has been fully abreast of the situation around GFG for some time, I readily engage with him and I very much look forward to that interest and active engagement from the Commonwealth being more fully known in the not-too-distant future.”
The premier also said he had spoken with Opposition Leader Peter Dutton last week to discuss the steelworks.
It is not yet clear what actions Mr Gupta will take following the forced administration.
Mr Malinauskas said he had not spoken with the magnate on Wednesday.
“They (GFG) will make their own assessments about their own options,” he said.
NewsWire has contacted GFG for a response to Wednesday’s developments.
Mr Malinauskas confirmed the government was not GFG’s largest creditor.
A meeting between KordaMentha and creditors will take place within seven days, where creditors can accept the appointment or propose an alternative administrator.
KordaMentha said it was now engaging with parties, including steel titan BlueScope Steel.
KordaMentha ran Whyalla’s previous administration process before it was purchased by Mr Gupta.
Whyalla steel is present in large-scale infrastructure projects across Australia from Optus Stadium in Perth to the Cross River Rail project in Brisbane.
A report from the McKell Institute warns a Whyalla fail would leave Australia “dangerously dependent” on Chinese steel imports.
“The Whyalla Steelworks Australia’s is the only manufacturer of ‘long steel’ products which are core inputs into Australia’s transport, construction and manufacturing industries,” McKell chief executive Edward Cavanough said.
“They are even more crucial as Australia confronts burgeoning public infrastructure projects and a housing crisis, and aspires towards a manufacturing resurgence.
“If Whyalla steel fails, Australia would become dependent on imports for long steel.
“That would leave us completely exposed to coercion from strategic adversaries. We had a taste of what this looks like in 2021, when the Chinese Government imposed tariffs and trade restrictions on key Australian export sectors.”
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