Malcolm Turnbull steps in but no bailout for Arrium
Malcolm Turnbull has directly intervened in the Arrium crisis urging creditors and the company to co-operate.
Malcolm Turnbull has directly intervened in the Arrium crisis, urging creditors and the company to co-operate and continue trading to allow time to develop a rescue plan to protect almost 7000 jobs across Australia.
Arrium’s collapse sparked a political firefight over the future of another of Australia’s foundation manufacturing industries — in particular the South Australian industrial centre of Whyalla, where Arrium operates a steelworks.
Bill Shorten pledged a Labor government would compel federal, state and local government agencies to buy Australian steel.
However, Trade Minister Steve Ciobo said such a move would breach Australia’s trade deals and potentially jeopardise the jobs of exporters.
Industry Minister Christopher Pyne said the Prime Minister had already announced $80 million in steel orders for Arrium’s Whyalla Steelworks by bringing forward the upgrade of 600km of rail line between Adelaide and Tarcoola in the far north of the state.
Arrium has estimated it needs between $100m and $120m in additional orders over the next two years to underpin its Whyalla operations.
The Opposition Leader said the government should consider a “co-investment” in the domestic steel industry to ensure it stays alive. “Tough times call for unusual actions. There’s a role for government in something as important as the steel industry; that we look (at whether) there are opportunities for co-investment for a period of time. If there is a way in which government can help the steel industry to stay on its feet, (whether it’s) helping them with technology transfer, so that we upgrade our industry, we should.”
The South Australian government is understood to be open to a co-investment to develop new markets.
The Australian has learned that Mr Turnbull had “a number of conversations’’ with key players in recent days urging them to give it time and keep trading to find a solution.
Arrium was placed in voluntary administration yesterday owing more than $2.8 billion to creditors, $1bn to suppliers and $500m to staff.
Mr Pyne said he knew people would be very worried about the company being placed in voluntary administration, but noted several companies had emerged from such a position to be successful. “Out of these ashes of Arrium could well become a phoenix which will rise and provide the jobs and growth in the economy that we all want to see for the workers of Arrium,’’ he said.
The company was spun out of BHP in 2000 as OneSteel and includes the Whyalla steel operations and an iron ore mine in South Australia’s Middleback ranges. It also has a mining consumables business, including Moly-Cop, the largest supplier of grinding balls and grinding rods in the world, as well as Canada-based AltaSteel.
The company employs 6710 people across Australia including 2800 in NSW, 1600 in South Australia, 930 in Victoria, 900 in Queensland, 350 in Western Australia, 60 in Tasmania, 40 in the Northern Territory and 30 in the ACT.
Unions and both sides of politics believe the Whyalla steelworks, which supplies up to 75 per cent of the structural steel in the Australian market, can have a viable future under the right rescue plan, and that the lion’s share of the company’s problems have been caused by a massive debt burden fuelled by corporate acquisitions.
Four years after Tony Abbott declared Julia Gillard’s carbon tax would cause a wipeout in Whyalla, Labor yesterday blamed the scrapping of the $300m Steel Transformation program, which was abolished along with the carbon tax two years ago and had provided an effective subsidy of up to 10 per cent to the industry.
South Australian Liberal senator Sean Edwards blamed high power prices in South Australia that he said were damaging the state’s industrial users. Government sources pointed to World Steel Association figures showing crude steel production fell from 7,625,000 tonnes in 2008 — Labor’s first full year in office — to 4,688,000 in 2013.
Mr Pyne played down the prospect of a government bailout, saying he was confident the company could trade out of its difficulties.
The Arrium board yesterday announced Grant Thornton had been appointed voluntary administrator ahead of the banks’ preferred choice, McGrathNichol. The move came after the banks this week rejected a $1.2bn recapitalisation proposal by vulture fund GSO Capital, the credit arm of US private equity giant Blackstone. Creditors now stand to lose as much as $1.6bn.
Grant Thornton’s managing partner, Paul Billingham, said the voluntary administration provided Arrium and its stakeholders time to develop options that would help preserve long-term value and optimise the position of its creditors.
Mr Pyne is understood to be considering a strengthening of recent changes to the anti-dumping regime against foreign steelmakers accused of selling into the Australian market below-cost, after the government this week received a report on assistance by foreign governments to their own steel industries.
The Opposition Leader, accusing the Coalition of having failed the industry, warned any country that abandoned domestic steel production would lose economic firepower.
“Governments at all levels — council, state and federal — spend a lot on infrastructure. What is wrong with requiring Australian content in the steel?” Mr Shorten said in Brisbane.
South Australian Treasurer Tom Koutsantonis was highly critical of the big banks and said they had pushed Arrium into administration.
Additional reporting: Joe Kelly
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