Upgrade to make Whyalla steel plant self-sufficient in energy
New owners GFG plan to invest $1bn to upgrade the plant to make it self-sufficient in energy and to lift production.
GFG Alliance-Liberty House’s $1 billion investment plans to upgrade the Whyalla steel mill include the conversion of the plant to use unwanted gas to generate electricity and eventually make it self-sufficient in energy.
The $700 million purchase last week is subject to a creditors meeting this Thursday and formal approval from the Foreign Investment Review Board.
Treasurer Scott Morrison has already indicated FIRB approval will be forthcoming.
Liberty plans to talk with both the state and federal governments over potential guarantees to support its planned investment.
The aim is to convert the plant back to hematite iron ore, reversing the plans of the previous owners, who converted the plant to magnetite.
This will exploit the fact that hematite can be exported at the top of the market.
The GFG-Liberty team also aims to reduce the costs of producing steel through the hematite process, which will make it sustainable long-term. To make the change it will have to invest in a sinter plant to convert to ore.
The aim is to increase production from the present 1.1 million tonnes a year to as much as 1.5 million tonnes, and export slab to its British mills, which are presently short of the product. This will be the first time in recent years that Whyalla has been an export steel mill.
The products produced at the plant have suffered from too much capacity and hence lack of demand, which Liberty is planning to offset by solving its own shortages in Britain.
By reducing raw material costs, including energy, the new owners hope to make the plant self-sufficient over the long term and go further to invest in energy production.
The deal is being put together in part by Australian lawyer Michael Morley, who learned the trade at Smorgan Steel.
Mr Morley spent the last decade at Nyrstar in Port Pirie, where he was instrumental in helping to retire smelting operations at the centre. He left Nyrstar early this year to join Liberty.
This year marks the 10-year anniversary of the acquisition of Smorgon Steel by the entity now known as Arrium.
Mr Morley’s former Nyrstar boss, Roland Junck, is now chair of British Steel and helped introduce him to Liberty boss Sanjeev Gupta.
Meanwhile, the South Australian government would look to leverage opportunities from its $50m commitment to help ensure the future of the Whyalla steelworks, Premier Jay Weatherill said. Mr Gupta is expected to travel to Adelaide this week for talks with the government and Mr Weatherill said the details about the state government’s support were expected to be advanced.
They will include renewable energy projects and greater access to Arrium’s port facility, with the government looking for the funds to go to “productive future infrastructure”.
“We are keen to secure the commitment that we made, a condition if you like, of our grant, which is opening the port to third-party access,” Premier Weatherill said.
“This is a fantastic asset — it is underutilised.”
Additional reporting: AAP