Anthony Albanese gambles $2bn on faith in green steel future

Anthony Albanese has poured more than $2bn of federal funds to decarbonise the steel industry and keep the Whyalla steelworks operational in a net-zero future.

Anthony Albanese and South Australian Premier Peter Malinauskas at the Whyalla steelworks on Thursday. Picture: NewsWire / Tim Joy

You can now listen to The Australian's articles. Give us your feedback.

You can now listen to The Australian's articles.

Anthony Albanese has put the viability of green manufacturing into focus for the election campaign after pouring more than $2bn of federal funds into decarbonising the steel industry and keeping the Whyalla steelworks operational in a net-zero future.

The move from the Prime Minister comes a month after committing $2bn to decarbonise aluminium smelters, with federal Labor sticking with hydrogen as a future energy source for heavy industry despite state governments and industry putting investments in the sector on ice.

The federal government’s preference is for a local company to take over the steelworks – with BlueScope in the box seat if it makes a bid – but is also open to working with offshore steelmakers willing to show a long-term commitment to Whyalla.

Peter Dutton hit out at Mr Albanese for sticking with the “green hydrogen dream”, while Rio Tinto warned its Tomago aluminium smelter was at risk of closing by the end of the decade because of the higher cost of sourcing electricity from renewables.

Joining South Australian Premier Peter Malinauskas on the site of the Whyalla steelworks, Mr Albanese on Thursday declared there would be a market for steel made from low-carbon energy.

“You bet there is a market for Australian steel, there is a market right here,” Mr Albanese said.

“There’s no industry that is more important for our nation than steelmaking.”

The South Australian government on Wednesday forced the steelworks, which directly employs 1100 people and supports a further 2000 jobs, into administration, arguing it was on an “irredeemable” path to failure under British steel magnate Sanjeev Gupta.

Rio Tinto chief executive Jakob Stausholm said the failure of Whyalla under Mr Gupta’s conglomerate, GFG, underscored the challenge of manufacturing in Australia. Amid fears Rio’s massive Tomago aluminium smelter near Newcastle was headed for closure by the end of the decade, Mr Stausholm confirmed a plan to move the electricity contract from coal to solar and wind power by the end of 2028 would double electricity costs.

“I can’t give you an assurance on Tomago today,” Mr Stausholm told The Australian. “If you can’t get competitively priced electricity, you cannot have smelting.”

On Wednesday, the federal and state governments unveiled a mammoth $2.4bn package to save the Whyalla steelworks with the vast majority of funding to be used to upgrade the mill so it can become a major producer of green steel under a new owner.

The package includes nearly $500m towards keeping the steelworks operational while it is in administration, including $50m to pay creditors owed money by Mr Gupta’s GFG.

There will also be $1.9bn to fund upgrades to the mill to ensure the future owner can manufacture steel with green energy sources, with most of this coming from the federal government.

The Albanese government will set up a new “green iron fund” to help decarbonise the steel sector more broadly, with $500m of this fund earmarked for Whyalla.

The Australian understands upgrades to the mill would likely include installation of an electric arc furnace powered by renewable sources, including hydrogen.

The $2.4bn for subsidies to support 1100 direct jobs compares to an average of $2bn a year to subsidise the jobs of more than 50,000 employees in the car industry between 1997 and 2012.

Mr Albanese insisted there was a future for green hydrogen despite Mr Malinauskas indefinitely deferring his planned $593m hydrogen plant, with the money used on the steelworks rescue package.

“What the South Australian government has done is to reallocate some funding, but that doesn’t mean that green hydrogen doesn’t have a future in this country,” Mr Albanese said.

Industry Minister Ed Husic revealed the preference was for the buyer of the Whyalla steelworks to be an Australian company, but the process would be open to offshore groups. “Clearly, we would love an Australian firm to be responsible for making steel in Australia,” he told The Australian. “The most important thing is we want someone who has a long-term commitment to steel, to make a long-term commitment to Whyalla.”

Japan’s Nippon Steel and South Korea’s Posco are potential international buyers.

The Opposition Leader is yet to declare whether he will retain the entire package if the Coalition wins government, and was seeking briefings from Labor on Thursday.

“We want to make sure that jobs are protected and that steelmaking continues because it’s an essential industry for our country,” Mr Dutton said. “But the Prime Minister can’t pretend this green hydrogen dream is going to deliver any jobs. In fact, it’s going to undermine the viability of the site.

“We need to make sure that we have a strong steel industry, that workers at Whyalla are supported – and we support the measures helping those workers and making sure that the business is viable.

“We need to make sure that the Prime Minister explains to Australians how green hydrogen is going to work because the electricity cost is much higher than what Whyalla would be paying now, when nowhere else is commercially operating in this way.”