Whyalla’s ‘man of steel’ Sanjeev Gupta has done what even he thought impossible

Whyalla’s ‘man of steel’ Sanjeev Gupta has done what even he thought impossible.

Sanjeev Gupta visited what was then the Arrium steel mill at Whyalla back in 2017. His company, GFG Alliance, now owns the plant.

Sanjeev Gupta’s GFG Alliance is on the cusp of taking the once-beleaguered Whyalla steelworks from “red to black” financially - a task he says, if he’s being honest, even he didn’t think was possible.

Almost two years to the day after he hosted Prime Minister Scott Morrison and South Australian Premier Steven Marshall for a “Big Reveal” at the Whyalla steelworks, where ambitious expansion plans for steel production were announced, Mr Gupta spoke to The Australian about his pride in what’s been achieved at Whyalla, and what’s in store going forward.

Executive Chairman of GFG Alliance Sanjeev Gupta (right) and South Australian Premier Steven Marshal on the Whyalla Jetty.

Gupta’s GFG Alliance - then a global steel and manufacturing empire already employing 11,000 people - was late to the party in 2017 when the assets of Arrium - the listed steelmaking and mining entity which fell into administration under crushing debts, hit the market.

Posco Capital, the South Korean venture capital arm of one of the biggest steelmakers in the world, Posco, was rumoured to be the favourite to buy the assets, and planed to modernise the Whyalla steelworks with its FINEX technology.

Mr Gupta, little known at the time in Australia, swooped in and won the day however, bringing with him promises to spend big modernising the Whyalla plant, and also not to sack a single worker.

While the claims seemed audacious, Mr Gupta had form.

In 2013 his company Liberty House bought a steel Mill at Newport in Wales from its Russian owners, placed it in mothballs, then made an offer to its workers which appeared to defy basic business logic.

In a bid to keep the workforce together, all 150 employees were offered 50 per cent pay - to not turn up to work - as long as they committed to come back once the plant had been modernised.

They could get another job to make ends meet in the meantime. Mr Gupta also vowed to keep their superannuation payments up to date.

Two years later the mill reopened — and 144 of the staff came back.

Since the Arrium purchase in 2017 for a rumoured $700 million, Mr Gupta has made waves globally, with an aggressive acquisition program.

His headcount has grown to 35,000, picking up assets from companies such as Rio Tinto and South32, and he has a bid on the table for Thyssenkrupp’s steel unit, which could take employee numbers to a reported 50,000.

Mining and steelmaking have been a part of Sanjeev Gupta’s life since he was a child.

Questions have been raised about the opacity of the company’s finances - concerns Mr Gupta dismisses, saying that following a consolidation into Liberty Steel Group - part of GFG - those matters will soon become clear, with financials to be published after the end of the calendar year.

“Within the next few weeks you’ll have those. They show a very positive picture, we’ve done very well. The only business, really, to be honest, which was dragging it down a bit was the Whyalla steelworks. Every other business is profitable and is making decent money.

“The Thyssenkrupp deal, if it goes through, will really put (the business) into a different league altogether.

“And I’m also positive about the future. I think next year, and years actually, will be very good years, because coming out of COVID there is a lot of appetite for investment.

“There’s lot of money floating around, everybody wants to get behind industry which is a big positive out of a very bad year, a tragic year in many ways.’’

In Australia, his pride in what the company has achieved is palpable.

The Whyalla steelworks, with the current blast furnace built in 1965, has in recent years, in Mr Gupta’s words, been the “poor cousin’’ of the business, which also includes profitable hematite and magnetite mining operations in the Middleback Ranges and steel product manufacturing on the east coast.

The current Whyalla blast furnace was built in 1965, although the operations predate that by a long stretch.

At the Big Reveal in December 2018, plans were announced to pump $600 million into upgrading the steelworks, bolstering its capacity and securing 2500 jobs, while feasibility studies for a massive new steelworks producing up to 10 million tonnes per annum were worked through.

Plans to build a 280MW solar farm had already been announced, along with possible hydropower ambitions.

The current steelworks were expected to limp along until the larger plans came to fruition.

But the thinking has evolved, in line with GFG’s ambition to be producing carbon neutral GREENSTEEL by 2030, and with the surprise outcome that the Whyalla plant is expected to be profitable in the second half of this financial year.

“The most important thing, which I’m really proud of, and if I’m honest, didn’t think was possible, is the turnaround of the steel plant,’’ Mr Gupta told The Australian from Europe.

“The steel plant, as you know, has been the main problem, it has lost money ever since we bought it.’’

Mr Gupta said he put together a senior expert team at the start of the year “and despite Covid they’ve been not only able to address that issue, but undertake that turnaround’’.

“The plant as it is, obviously with lots of little investments and lots of operational changes, is

now at a point where it is basically turning from red to black which will be a major achievement for the business,’’ he said.

“Now that the steelworks will be profitable, Whyalla comes into a very good position’’.

This position, Mr Gupta says, is a jumping-off point for a three-pronged investment in the next generation of steel making: renewable energy, powering an electric arc furnace, and a new direct reduced iron facility initially powered by gas, and then by renewably-produced hydrogen.

Solar is at the core of Sanjeev Gupta’s hydrogen ambitions.

The company’s planned 280MW solar farm just outside the city of Whyalla, which has been held up by COVID-19 and grid connection issues, is about to break ground, Mr Gupta says, and will be followed up with a 3GW renewables pan, mostly based around solar.

That massive investment will underpin the hydrogen production to feed into GREENSTEEL.

Financial close on the 280MW project is expected around Christmas, followed shortly by construction, with power to flow within 18 months.

“During that time we will progress our development plans for the 3GW program, which will then feed hydrogen,’’ Mr Gupta said.

The GREENSTEEL process needed magnetite, he said, with mining of that ore to increase from 2 to 2.5 million tonnes per year, with longer term ambitions for 5 and then 15 million tonnes.

“The GREENSTEEL project has three aspects: it’s now based on an electric arc furnace, a direct reduced iron plant and the (new) mill.

“Initially the DRI plant can be fed by natural gas, but our ambition very much is to have it fed by our own hydrogen from our own renewable energy.’’

In terms of timelines, Mr Gupta said the mill was “very well developed, the EAF is also quite developed, the DRI we’re completing a lot of engineering work now’’.

The project would be a global leader for GFG in its ambitions to make emissions-free steel, Mr Gupta said, and with Whyalla now profitable, they had some breathing room to bring the many strands of the next step up project together in a co-ordinated way.

“Whereas the perspective was before that the steel plant was doomed, that has changed,’’ Mr Gupta said.

“It’s completely done a U-turn. That business is now virtually profitable on its own rights as it is. And we will be investing significant money, not hundreds of millions .. but certainly over $100 million in the existing plant because we believe now that it can bring profitability to the business in its own right.’’

Mr Gupta said GREENSTEEL was an absolute commitment, but it was not now “a solution to a burning platform, it’s now there as an ambition’’.

“It’s the future of the business and the future of the world.’’

Mr Gupta said the engineering designs for the GREENSTEEL elements were the work of the next six months, with issues such as planning permissions and financing to follow.

When asked to reflect on the Whyalla steelworks’ turnaround, Mr Gupta said it was one thing to build something new, but it was particularly special to breathe new life into a legacy business.

“The fruit of hard labour, which is basically what Whyalla has done right? If you think of all of the sacrifices the town, the workers have gone through, and the sacrifices GFG has gone through, we’ve spent a lot of money and I don’t think we get enough credit.

“I’m very proud of what Whyalla has done for itself and what GFG has done.

“When you turn around a bad business into a good business, the satisfaction that you get from that, actually in some ways is bigger than from making a major investment.

“Then when we can do the big investment, and that guarantees the future forever for Whyalla, then that’s even better, to come from that foundation where through your hard work you’ve managed to turn around something.’’