South Australian Premier Peter Malinauskas has engineered a massive political stunt to be seen to be doing something to rescue the aged Whyalla steel mill when its ultimate survival is at best uncertain.
Just a day after good news on interest rates, the last thing Anthony Albanese wants heading into an election is the collapse of a major company. And while Sanjeev Gupta has teetered on collapse for a long time, the timing of the administration is pure politics.
Albanese and Malinauskas want to be seen to be doing something when the ultimate outcome is questionable.
It is unprecedented in Australia for a state to put a company under like this, but the politics is clear because the mill is the lifeblood for the 22,000 people in the town.
Mark Mentha and ABL’s Leon Zwier, the same team that managed the administration seven years ago that saw Gupta emerge as the new owner, were en route to the town last night to work out where to go next.
The running joke in the world of corporate undertakers is “if you are appointed to the same job twice it’s time to get out”.
Just whether the Korda Mentha founder follows the mantra remains to be seen.
Amid the gloom there is some upside.
The folk at the Gupta-chaired steel distributor Infrabuild gain a reprieve because the corporate structure ring fences it from the steel mill so its collapse leaves its assets untouched.
Infrabuild is a secured creditor to the mill buying steel billets and structural products from Whyalla and the amount in question is under $100m.
But now Whyalla is under administration there will be no more commercially damaging rumours that Infrabuild is being used to rescue the steel mill.
BlueScope, which was spun out of BHP early this century after the then OneSteel Whyalla assets were sold, is certain to play a role in the restructure.
Its chief, Mark Vassella, has made it known he is keen to buy high-quality iron ore assets owned by Whyalla which are a higher standard than BHP and Rio’s Pilbara ore.
These demand a premium in the push for green steel.
The Pilbara output needs further processing to be used for green steel but Whyalla’s Iron Knob ore is already up to standard.
Just what more Vassella needs to do to get his hands on the ore remains to be seen, with some speculating his team may be required to run the aged Whyalla plant under licence to a government-backed entity.
There are myriad trade issues because Gupta has been a frequent visitor to the Anti-Dumping Commission seeking trade support. But if the mill isn’t working there is no industry to protect anymore.
The politics are such that there will be no easy quick fix to the corporate collapse – and the bigger question is just what is the long-term future of an old mill producing steel that is not in long-term demand in Australia or around the world.
All the state government has done is to protect its interests. But as the solution is sought, this raises the question just why would taxpayer funds be put at risk for a questionable asset.
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