If you believe the promoters’ scripts Australia is on the verge of a boom in manufacturing, with two new steel plants and the first fruit and vegetable processing plant due in Queensland’s Lockyer Valley since Heinz pulled the pin 13 years ago.
Just how much is fundraising hype will be seen in the next two years. All three, just to confound the sceptics, are based on green technology.
Australia’s two existing monopoly steel plants, Whyalla (long product) and Port Kembla (flat product: BlueScope), were split from BHP in 2000 and 2002 respectively.
Neither new steel entrant will admit it, but their success could well depend on whether Australia’s dirtiest steel plant, Sanjeev Gupta’s Whyalla blast furnace, manages to get past its second attempt to restart after a shutdown.
Infrabuild is also owned by Gupta but the steel mill is ring-fenced to avoid the whole company collapsing if the mill closes, and right now little steel is coming from Whyalla.
The new mills will be the first in Australia since BHP Steel built an electric arc furnace in Sydney’s Rooty Hill 32 years ago to match upstart Smorgon Steel’s Laverton plant.
Both are now part of Gupta’s Infrabuild.
The new plants will not replace all Whyalla’s output, given both are producing reinforcing bar, not heavy structural steel and rail.
Even if Whyalla survives, Westview’s Grant Johnston argues the 70-year-old mill has a job ahead to match his proposed new Brisbane electric arc furnace mill.
The latter emits 400kg of carbon per tonne of steel compared to Whyalla’s 2200kg, and then the steel billets are sent to processing plants in Newcastle and other mills for reheating and rolling to make rebar, which can be done in a single process by the new mills. Johnston claims the technological advantage and has a point.
The emissions fall further when supplied by renewables.
Whyalla supplies around 1.4 million tonnes of rebar each year in the 2.5 million tonne market, with the rest imported.
Infrabuild is a vocal anti-dumping complainant but the pleas for government protection won’t work against local competitors.
Given the glut of Chinese steel on the market, Infrabuild will have access to cheaper billets than it could make in Whyalla.
The most advanced project is the West Australian government-backed Collie steel mill run by former BHP and Fortescue executive Azian Ho. Collie, south of Perth, has two coal mines and three coal-powered power stations scheduled to shut down by 2030. The electric arc furnace mill is one of the government’s transition projects to preserve the town.
WA now exports all its steel scrap but the new mill will use 500,000 tonnes of local scrap a year. Construction is to start next year and it will commence operation using a furnace made by Italy’s Danieli in early 2027.
Its challenge is the road to market, given Johnston’s Bestbar grew up in the west and is unlikely to buy rebar from a rival, and Infrabuild is also a competitor.
The good news is container freight rates from Perth to the east coast are around one fifth of the rate from Sydney to Perth, given the absence of manufacturing in the west, which means containers come back empty.
Westview is behind Collie but has the advantage of a national distribution network through the Johnston brothers Grant and Brad’s Bestbar rebars, among other brands, built over 35 years in the steel game.
He too plans on starting production as soon as 2027.
Grant is coy on just who is backing the family but given his close ties over many years with Singapore-based NatSteel, now owned by Singapore locals, one presumes it will be involved.
At some point it makes sense to supply full details of financial backing.
Infrabuild’s Gupta has long talked up his green steel plans but has little to show for it and is struggling to survive financially in the wake of an ill-fated relationship with failed financier Lex Greensill.
Westview’s Johnston made clear his investment is based on his building industry customers’ demands for greener steel.
He has land near Brisbane airport and has short-listed Danieli and UK-based Primetals for the plant.
Steel is essential to industry, and if Whyalla fails then the two new mills will come into their own, even if they don’t supply the full product range.
The new Brisbane mill will initially use grid electricity, with plans to replace that with renewables.
The Murray Chatfield-chaired Lockyer Valley fruit and vegetable processing plant is an attempt to succeed where others have failed in competition with global majors like Simplot and McCann.
With $5.2m in his pocket, Chatfield is now in the market for $50m to kickstart what he hopes will be a cashflow-positive expansion to help use the 50 per cent of “Australia’s salad bowl” which is now wasted if the fruit and vegetables don’t meet supermarket standards.
Step one is to make plastic pallets to offset the fact Australia now has a shortfall, then steel can making, and all going to plan, a fully operational cannery in 2028.
Two years later a bio-methane plant will be running and a fully operational circular food company will be up and running to help preserve food security.
Australia’s future will be all the better if all three ventures succeed but now they need to prove the sceptics wrong.
Competition concerns
CCMP Capital’s BGIS was the informant for the ACCC’s civil cartel case against Downer’s Spotless and Ventia Services Group, with the three companies the big suppliers to the Defence Department in the multibillion-dollar estate management and operations market.
Brookfield sold BGIS to CCMP in March 2019 and the ACCC allegations centre on behaviour between April 2019 and 2022.
While that case rolls through, BlueScope and the ACCC await the High Court’s decision in the CFMEU case, with the full Federal Court reluctant to hand down a decision in the attempted steel cartel case before seeing the High Court’s ruling in the collective boycott case.
The CFMEU case was before the High Court last week.
Separately, the ACCC is still preparing to file a case about Google’s virtual search monopoly next year, despite promised changes to the digital platform enforcement regime and technology changes which hold out hope that the Google stranglehold can be broken.
The ACCC may be at war with the big supermarkets but don’t be surprised if the regulator clears the Woolworths decision to buy Beak & Johnston’s City Kitchen.
The chilled and frozen meal supplier is 23 per cent-owned by Woolies and at worst the case will attract a statement of issues for display reasons.
The ACCC is in court against Woolworths and Coles over allegedly dodgy discount claims.
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