BlueScope’s dominant position an issue for Whyalla Steelworks sale

Whyalla Steelworks. Picture: Brett Hartwig

Prospective suitors for the Whyalla Steelworks are understood to have been put off by BlueScope’s dominant position in the sale process and have opted not to bid, industry sources say.

BlueScope, which was initially appointed as a government adviser, has last right of refusal to buy the business.

DataRoom understands that because of this, other suitors are not planning to put forward any offer for the South Australian asset.

As reported by The Australian on Tuesday, more than 30 domestic and international companies expressed interest in buying the steelworks, mine and port that was saved by a $2.4bn government funded rescue package.

The formal sale process for the Whyalla Steelworks and associated mining operations was launched on June 24, with selected prospective buyers provided access to a “secure data room” that enables initial due diligence and allows bidders to prepare “non-binding indicative offers”.

Steel companies from Australia, Japan, India and South Korea considered the opportunity, including JSW and Korea’s POSCO.

The government describes the Whyalla Steelworks as a unique pit-to-port asset and a critical pillar of sovereign steelmaking in Australia.

DataRoom reported in February that BlueScope had been in prolonged detailed talks with the SA government, and was set to wind up as the reluctant saviour of the steelworks, with inside run on a plan to take the reins.

More interesting to the UBS-advised BlueScope would probably be the steel manufacturing operations of Whyalla’s sister company InfraBuild, bought with Whyalla by Sanjeev Gupta’s GFG Alliance.

InfraBuild and Whyalla are closely related in that most of the steel produced at Whyalla is sold to InfraBuild.

InfraBuild currently has about 70 per cent market share and manufactures reinforcing steel.

The loss-making Whyalla owed hundreds of millions of dollars to its creditors, which are groups such as Aurizon and NRW, and the SA government, which passed new laws to place Whyalla into administration.

Administrator KordaMentha also handled Whyalla when Whyalla’s parent company Arrium collapsed.

GFG bought Whyalla and InfraBuild, beating rival bidder, POSCO.

In February, a move by BlueScope to manage Whyalla Steelworks on behalf of the gov­ernment was seen as stage one of a long-term plan to find a solution for the troublesome operation where it could establish the costs of making it relevant and ­viable for its own business.

Then it would call on the government to fund investment to make the facility fit with its own business plan, which may include building arc furnaces, green steel capacity or a new plant to make flat steel.

BlueScope’s Port Kembla mills are break even $US220 a tonne less the cost of iron ore and coking coal and the price in Australia for steel is currently at about $US170 a tonne.

Due to the challenges in the market, BlueScope is moving from upstream steelmaking to downstream, with more of a focus on products such as its Colorbond roofing and cladding solutions.